NCPA - National Center for Policy Analysis

More Companies Encouraging Workers To Report Corporate Fraud

December 16, 2002

Stung by the recent rash of corporate scandals, a number of companies are making it easier for employees to come forward and report instances of wrongdoing. In many cases, such efforts are prompted by a provision in the Sarbanes-Oxley Act, passed this year by Congress, which requires publicly-held companies to have a mechanism to raise anonymous questions about securities fraud.

  • An Ernst & Young survey of 617 U.S. workers has revealed that 30 percent of workers prefer to report questionable acts through anonymous phone calls, while 27 percent prefer to utilize a confidential hotline installed by the company.
  • Some 20 percent favor writing an anonymous letter -- while 16 percent would use a company Web site anonymously.
  • Some companies utilize ethics hotlines which are run by an outside organization.
  • Ernst & Young estimates that employers lose an estimated 20 percent of every dollar to workplace fraud.

National Hotline Services, based in Fredericksburg, Va. -- which provides ethics hotline services -- reports that it has 25 percent more clients than a year ago. Clients of ethics hotlines include financial institutions, the defense industry, and the health care and retail sectors.

Source: Stephanie Armour, "More Companies Urge Workers to Blow the Whistle," USA Today, December 16, 2002.

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