Employee Hotline, Part II: Planning ...continued

Internal vs. External
Some financial institutions provide an internally answered hotline as an option for employees who are uncomfortable discussing issues face-to-face. Calls to the hotline are frequently routed to an employee somewhere in the company, generally in Human Resources, Legal or the officer who handles Ethics. This solution may seem attractive and economical, but there are some serious drawbacks.

If employees realize they are calling an internal number, they may be afraid their identity will be traced and may decide not
to call.

There are also operational issues, like the potential for inconsistent handling of sensitive calls and callers encountering voice mail. An anonymous caller is generally fearful and cautious about leaving a recorded message. If they do leave a message, it is likely to be brief, potentially lacking important details that enable the company to investigate the allegation.

An internal hotline also leaves the financial institution vulnerable to charges of covering up issues involving management.

An external process provides greater safeguards of anonymity and avoids even the appearance of impropriety. While there are costs associated with an external hotline, the financial investment is small in comparison to the potentially disastrous results of actions, thefts or embezzlements that go undiscovered. In many cases, a professional hotline provider can offer these services for much less than it costs to implement them internally.

Making the decision early on about whether the hotline will be administered internally or externally is important, and you may find this a difficult hurdle. It should be addressed very early in your meetings.

Hotline Calls By Time Frame
(48% of Calls Were Received Outside of Business Hours)

52% - During business hours
28% - After Business Hours
15% - Weekends
5% - Before Business Hours

Receiving Tips - Compare Methods
The most effective method for any communication is a two-way conversation. The most effective hotlines are staffed 24 hours a day, 365 days a year. Around-the-clock coverage is vital, since past usage shows that nearly 50% of hotline calls happen outside of regular business hours. Typically, employees don't call from work and won't leave a message, so it's important to have someone standing by 24/7 who knows the right questions to ask.

The need for human interaction is especially critical when dealing with an anonymous caller, because there may never be another chance to document his/her complaint. If the caller leaves a message, details may be omitted that would help the financial institution investigate.

Gathering information via a suggestion-box style approach (email, voice mail box, web form, etc.) does not make the most of a unique opportunity to learn from a concerned caller. You need enough information to successfully investigate. Under the requirements of Sarbanes-Oxley, legally, this is a very important point because receiving a tip constitutes notice of an issue. You will be exposed to greater liability if you are found to be aware of an issue without taking action to investigate and
correct it.

It is important to understand that even with an external resource, you may continue to receive anonymous information through a variety of channels, including voice messages, letters and faxes. Information received through any channel should be funneled to the same people who receive hotline reports, regardless of the source.

What Issues Go To The Hotline?
The Sarbanes-Oxley reporting requirement concerns financial irregularities. However, employees, customers, members, vendors, and other stakeholders are likely to use a hotline number to report any issue that makes them uncomfortable. For example, complaints regarding discrimination and sexual harassment are high-liability issues that might be reported. Besides these two high-profile issues, studies show calls to hotlines cover theft; wages and hour issues; customer relations; safety, sanitation and environmental issues; workplace violence and threats; substance abuse; and other legal and compliance issues. Turning away these calls because the hotline is "for Sarbanes-Oxley Complaints Only" may alienate the employee who has made the difficult decision to take action. It's better to learn about any high-liability issue as early as possible, so that damage control can begin and potential legal action can be avoided. Simply having a general ethics hotline in place gives the financial institution an opportunity to limit their liability regarding such offenses.

Multiple hotlines are typically difficult to communicate. Offering one hotline for a host of complains makes communication simple for callers.

Who "Owns" The Hotline?
The people at your discussion meetings are typical of the several departments that should be interested in the ethics hotline, including Legal, Compliance, Human Resources, Internal Audit, Security, Risk Management and Loss Prevention.

The Legal Department and your Compliance Officer are interested in assuring the company is in compliance with section 301 of the Sarbanes-Oxley Act, which requires you to provide a mechanism for reporting financial irregularities while offering employees anonymity. Legal should also be aware of complaints that may result in legal action, such as those regarding discrimination, wrongful termination or harassment.

Human Resources focuses on the lion's share of issues reported via the hotline. Experience has shown that many of the calls report unfair treatment, discrimination, harassment, substance abuse or concerns about policies. For this reason, most financial institutions choose to make Human Resources responsible for managing the hotline program. The other ideal candidate for "ownership" of the hotline is the Compliance Officer.

One department that needs to be involved early on in the planning of a hotline is Information Technology (IT). There may be a need to set up mailboxes or plan for data feeds. Discussing these issues up front makes the entire process run more smoothly in the long run.

To be continued

Our thanks to THE NETWORK for providing us with Best Practices in Ethics Hotlines and for their permission to use it.

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 7, 7/05