“Having an Ethics Hotline is a Really, Really Bad idea.” (Really?)


Ethics Hotline

photo of Jim BrennanBy Jim Brennan

Sometimes they admit it openly . . . but usually they don’t. Whether it is openly expressed or not, though, it’s true: many members of management, especially outside the corporate headquarters, hate their company’s Ethics Hotline. They want to blow it up. They think having a Hotline is a really, really bad idea — for numerous reasons.

A kneejerk reaction may be to resist the contention that there are ‘cons’ to having a Hotline. It would be a mistake to do so, though. Why? Because there are ‘cons’ to having a Hotline. Failing to admit this fact does nothing but hurt our credibility. Admitting it, on the other hand, is only honest. Moreover, admitting it both adds to our credibility and helps us in our efforts to win over the “Ethics Program skeptics.”

Here are just a few of the anti-Hotline diatribes that I have heard:

  • “At my location/facility, I’m trying to build a family culture of trust and of open, mature communication. The Ratline – I mean, the Hotline – undermines our efforts. It encourages people to skip difficult conversations and to instead take the easy way out with an anonymous call to Corporate.”
  • “The Hotline lets poor performers, whose job is in jeopardy, throw a Hail Mary pass by calling the Hotline to get whistleblower protection.”
  • “The Hotline is abused by cowards who, anonymously and unfairly, knowingly make up things to defame people they don’t like.”
  • “Some people don’t like it when a new boss (appropriately) holds them to higher levels of accountability, so they call the Hotline to complain that their boss is abusive.”
  • “The Hotline causes confusion about leadership and chain of command.”
  • “The Hotline creates a culture of paranoia.”
  • “The Hotline sends the signal to employees that Corporate does not trust local leadership and thus neither should the employees.”

There is obviously more validity for some of these objections than for others (although there is arguably at least a grain of truth in each of them). Furthermore, there are of course rejoinders to each objection. For instance, although it is not unheard of for employees to invent falsehoods to defame another, still, anyone who has experience with a Hotline knows that such calls are – thankfully — exceedingly rare. Moreover, even if there are suspicions about an employee’s bona fides, the obligation always remains to fairly, objectively and independently ‘run out the grounders.’ Doing so sometimes results in very important findings that were completely unexpected.

Although not all the Hotline objections hold much water, still, given that there are multiple anti-Hotline objections – some of which raise pretty good points – it begs the question: why the heck do we have a Hotline? Simple: the ‘pros’ outweigh the ‘cons.’ By far. Just a few of the ‘pros’ are:

  • Hotlines are a proven resource. They have allowed companies to detect and address countless  issues and concerns. Hotlines are thus a strategically essential component for upholding a company’s ethical fabric.
  • Many companies are required, by their industry or issuer/ownership status, to have a Hotline.
  • Even for those companies which are not per se required to have a Hotline, various bodies, both governmental (e.g., the United States Sentencing Commission) and quasi-governmental lay out compelling incentives and disincentives for having/not having a Hotline. Under the United States Sentencing Guidelines, for instance, convicted companies which are found to have had an effective compliance program may have their fines reduced up to 90%. (It is essentially impossible that a judge will make a finding of an effective compliance program if there is no Hotline.) If, on the other hand, a company is found to have ignored this vital component of corporate compliance, it can get thumped by the court even harder. Thus, even companies which are not technically required to have a Hotline would be foolish and reckless – and open to potential liability in various contexts — if they do not have one.
  • The company makes a commitment to always give people a place to turn with concerns or reports of wrongdoing. Certainly, employees should always first think of turning to their supervisor if they see something wrong, but if the problem is with their supervisor and/or their chain of command, or they have already pursued that route, or have reasons to believe that this route is not a viable one, it is vital that employees know there is always somewhere they can turn. The Hotline is always available, 24/7.
  • Hotlines save the company a lot of money. (Now there is something that management will understand!) Here is just one example of how. A terminated employee calls the Hotline alleging that his termination was unfair. After an independent, fair investigation there is a finding that the termination was not inappropriate. It is thus upheld. Hotline personnel telephone the former employee back, explaining that there was an independent review of the termination and “I am sorry to tell you that the termination stands. We wish you the very best of luck in the future.” Anyone who has made a number of these calls will attest that the vast majority of the time the reaction of the caller is not to protest but is to express gratitude for the inquiry and for the callback. They are grateful because someone heard them . . . and oftentimes being heard is what they really wanted. Such persons are extremely unlikely to retain counsel and sue the company for wrongful termination. Take away the Hotline, though, and a certain percentage of them would have sued the company. It is obviously impossible to reduce this phenomenon to a dollar figure, but experience shows that it is not insignificant.
  • Lastly, what would happen if the company did not have a Hotline? Well, one of two things would likely occur. Either the employee who witnesses wrongdoing (but does not want to speak up locally) will not speak up and the problem will fester and grow — a recipe for disaster – or, the employee will speak up . . . probably outside the company (plaintiff’s attorney, government agency, the media, etc.). Even the staunchest “Ethics Program skeptic” recognizes that it is better for the company to have the chance to solve the problem internally than it is to have the problem go to the outside.

Let’s face it: sometimes the ‘Ethics Program skeptics’ consider ethics and compliance practitioners to be ‘clueless’ about the realities of business. If we fail to concede any valid points that they have (such as that there are negatives to having a Hotline), we only play into their hands. If, on the other hand, we admit their valid points and then explain why their concerns are outweighed by other considerations, this goes a long way toward winning them over. That, in turn, helps us strengthen the foundation of the ethics program, thereby improving and reinforcing the company’s ethical culture.

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  1. Experience taught me that the existence of a compliance hotline is not what bothers management as much as how the compliance officer responds to it. The hotline is just a tool, a mechanism for making a report.

    Every organization should have an intake or triage process to assess the report and respond in a programmatic way to the report. Not every report needs to be investigated or treated like the crime of the century.

    Management may hate the hotline because of how we respond. They understand conceptually that it is needed or a necessary evil.

  2. I clearly view some of the ideas about a hotline related to the fact that EVERYONE or ANYONE can be reported through a channel that no one has any control over as to who does or does not use it.

    Takeaway…it may keep some people on their goes who otherwise might think that something they did that was questionable in terms of compliance or ethics may be reported. This, for some can be an uncomfortable feeling…those with a clear conscious probably don’t even give it a second thought.

  3. I do think that hotines are a pain in the behind because they force you to address issues that you might otherwise try to ignore. And that is why they are a good idea. A well run hotline is the organization’s conscience.

    • I think where people “game” the system is when a hotline call is made anonymously. For whatever reasons I see or have heard from folks where the recipients of the hotline call spend as much time and energy trying to identify who may have made the anonymous report than addressing the issue.

      This goes back to as described as the “ratline”…because along the same thinking..if people can discount the person making the call…automagically there are attempts to rationalize the call as an act of a disgruntled employee and then things go downhill from there.

  4. Nice to have and so what? But it is part of proportionate and commensurate measures to prevent, deter and detect…

  5. I think the strongest argument for a hotline is to view it as a “safety valve”. If the GM team was paying attention to its safety valve instead of chasing down 60 Naughty Words (UGH), they would have learned about the delayed recall concerns. Similarly, VW missed two valid calls about its cheating scandal that should have been escalated. The main “con” of the hotline is that many companies don’t manage it correctly and blunders in the follow up destroy trust and ethical culture. The CCO needs to clarify all the roles in investigations and develop investigation guidelines that all involved are required to train in. An escalation policy is also key. The CCO must exercise proper oversight that this has been done and that the system is working.Run properly, the hotline sends the right messages and supports confidence, transparency and trust. Boy, I bet GM and VW wish they had a “do-over”. Many more examples like that.

    • Donna,

      To your point…given the standing of Germany among the industrialized nations with its expertise and technology, I think a “do over” of instead of figuring out how to program their vehicles to go from “dirty” to “clean” based on all of the onboard technology to detect when the vehicle might be getting tested…and applying that to other technology that could have made their vehicles more efficient within the rules is definitely a missed opportunity.

      Interesting to see how the significant drop in stock price is beginning to show a slow but clear upward trend of recovery. I am curious to see how long will the public’s memory be on this one.

  6. It should be noted that this commenter is NOT saying that if there is some Hotline antipathy out there, that must mean Hotline calls are being handled badly. Anyone who interprets his comments in that way would be well off the mark.

    Certainly incompetent handling of Hotline calls will cause some to dislike the Hotline. Conversely, though, some won’t like the Hotline precisely because calls ARE being handled well. (Think of field management which tried to be inappropriately lenient to a star performer who committed wrongdoing — and then the Hotline was called . . . .)

    Whether Hotline calls are handled well or are handled poorly, though, some Hotline antipathy will always be there. There are various reasons for this, but one of the biggies goes back to human nature: some don’t like Corporate seeing their dirty laundry. This is the case whether a claim is true or whether it is b.s.; whether Hotline follow-up is flawless or whether it sucks. This is not to say that their attitude is enlightened (it is not), nor is it to say that education, communication and collaboration cannot ameliorate the situation (it can); but it is to say that we will never be in a situation where everyone loves the Hotline. (As the commentator indicates, the best we can hope for from many is a grudging acceptance that the Hotline is a ‘necessary evil.’)

    The question, then, is not whether competent handling of Hotline calls will eliminate all griping — it won’t – but is whether the griping occurs to our face or behind our backs. It is incumbent on all of us to forge good relationships and open communications so that the griping occurs to our face, often over a beer. That way, we can talk about it. Otherwise, they will still gripe – we will just never hear it.

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