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

By Jim Brennan
jamesmbrennan@att.net

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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