Whistleblower complaints have surged in recent months, although COVID-19 lockdowns are keeping a large number of employees out of the office and working from home.
Between mid-March and mid-May, the U.S. Securities and Exchange Commission received more than 4,000 tips, complaints, and referrals of possible corporate misconduct, a 35% increase from the same time last year.
What’s behind this surge?
Whistleblowers feel more comfortable speaking up when they are out of view of coworkers and managers, Wall Street Journal. In the privacy of their own homes, tipsters feel less likely to be exposed or to experience workplace retaliation.
Whistleblowers who routinely aren’t interacting with their manager, or those who have been furloughed or laid off, are even more likely to report infractions, such as the promotion of fake home-testing kits, and more traditional infractions such as bribery, money laundering, insider trading, accounting gambits, and bankruptcy fraud.
Remote work is not the only reason for an increase in whistleblower tips and complaints; there’s likely been a rise in corporate misconduct. With many companies struggling to stay open, employees are experiencing growing pressure to perform and meet goals during this difficult time, increasing the likelihood of wrongdoing. According to WSJ, anticorruption organizations “have warned that the current economic tumble could create an environment ripe for bribery.”
LRN’s recent report, Confronting the Root Causes of Misconduct, may help shed some light on the sudden increase in SEC complaints. According to the report–based on a survey of 500 ethics, compliance and legal professionals from around the world–37% of respondents said their organizations take ethics into account when setting sales targets.
Less than half (46%) say their organization’s business leaders support effective penalties on senior executives who are involved in misconduct. LRN’s Susan Divers points to the importance of company culture in preventing misconduct. Elaborate rules, training and procedures are not enough to encourage ethical behavior, she said.
Companies should take ethics and compliance into account when setting revenue targets, and enforcing internal controls to avoid incentivizing misconduct, in addition to supporting affirmative values and transparency.
When a company has a strong ethical culture, leaders will model values-based behaviors. When leaders consider E&C criteria during business decisions and revenue opportunities, their employees are 4.3 times more likely to question decisions that conflict with the organization’s values and are 3.8 times more likely to do what’s right, the LRN report shows.
The economic spiral caused by COVID-19 may serve as a stress test for many business leaders and their employees. Those facing pressure to maintain and improve performance will be more tempted to engage in misconduct.
Only companies with strong ethical values can expect to avoid scandal; others will need to improve their overall culture and E&C programs to help reduce the chances of employee misconduct.