The heightened focus on the need to address and improve corporate governance started in 2001-2002 with the scandals at WorldCom, Tyco and Enron. As a result of the impact in the US and the flow on to the international economy the value of savings and superannuation in many countries (including Australia) dropped.
In the ensuing enquirers into those events it was discovered that personnel within the companies involved had failed in their internal attempts to raise their concerns about serious managerial misconduct and corruption they were aware of.
As a consequence of those findings and the severity of the financial impacts the US Congress passed the Sarbanes-Oxley Act (SOX) unanimously and in record time. The legislation had significant implications for boards, audit committees, management, auditors, attorneys and analysts. SOX was, and is, applied to all publicly traded companies listed with the US Stock Exchange; including companies from Australia.
The US legislation required audit committees to “establish procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters “. Obviously a telephone `hotline’, facilitated internally or by an external third party provider would satisfy that requirement.
The US has a long history of whistle blower facilitation and the US Fraud Examiners consistently report their major source of information comes from ‘tip offs’ (mostly from employees). However here in Australia there is no such history, certainly within the private sector and it was initially perceived as something new and untested.
While that attitude has decreased over the past decade and a half when it comes to other elements of whistle blowing there are still many myths and misunderstandings held by managers and other professionals.
In following installments we will enlighten you in respect to those existing misconceptions.