In 2018 the CEO of Barclays, Jes Staley, was castigated by British regulators for trying to unmask a whistleblower who had raised concerns about one of Staley's top lieutenants. Barclays' board clawed back a 500,000 [pounds sterling] bonus from Staley, and regulators fined him 640,000 [pounds sterling]. Regulators in New York then hit Barclays, itself, with another $15 million penalty.
The year prior, life sciences company Bio-Rad had to pay nearly $8 million to former general counsel Sanford Wadler after he reported fears of possible bribe payments to government officials in China. The company sacked Wadler, who filed a whistleblower retaliation lawsuit.
Bio-Rad and Barclays are especially noteworthy because in both cases, the whistleblowers' allegations were later determined to be unfounded. An arbitrary approach to handling whistleblowers is what got those companies into hot water. In our highly regulated, highly litigious, highly transparent world, it always is. Hence the need for rigor--and the need for boards to assure that rigor exists.
"It's important to set up a process [for addressing whistleblower complaints] in advance because you have to take every one of these issues seriously," says Dotty Hayes, a former CAE at both Intuit and Hewlett-Packard and now chair of the board of directors at First Tech Federal Credit Union in San Jose, Calif., and a board member and audit committee chair at a range of organizations. "You can't do it haphazardly."
That point is true even if the allegation doesn't seem credible, and even if it's proven wrong, Hayes says. The last thing a board wants is to improvise a response.
Be Disciplined; Be Independent
The good news is that truly grave whistleblower reports--allegations so serious that the board should oversee them, and should do so immediately--seem to be rare. "In my experience, if you have one or two a year that are significant and require high priority, that's a lot," says David Diamond, former head of internal audit at Lionsgate Entertainment, and now audit committee chair for The Daily Breath, a chain of Pilates studios in Brazil and the U.S. Likewise, Charlotte Valeur, CEO of the Global Governance Group and currently a director on seven boards, says that in 14 years of working in board governance, she has encountered only two instances of whistleblower allegations so serious that only the board could address it.
Again, so what? Boards don't know the veracity of a whistleblower allegation...