It’s time for a walk down economic-implosion memory lane.
Remember Sherron Watkins, a former vice president at Enron? She went down in history as a famous whistleblower who told her bosses, including the then CEO Kenneth Lay, that the company was basically a Ponzi scheme.
“I am incredibly nervous that we will implode in a wave of accounting scandals,” she wrote in a letter to Lay. “My 8 years of Enron work history will be worth nothing on my resume, the business world will consider the past successes as nothing but an elaborate accounting hoax.”
She ended up testifying to Congress about the scandal, which was just one of many scandals to come and ultimately take down our nation’s economy. But it wasn’t Watkins who really blew the whistle on dirty dealings at Enron. You see, her attempts to stop the company from doing bad went nowhere because she was basically trying to reason with the criminals themselves. That’s why it’s so important for employees to have other means — beyond company channels — and incentives, if they are ever going to expose unlawful corporate behavior.
That’s where the Dodd-Frank financial reform law comes in. It created more incentives, including a whistleblower bounty, for employees to step forward, something that’s very difficult for them to do because they can lose their jobs as a result, and many have. The legislation actually calls for financial incentives of up to 30 percent of funds recovered for information employees give regulators that leads to prosecution.
But Corporate America isn’t happy.
In a Wall Street Journal article today, we find out Google and General Electric are among a host of companies that want to put the kibosh on financial incentives for exposing wrongdoing, even though the program is already paying off in terms of tips from employees. These major employers believe employees will bypass company channels and go straight to government regulators, mainly motivated by the rewards.
Unfortunately, company channels are not doing enough, and workers are increasingly nervous about reporting problems internally for fear of losing their jobs in this crummy economy. This from a KPMG report:
More than half (57 percent) of the respondents reported that they would feel comfortable using a hotline to report misconduct, which is up from 40 percent when we began surveying. However, only half (53 percent) believed they would be protected form retaliation and even fewer (39 percent) believed that they would be satisfied with the outcome if they reported misconduct to management.
Despite this, corporations are pushing to take the teeth out of the Dodd-Frank law’s incentives program, but lawmakers should keep their eyes on the prize, getting employees to step up when they see crooked behavior, a bunch of which got us into this economic mess we’re in now.
The Project On Government Oversight, known as POGO, offered a reality check on why such provisions were added to the financial reform legislation: “Congress was only concerned about improving the free flow of information from whistleblowers to the SEC and protecting those whistleblowers from retaliation, not about protecting corporate compliance programs.”
The Securities and Exchange Commission is seeking comment on the new program. Here’s an excerpt from a letter already submitted by the following firms, General Electric Company, Google Inc., Honeywell Inc., JPMorgan Chase & Co., Microsoft Corp., and Northrop Grumman Corp.:
“Any whistleblower bounty program creates the potential for monetary incentives to cause employees to bypass or ignore internal compliance reporting mechanisms for the possibility of a substantial financial reward.”
It’s a strange twist on the greed argument. The whistleblower bounty is supposed to stop corporate greed, but, these firms argue, it could create employee greed.
So the choice for the SEC may come down to who they think will be greedier?
February 18th, 2011 at 11:23 am
Just about everyone in America knows that the whistleblowers will lose their jobs if they tell on their company. With unemployment at 9% averaged nationally, any whistleblower with a bit of common sense will go directly for the money.
Companies are not inclined to either 1) believe the whistleblower, or 2) change anything, except to fire the whistleblower. It’s like going to HR with a complaint about your manager - the manager is safe as churches, but you’ve just put your own neck in a noose.
Ethics, sadly, do not pay the bills.
February 18th, 2011 at 11:24 am
If the SEC sticks to its guns, and the letter of the law, ethics may pay the bills after all.
February 25th, 2011 at 4:03 pm
A coworker and I, both federal contractors with jobs onsite at client location were retaliated against just after we became aware of improprieties that were directly affecting the job tasks of over a dozen onsite company employees. We alerted the client only to fact that information from non-management technical staff that provided facts critical decision-making for direction of project were not being conveyed by our company Project Manager, division manager and CEO. This was causing long term delays and cost overruns in the work partly due to lack of required tools to accomplish job tasks. After five months of duplicate management requests, with staff submitting monthly documentation of these technical requirements holding up the work went unresolved and ignored by corporate management the client began complaining about delays. The client began to suspect there was some kind of disconnect and consulted the non-management technical staff directly asking for an assessment of the situation. After we provided this information on February 9th, which illustrated management’s lack of experience and expertise related to critical technical aspects of the job performance, the retaliation began. It ended on Feb 21st with our being dismissed for not meeting the job requirements. It’s interesting to note however that the two of us dismissed were only two corporate staff who had been rewarded by client for outstanding service and had been promoted to lead roles (not financially compensated of course) within the client project team. Neither of us had any previous complaints on the quality or quantity of the work we produced until we spoke out to resolve the logjam in the work flow created by management’s lack of experience.
Our company as a federal contractor was required to have an HR representative and to provide employees with information on specifics of task orders under which we were expected to perform, and were supposed to have been provided with ethics training identifying contacts we could report to in order to request mediation for these kinds of situations. There was no HR dept or rep, no ethics training or contact. We attempted to contact a number of different federal and state employment information sources to determine our rights and none of them were able to direct us to a suitable or knowledgeable resource. Our only recourse will be to retain a lawyer at $395/hr to attempt to give us information that should be available to any employee in this country. This seems to illustrate the fact that in America it continues to be a fact that “thems with the gold make the rules.”
If you can recommend resources that don’t turn into an endless phone chain where one office refers us to another office, who refers us to another office, ad nauseaum we would really appreciate it.