Illegal and unethical actions are a serious problem for companies. Information from employees, and other stakeholders plays an important role in the prevention and detection of legal or internal rules and values violations. Many companies have already recognised this and set up whistleblowing systems to identify misconduct at an early stage and avoid sanctions, fines and reputational damage. At the same time, many companies are still uncertain how to design and introduce an effective whistleblowing system.
This study provides answers and scientifically sound findings on whistleblowing and whistleblowing systems. In comparison to the report on whistleblowing systems in Swiss companies published last year by the University of Applied Sciences HTW Chur in cooperation with the EQS Group, this Whistleblowing Report 2019 has been extended to include Germany, France and Great Britain. The 2019 report is also much more comprehensive in terms of content: it shows the extent to which companies in these four countries are affected by misconduct and how and why whistleblowing systems are used as a detection and prevention tool. In addition, it examines the question of how effective whistleblowing systems can be designed and communicated and how they are of benefit to companies.
A total of 331 British, 352 German, 344 French and 365 Swiss companies took part in the online survey which forms the basis of this study. The sample per country is made up of around one third of small and medium-sized enterprises (SMEs) with 20 to 249 employees and two thirds of large companies (250 employees or more). As the study has used random sampling, the findings can be generalized across the population of companies in each country.
Keeping a close eye
Behaviour that violates applicable laws, or the ethics of a company, occurred in more than one in three companies surveyed. The statistical analysis shows that large companies and international companies are more likely to be affected. Although Swiss companies tend to be less prone to misconduct, the financial losses of the affected companies are generally higher than in the other three countries.
Prevention and exposure
Companies take various measures to prevent or identify illegal or unethical actions at an early stage. Across all countries and company sizes surveyed, almost 60 per cent of the companies interviewed had implemented a whistleblowing system, i.e. reporting channels excluding official reporting lines, through which whistleblowers can report concrete or suspected misconduct. Large companies, including banks and insurance companies, are more likely to have implemented these reporting channels.
The results show that companies have various reasons for introducing a whistleblowing system. These include wanting to avoid financial loss, enhancing the ethical and moral image of a company, and because they are convinced of the benefits and effectiveness of this tool. These reasons are also shared by one third of companies without a whistleblowing system, because they are planning for the introduction of one. For the remaining companies, the majority of which are SMEs, the implementation of a whistleblowing system remains a low priority, primarily because it is not yet a legal requirement.
The design of a whistleblowing system is essential to its successful implementation and use. On average, companies offer employees and stakeholders three different channels to report misconduct. Of particular note: the companies surveyed with specialized reporting channels – hotline/call centres, mobile apps, social media and web-based whistleblowing systems – receive more reports. For the majority of companies, in addition to employees, their reporting channels can be used by at least one other internal or external stakeholder group. The statistical analysis shows that the more stakeholders are allowed to report misconduct, the higher the proportion of financial loss uncovered with the help of the whistleblowing systems. Furthermore, around 60 per cent of companies allow whistleblowers to submit their reports anonymously. Larger and economically successful companies allow this significantly more frequently and French companies significantly less frequently.
Companies use numerous channels and various messages to draw the attention of stakeholders to their whistleblowing system. Companies that regularly inform employees, and other stakeholders, about their whistleblowing system are able to uncover a higher proportion of financial loss with the help of the whistleblowing system. Given this, it is striking that half of the companies surveyed with a whistleblowing system refer to it in their internal communications only once - for example when the system is launched - or annually.
In all four countries in which the survey was carried out, the majority of companies with a whistleblowing system received reports last year. On average, there are 52 whistleblowing reports per whistleblowing system surveyed. The likelihood of receiving reports is higher for large companies as well as for companies active internationally and public sector companies. In addition, specialised reporting channels and the use of numerous communication media are drivers for the number of reports.
Every second report received by the companies surveyed proved to be relevant and well-founded. Whistleblowing systems are thus an effective instrument for uncovering unlawful and unethical actions, and also make a crucial contribution to protecting a company’s reputation. Abusive reports of a purely opportunistic nature and aimed at discrediting an individual are rather seldom, although there are some significant differences between countries in this respect.
Contrary to regularly expressed fears, anonymous reporting has no influence on the number of abusive reports. In companies that make anonymous reporting possible, more than half of the initial reports were submitted anonymously; in more than one third of these cases, the identity of the whistleblower became known in the course of the further processing. In companies with web-based reporting channels, but also in the case of economically successful companies and those that communicate a lot of content regarding their whistleblowing system, the anonymity of the whistleblowers is more often maintained.
The results of this study show that companies benefit in many ways from their whistleblowing system. In 2018, around one third of the companies surveyed were able to recoup more than 60 per cent of their total financial loss thanks to the whistleblowing system. The proportion of financial loss revealed by the whistleblowing system is not only influenced by communication, but also increases with the whistleblowing system’s target audience. Companies also benefit from a multitude of non-monetary advantages. These include a better understanding of compliance by employees, reinforcing the ethical and moral image of a company as well as improved processes and the promotion of proper conduct.