The Network’s CEO Discusses Sarbanes-Oxley on CNNfn

The Sarbanes-Oxley whistle-blower legislation is drawing attention to the need for independent ethics hotlines. CNNfn turned to The Network to learn more about hotline best practices.

Romans: Since the Sarbanes-Oxley bill was passed into law, the hotline business has been booming. The law requires companies to set up an anonymous system for employees to report unethical behavior. One company benefiting from Sarbanes-Oxley is The Network. It provides outsourced hotlines and incident reporting services. The Network’s CEO, Tony Malone is joining me live from Atlanta. Welcome to the program.

Romans: Let’s talk about this Sarbanes-Oxley Section 301 that everyone keeps talking about. You have to have a whistle-blower hotline for your employees. That’s where you come in. How many of the Fortune 500, the big names, are signing up?

Malone: We represent roughly one third of the Fortune 500 companies. We’ve been in the business for 20 years, and were the pioneer in the hotline industry. We are delighted we have the opportunity to serve that range of clients.

Romans: How important is whistle-blowing as a business for you, and if you’ve got that much of the Fortune 500, that tells me there are an awful lot of companies that still need to do something more about whistle-blowing to comply with Sarbanes-Oxley.

Malone: Yes, there certainly are. Companies have until next year to become compliant with Section 301, but we are working with many of them now to make them compliant as quickly as possible, because some of the penalties associated with Sarbanes-Oxley are already in effect. We are working with them to help them become compliant and avoid the penalties of the Act.

Romans: Has there been a rush of whistle-blowing in the wake of all the big blow-ups we’ve heard about? Has it made employees more emboldened to call up on the phone and say ‘Hey, there’s something going wrong here’?

Malone: There’s no question about it. One of the great things a company can do is make sure their employees know what is appropriate behavior and also what to do if they witness something inappropriate. One of the things we’ve seen is all this awareness about the importance of calling in on those issues, all this awareness about what can happen to a company if they aren’t providing a mechanism like this, or if employees aren’t speaking up. This has created a great deal of interest on the part of employees to speak up.

Guest host: This sounds like the concept we had ten or 20 years ago of the ombudsmen. Do you think people are actually more comfortable today talking to an automatic system, talking to technology, than they are talking to a real person that’s down the hallway that they can talk to face-to-face?

Malone: If a company has an open door policy or an ombudsmen, certainly they should keep those programs in place. We don’t try to replace internal reporting mechanisms. What we do provide is an independent, anonymous hotline, staffed by trained interview specialists, 24 hours a day, seven days a week, 365 days a year.

About 40% of the calls we get are on weekends, and about a third of the time the incident has already been reported to management. Companies seeking this service want employees to know they will absolutely remain anonymous if they wish to – and about half of them do. They are also looking for a service that is available at all times for those employees to report their concerns.

Romans: When you get a whistle-blowing call, some egregious claim against a company, what do you do with that information? Do you contact the company and the SEC, or just the company? What happens after that?

Malone: It depends on the instructions from the company. Most companies ask us to send the information to particular employees within the organization or to members of the Audit Committee, based upon certain circumstances. As an example, if it involves falsification of company records, it may be that the company wants it sent directly to the Audit Committee. If it involves wage and hour issues, they may say to send that information to Human Resources. It really depends upon the incidents being reported, and where the client wants the information sent. Wherever they want it sent, is where we’ll send it.

Sometimes companies want to know about an incident immediately, which we call escalation. For example, if there has been a fatality in a facility, or the press is involved, or if there has been destruction of records, we can let them know about that right away.

Romans: So the company can take that information and try to figure out what is genuine whistle-blowing and what is a disgruntled employee.

Malone: Absolutely. A lot of times with anonymous callers you only get one shot at speaking to them to get accurate information. One of the things we offer as a service provider is actionable information, so people get the information they need to investigate the allegation.

Romans: Thank you so much for joining us to talk about the business of whistleblowing.