Employment and labor law firm Littler Mendelson has released the results of its National Whistleblower Survey. The firm surveyed a cross-section of senior executives, most of whom represent S&P 500 organizations, to determine how the new whistleblower rules are impacting their companies. With the new financial incentives for whistleblowers created by Dodd-Frank in effect, the survey revealed that companies are increasingly concerned about whistleblowing activity. An overwhelming majority of respondents (96%) indicated they are either very concerned (27%) or moderately concerned (69%) about potential whistleblower claims and 73% identified whistleblowing and retaliation as emerging risk areas. "As corporate executives start to see the impact of the new whistleblower rules, they are undoubtedly concerned about the potential risks to their organizations," said Gregory Keating, co-chair of Littler’s Whistleblower and Retaliation Practice Group and a shareholder in the firm’s Boston office, in a news release. "However, the legal changes and shift in social consciousness are still relatively new. The level of concern is likely to rise in the coming months as companies continue to adapt to the new regulatory environment created by Dodd-Frank." Looking ahead, survey respondents appear to be anticipating an increase in claims as the program develops and the SEC‘s new Office of the Whistleblower, which opened its doors in August, continues to receive as many as 100 tips per day, according to SEC officials.
Although an already high percentage of respondents (45%) indicated that their companies experienced a whistleblower claim in the last 12-24 months, 67% anticipate whistleblower claims to increase within the next 12-24 months.
While companies recognize whistleblowing as a significant risk that is likely to intensify in the near-term, the majority of respondents (65%) indicated that their companies are only moderately prepared to handle whistleblower claims and only 54% were confident that executives in their organizations understand unlawful retaliation concepts and know not to engage in such conduct. After expressing uncertainty regarding their current level of preparation, 84% of respondents indicated their companies have taken preventative steps to protect against unlawful retaliation claims and 59% are either conducting training in the next 12 months or plan to do so.
"Based on the modest confidence expressed about companies’ preparedness for whistleblower claims, it is not surprising that companies are stepping up management training," said Edward T. Ellis, co-chair of Littler’s Whistleblower and Retaliation Practice Group and a shareholder in Littler’s Philadelphia office, in the release. "A whistleblower can cause greater disruption to a business if internal compliance programs are not in order. It is critical that executives and managers be trained on compliance with laws that affect their businesses as well as best practices for handling whistleblower claims when they arise."
The survey also revealed concern among respondents that provisions within Dodd-Frank could undermine their existing compliance programs. Only 12% indicated this was not a concern, while 51% were concerned and 37% remain unclear as to what the impact will be.
"Many companies have strengthened their internal compliance procedures since the Sarbanes-Oxley Act was enacted in 2002; however, these programs may not be effective under Dodd-Frank," added Keating. "This regulatory shift creates a need for companies to modify their programs to be better prepared for new regulations and increased whistleblower exposure."
The survey, conducted in October 2011, was completed by a select group of 51 senior legal, compliance and human resources executives at publicly traded or highly regulated companies. The majority of respondents (60%) were from S&P 500 companies and 92% indicated their companies were based in the United States. Click here for a full analysis of the survey results.