Corporate Confidentiality Policies Prohibit Reporting of Illegal Conduct to Police

Despite the unwaivable right to report potential wrongdoing to law enforcement, and the federal government’s public effort to identify and punish organizations that illegally attempt to silence employees, 16 percent of those polled say their company’s confidentiality policies and procedures prohibit reporting potential illegal or unethical activities directly to law enforcement.


One out of every 10 respondents report they have signed or have been asked to sign a confidentiality agreement that specifically prohibits reporting potential illegal or unethical activities directly to law enforcement.

For those who make over $500,000 annually, that number rises to 25 percent.

Of the total sample, 19 percent feel it is likely that their employer would retaliate against them for reporting wrongdoing.

Those are some of the findings of a survey — The Street, The Bull and the The Crisis — released by Labaton Sucharow and the University of Notre Dame’s Mendoza College of Business.

The survey polled more than 1,200 U.S. and U.K.-based financial services professionals to examine views on workplace ethics, the nexus between principles and profits, the state of industry leadership and confidence in financial regulators.

“When corporate whistleblowers are prohibited, discouraged or retaliated against for reporting crime to cops, we should all be scared — very scared,” said Jordan A. Thomas, a partner at Labaton Sucharow and co-author of the report.  “The widespread, systematic and previously unknown scope of gag orders in Corporate America is a wake-up call for the SEC and other law enforcement authorities.  These tactics are particularly insidious because they keep local, state and federal law enforcement organizations in the dark about all types of wrongdoing—everything from large-scale corporate frauds, environmental accidents and public safety concerns.”

According to both U.S. and U.K. survey respondents, financial regulators and law enforcement authorities play a critical role in detecting and deterring corruption.

Sixty-one percent of all respondents felt authorities in their country were at least somewhat effective at detecting, investigating and prosecuting securities violations.

Eight-nine percent of financial services professionals who indicate a willingness to report wrongdoing given protections and incentives such as those offered by the SEC Whistleblower Program.

This result — coupled with the high percentage of individuals who report awareness of wrongdoing in the workplace — offers the industry’s best hope for reform, Thomas said.

As 37 percent of respondents say they are still unaware of the program, it is imperative that regulatory and enforcement authorities and financial services firms step up efforts to educate employees and the public on the importance of reporting wrongdoing in the workplace, internally or externally, Thomas said.

“The SEC Whistleblower Program and other similar programs have effectively deputized all of us to report possible violations of law,” Thomas said. “As a result, the probability of detection has dramatically increased.  Responsible organizations would be wise to redouble their efforts to establish and maintain a culture of integrity—where doing the right thing and speaking up are the norm.”

According to the survey, almost half of financial professional feel it is likely that their competitors have engaged in illegal or unethical behavior to gain an edge.

Nearly one in five professionals feels it is at least sometimes necessary for financial services professionals to engage in illegal or unethical activity in order to succeed.

And fully 32 percent feel compensation structures or bonus plans pressure employees to compromise ethical standards or violate the law.

Of those surveyed, 27 percent don’t agree that the industry puts the interests of clients first.

How severe is the ethical breakdown?

More than 20 percent of respondents say they have observed or have first-hand knowledge of actual wrongdoing in the workplace.

On an individual level, a quarter of those surveyed say they would likely engage in insider trading to make $10 million if there was no chance of being arrested.

Employees with less than 10 years experience are more than two times as likely to use non public information than those with over 20 years experience, reporting 32 percent and 14 percent respectively.

“Most disappointing is the lack of change in many of the results when compared to surveys from previous years,” said co-author Ann Tenbrunsel, Ph.D., David E. Gallo Professor of Business Ethics at the Mendoza College of Business and a co-author of Blind Spots: Why We Fail to Do What’s Right and What to Do about It. “Despite significant energy and efforts, it appears we need to continue to think about how to improve the culture of ethics in the financial services industry and most likely, in other sectors as well.”



Copyright © Corporate Crime Reporter
In Print 48 Weeks A Year

Built on Notes Blog Core
Powered by WordPress