Article originally published in the Philadelphia Business Journal on October 14, 2019
The whistleblower accusation about President Donald Trump’s July 25 phone
conversation with Ukraine’s President Volodymyr Zelensky has dominated the
news. Since then, another whistleblower has come forward. Given the spotlight on
these whistleblowers, I decided to update an April 2016 article I wrote on the
importance of protecting whistleblowers from retaliation.
Many times, a report by a whistleblower is the only way to uncover illegal or
unethical acts in the private sector or in government. The whistleblower who
uncovers and reports wrongdoing in business is a hero, and in government, a patriot.
Whistleblowers in government are protected by the Whistleblower Protection Act of
1989. Congress passed the Sarbanes-Oxley Act (SOX) in 2002, requiring public
companies to put in place a whistleblower hotline to report fraud and illegal
activity. Those who retaliate against whistleblowers are subject to criminal
penalties. All organizations should have a hotline in place.
Why is a whistleblower hotline important?
A hotline provides employees a safe place to file a report about illegal or unethical
activity. Hotline reports from employees provide an opportunity for your company
to address issues in a proactive manner, and avoid or lessen financial liability and
legal or reputational damage to your company.
Are some hotline reports found to have little substance or be malicious in some
manner? Yes. The reports with no merit can be screened out. That is part of the
process. A rough measure of the climate within an organization and a company’s
relationship with employees are reflected in the types and substance of the hotline
reports that are submitted.
In practice, employees use hotlines for anything they are uncomfortable reporting
using normal company channels, mostly due to fear of retaliation. In addition to
financial fraud or other illegal activities, these reports could run the gamut from
perceived violation of employee anti-discrimination laws, to violation of company
travel and entertainment policies, to a tyrant in a management position making life
miserable for direct reports.
Role of the audit committee
The audit committee of the company’s board has the responsibility to review hotline
reports and the results of the subsequent investigation. The hotline is monitored
either by the organization’s internal auditor, legal counsel, or in some cases, an
Whoever is monitoring the hotline informs the chair of the audit committee and the
CEO of hotline reports, as long as the CEO is not the subject of the report. In the
event that the hotline report involves the CEO, the monitor directly informs the
chair of the audit committee.
Because I used to work for a tyrant, when one is reported through the company’s
hotline, as a member of many audit committees, I always take a personal interest in
how the complaint is investigated by executive management and the actions to be
Without hotline protection, employees might not report wrongdoing for fear of
While president of PQ’s industrial chemicals group, an employee informed me that
his general manager had violated an important company policy, which could have
had serious ramifications. PQ did not have a hotline at that time.
After searching for and identifying his accuser, the general manager brought him to
meet with me and asked the employee if he, the general manager, had violated the
policy. What an intimidating position in which to put the employee! Not knowing if
the general manager would be terminated and fearing retaliation if he wasn’t, the
employee withdrew his report of the violation.
I terminated that general manager a short time later. I don’t know why the general
manager thought he could get away with intimidating his employee.
Outside of the protection of a company’s hotline process, don’t expect an individual
to make an accusation of wrongdoing if the accused will continue to exercise power
over or could cause harm to that individual. Why would they place themselves in
Even within the hotline reporting process, the reporter is taking a risk if the accused
remains in their position. This is clearly evident as the hunt for the identity of
Trump’s whistleblower by the president’s supporters plays out on the national stage,
in attempt to damage the whistleblower’s credibility.
Is it necessary to reveal the identity of a whistleblower? Not if evidence is
uncovered that corroborates the allegations made by the whistleblower. Why put the
whistleblower in harm’s way?
All hotline reports need to be investigated
Even when the evidence and subsequent investigation indicates that the allegations
are factual, there are those who will attack the whistleblower to divert attention
away from the accused. Those who attack a whistleblower to discredit or intimidate
them don’t realize that they destroy their own credibility and character, and damage
any trust that people may have in them in the future.
Those who retaliate against hotline reporters need to be terminated. Handling
hotline reports in the right way builds employee trust and will significantly reduce
the possibility of a scandal and damage to your reputation or that of your
Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker,
advisor and nationally syndicated columnist on leadership, entrepreneurship and
corporate governance. Silverman earned a Bachelor of Science degree in chemical
engineering and an MBA degree from Drexel University. He is also an alumnus of
the Advanced Management Program at the Harvard Business School. He can be
reached at Stan@SilvermanLeadership.com.