External whistleblower activity can be very costly in the auto industry.
As the industry continues to develop, prevention of whistleblower claims will only grow in importance. It’s an issue that can impact every company within the industry, both foreign and domestic. Retaining employees is one method of minimizing the risk of whistleblowing. Compliance can also be an effective method.
The SEC whistleblower program has resulted in numerous Foreign Corrupt Practices Act (FCPA) penalties and announced settlements. In addition, with studies showing that most whistleblowers are motivated by reasons other than money (i.e., whistleblowing often occurs because employees are disgruntled or terminated, or because an employee believes internal reporting was not taken seriously), even companies that are not publicly traded should be concerned about whistleblower activity.
Minimizing whistleblower risk, to a large degree, starts with an effective compliance program. An effective compliance program, supported by a culture of compliance where employees are encouraged to speak up and internally report potential violations of law, is the best weapon to prevent external whistleblower activity. The more effective internal handling of compliance lapses is, the less likely external whistleblowing will occur.
Specific compliance measures auto companies should consider to minimize the risks of external whistleblower activity include:
Maintaining a Culture of Compliance
- Ensuring that there is senior management support for compliance efforts.
- Hiring and adequately supporting well-trained staff empowered to independently identify misconduct and thoroughly investigate complaints, hire external counsel, and to report findings directly to senior management and relevant board committees/personnel.
- Ensuring that compliance efforts are adequately funded, based upon a clear and objective evaluation of the regulatory risks facing the organization.
Maintaining Effective Policies
- Maintaining effective anticorruption policies that cover all forms of bribery-related regulatory risk (both for government officials and commercial bribery).
- Maintaining anti-retaliation compliance policies to ensure that there is no retaliation for whistleblower activity, and that whistleblowers continue to be evaluated solely based on quality of work and not concerns related to whistleblower activities.
Maintaining Effective Procedures
- Implementing procedures to evaluate the significance of claims quickly, determine the priority of investigation, and appropriate follow up based on the potential seriousness of the issue.
- Creating procedures to ensure that any compliance lapses are remedied, such that issues identified as a result of whistleblower activity (or that are otherwise discovered) are not repeated.
- Maintaining procedures to document all claims received, how they were handled, and their resolution, tracking all complaints from initial report to ultimate resolution.
- Maintaining procedures to report back to whistleblowers regarding how their claims were handled while sanitizing the report of any confidential data.
- Maintaining procedures for determining when outside investigative resources, including law firms and forensic specialists, need to be brought onto investigations.
- Implementing special procedures related to the handling of complaints related to senior management, board of directors, audit committee members, and compliance committee members.
- Drafting procedures to ensure confidential treatment of materials related to internal investigations, including procedures designed to preserve attorney-client communication and attorney work product privileges
Encouraging Effective Reporting
- Creating multiple ways to report potential misconduct, including independent 24-hour telephone hotlines with multiple language capability, web-based reporting, and email.
- Creating ways for external compliance stakeholders to report misconduct.
- Creating pre-existing procedures regarding how to properly engage whistleblowers, investigate allegations of misconduct, and otherwise manage whistleblowers.
Encouraging Effective Follow up
- Properly documenting the results of investigations, including the persons involved, the allegations, how they were investigated, and any remedial measures adopted in response.
This list was generated as part of a Legal News: Government Enforcement, Compliance & White Collar newsletter by Scott Frederickson, Jaime Guerrero, Greg Husisian, Zaldwaynaka (Z) Scott, David Simon and John Turlais titled, “The Foreign Corrupt Practices Act and the New Trump Administration: Your Top Ten Questions Answered.” Click here for the original publication.