Essential Guide to Ethics Hotlines: Best Practices, Benefits, and Policies

Introduction

Organizations are under continual pressure to adopt and maintain ethical practices. Stakeholders, including shareholders and customers, expect companies to behave ethically; when they don’t, they are quick to voice their displeasure. In addition, the rise of social media has made it easier for people to share information about unethical behavior, putting pressure on companies to be more transparent and accountable.

One way that companies are trying to adopt more ethical practices is by setting up ethics hotlines. These hotlines allow employees to report unethical behavior anonymously, which can help prevent retaliation. In addition, having a hotline can show that a company is serious about addressing unethical behavior.

In this essential guide to ethics hotlines, we’ll cover everything you need to know, including best practices for ethics and compliance program policies, benefits of using an ethics hotline, and what you need to know about selecting and working with a hotline vendor.

Let’s dive in:

What is an ethics hotline?

Ethics hotlines are telephone or online services allowing employees and other stakeholders to report ethics violations or misconduct confidentially.

These hotlines provide a way for employees to speak up about potential misconduct without fear of retaliation.

Some businesses use a variation on this service in the form of an in-house hotline or complaint system; however, the problem with these solutions is that they are not found to have the same anonymity promise as an independent line. That’s why many firms opt for a third-party hotline provider.

An ethics hotline allows whistleblowers to safely present their concerns to an outlet that will directly send the communication to your organization — with the option of maintaining anonymity. Ultimately, this allows your company to collect and receive actionable information to improve your ethical business endeavors.

Ethics hotlines may also be referred to as:

• Ethics compliance hotlines
• Whistleblower hotlines
• Whistleblower compliance hotlines
• Compliance hotlines
• Anonymous hotlines
• Employee hotlines (there are other employee hotlines besides ethics compliance, such as employee call-off hotlines, but most people searching for employee hotlines seem to be looking for ethics hotlines, based on Google’s search results for the query)

When ethic hotlines are required

Some organizations are legally required to maintain anonymous reporting systems. Public companies must comply with Sarbanes-Oxley Act requirements for anonymous reporting of securities law violations. Government contractors typically need hotlines for reporting fraud, waste, or abuse. Other organizations may need them to meet specific contract requirements or bidding qualifications.

Whether your organization has a legal requirement depends on your industry, business structure, and applicable regulations. Your legal or compliance team can help determine what applies to your situation.

5 benefits of ethics hotlines

There are numerous benefits of establishing an ethics hotline, including:

1. Effective Fraud Deterrent

First and foremost, having a dedicated and publicized way for any employee to report allegations of fraud safely serves as a strong psychological deterrent for anyone who might consider trying to get away with misconduct at your organization.

According to the 2018 Global Study on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners, organizations without a hotline were 50% more likely to discover fraud within their organization by accident or as part of an external audit. The only thing worse, as a company, than discovering fraud is to be publicly caught off guard when it happens.

With a proven ethical hotline service, you can prevent corporate misconduct before it happens and take care of any potential allegations as soon as they are identified.

2. Promote an Ethical Culture

Ethics hotlines can help reinforce a company’s commitment to its ethics policies, which positively influences company culture.

The presence of an anonymous hotline can also help create a culture of honesty and accountability within an organization. The hotline can help ensure that employees are held accountable for their actions by encouraging employees to speak up about potential wrongdoing.

The hotline can also help organizations identify and address potential areas of concern before they become larger problems. The longer misconduct is allowed the fester, the more detrimental it can be to the organization.

3. Employees Trust Them

Third-party whistleblower hotline services are the most trusted reporting method among employees.

While many tips are received internally through direct reporting, having an anonymous hotline adds another layer of monitoring and prevention.

According to the 2018 study mentioned above, 42% of complaints were received through a telephone hotline.

However, when no other reporting mechanisms were in place, speaking with a direct supervisor was the next most popular way to report internally, accounting for 32% of tips received.

This metric represents the high trust employees place in accessible and comfortable reporting methods.

4. Collects Evidence

While not every tip that comes through will represent a warranted grievance, by creating a database of evidence in the form of a case management system, your organization will have the capacity to notice reporting patterns and latent concerns with individual departments or managers.

Sometimes a corporate misconduct concern isn’t one big conspiracy but, in fact, a variety of small grievances that categorically affect the treatment of a given team, hurting morale and decreasing productivity.

Further, according to the Association of Certified Fraud Examiners, half of all corruption cases were identified as the result of a tip, and businesses employing independent hotlines were 16% more likely to detect fraud by tip than those without.

These are just some of the many organizational concerns that can be uncovered and solved with an independent hotline.

5. Saves Money & Protects Your Organization

Suppose, for some unavoidable reason, a concern reported through a hotline does lead to later legal repercussions. In that case, the evidence and previous investigation performed by your organization as a result of a hotline tip can help mitigate the damages or exonerate you entirely.

While there will always be people who decide to pursue legal action, knowing that complaints were documented and HR investigations were conducted thoroughly can deter potential retaliation.

According to the same study mentioned above, organizations that utilized independent ethical hotlines saw 50% lower monetary losses associated with the fraud.

In the long run, employing a hotline will save you and your organization more money.

What gets reported to the ethics hotline

When should employees call the ethics hotline?

What gets reported to the ethics hotline can vary from organization to organization.

But, in general, the hotline is there to report any type of misconduct that could be considered illegal or unethical. This might include:

• Financial irregularities, such as embezzlement or fraud
• Bribery or kickbacks
• Discrimination or harassment
• Health and safety violations
• Environmental violations
• Conflicts of interest
• Violations of company policy
• Theft or vandalism

If you’re unsure whether something should be reported, it’s always best to err on the side of caution. Encourage stakeholders to give the hotline a call for things that can’t be resolved through existing channels.

Are ethics hotlines really anonymous?

The answer to this question depends on how the organization configures the hotline. Generally, when using a third-party hotline provider like CMS, the organization has the option to enable it as they see fit. The most common configuration is giving callers the option to remain anonymous or not.

When establishing a hotline, it’s important to be clear on the difference between anonymity and confidentiality and which applies to your organization.

When it comes to ethics reporting and whistleblowing, there is sometimes confusion about the difference between confidential and anonymous reporting. Because both allow individuals to report misconduct without fear of reprisal, they are often used interchangeably, but there are critical differences between them.

Confidentiality refers to keeping information private between two parties, while anonymity means the person’s identity is unknown.

If you have a hotline that gives callers the option to identify themselves, it will then be up to the organization to keep their identity confidential.

4 standard elements of an ethics hotline system

Now that we understand what ethics hotlines are and how they fit into the big ethics compliance picture let’s take a closer look at the hotline itself.

There are a few standard elements that come with most ethics hotline services. For this article, we’ll be examining third-party hotline services, not internal implementations. Still, these would be components you’d want to emulate if you were building your in-house solution.

1. Phone and web reporting channels

Most ethics hotline solutions have two channels for reporting misconduct: phone and online.

The telephone reporting feature is what the term “hotline” refers to. A hotline is generally a toll-free number that forwards directly to a third-party call center.

The online functionality is generally a branded web portal with a form that can be used to submit a report.

2. 24/7 availability

Another element of an effective hotline provider is that the service should be available to employees 24 hours a day, 7 days a week.

This means hesitant employees can call in a report from the comfort of their homes after mulling it over in a neutral environment outside the workplace.

Further, the hotline will anonymously collect all the information you need and have it ready and waiting for human resources or a dedicated compliance officer to review it first thing the next day.

The service can also easily send follow-ups when the investigation has been completed, notifying the person who lodged the complaint of the outcome or the consequences that were enacted due to their due diligence.

3. Anonymous and/or confidential reporting capabilities

As shared above, anonymity and confidentiality are two different things. Any ethics hotline solution should be able to keep the caller’s identity a secret. Whether you choose to maintain that feature is up to you.

4. Case management tool with two-way communication

A case management system with two-way communication is an important element of any ethics hotline because it allows the reporting party to share information and allows the responding party to follow up to get more information.

Tips on selecting and monitoring an ethics hotline vendor

There are several factors to consider when selecting an ethics hotline vendor. Here are some key considerations:

• Does the vendor have experience with anonymous ethics reporting? Almost any call center or answering service can take calls for you, but not all of them will have experience functioning as an ethics compliance hotline.
• Is the vendor independent? It’s important to select a vendor that is independent and objective.
• What are the fees? Some vendors charge based on the number of calls received, while others charge a flat fee. Be sure to understand the fees involved before selecting a vendor.
• What are the reporting procedures? Ensure you understand how reports will be made to the hotline and how they will be kept confidential.
• What are the confidentiality procedures? Confidentiality is critical for an effective hotline. Make sure you understand how the vendor will protect the confidentiality of callers.
• What are the communication procedures? You’ll want to know how the vendor will communicate with you about reports made to the hotline. Make sure you understand the vendor’s communication procedures before selecting them.
• What are the security procedures? Confidentiality of hotline reports is important, but so is security. Make sure you understand the vendor’s security procedures before selecting them.
• What are the termination procedures? If you decide to terminate your relationship with the vendor, you’ll want to know how they will handle any remaining reports. Make sure you understand the vendor’s termination procedures before selecting them.

Following these guidelines will help you select an ethical hotline vendor that is right for your organization.

Once you’ve selected a vendor, monitoring their performance is important to ensure they meet your expectations. Here are some key indicators to look for when monitoring your hotline vendor:

• Are calls being answered promptly?
• Are calls being handled professionally?
• Are reports reaching the right personnel in your organization?
• Are you receiving timely and accurate communication from the vendor?
• Is the hotline remaining confidential?
• Is the hotline secure?
• Are employees satisfied with the hotline?
• Are you given data on hotline usage?

These are just a few questions to ask when monitoring your hotline after it has been implemented. By following these guidelines, you can select and monitor an ethical hotline vendor that is right for your organization.

Introducing and promoting an ethics hotline

Once you have chosen a vendor and established your ethics hotline, you must introduce and promote the hotline within your organization.

Hotlines are only effective if employees know about them and feel comfortable using them.

Here are some tips for introducing and promoting a new ethics hotline within your organization:

1. Keep the messaging and instructions simple. Employees should understand the hotline’s purpose and how to use it without much training or explanation. Use relatable examples to highlight what the ethics hotline is for and how it aligns with your policies and culture.
2. Reinforce your commitment to no retaliation. Employees should feel confident they will not face repercussions for speaking up about potential wrongdoing.
3. Guarantee confidentiality. Employees should know that their identity will be protected if they remain anonymous.
4. Express commitment from the top of your organization. Employees are more likely to use the hotline if they see that senior leadership is committed to ethical business practices.
5. Publicize the hotline in the form of instructions and reminders in multiple locations. Hotline information should be prominently displayed in high-traffic areas, such as the break room or lobby. Additionally, reminders about the hotline should be included in companywide communications, such as newsletters or all-staff emails.

By following these tips, you can help ensure that your new ethics hotline successfully promotes ethical behavior within your organization.

Ethics hotline examples

Below are some examples of ethics hotlines at various organizations. More examples are available here.

Example 1: Higher education ethics and compliance poster

This example is from Washington State University in St. Louis

Poster text:

“Compliance Hotline

To report suspected violations of laws, regulations, university policies, or ethical/professional standards call: [phone number] or report online in writing at [web portal address]. All calls and written reports are anonymous unless you choose to leave your name or contact information to help us with follow-up. Hotline telephone and online reporting form have no caller/writer identification.

Protection of whistleblower policy

Anyone who, in good faith, reports a suspected or actual violation will be protected from retaliation.

For fully policy: [website address]”

Source: https://universitycompliance.wustl.edu/code-of-conduct/

Example 2: Standard verbiage from CMS’s Ethcomp reporting website

This is the standard text used on the CMS Ethcomp website, which is the online reporting portion of our ethics hotline service. This text explains what the system is and how it works.

Text:

“The Demo Sample Account Ethics and Compliance hotline is provided to staff, customers, vendors, and the public for the anonymous reporting of concerns, complaints and/or unethical events. The hotline is administered by an independent third party company to ensure the privacy of those filing reports. Live operators are available via phone 24/7/365 by calling 555-555-5555 or a report can be filed online by . The service allows for anonymous two-way communication and no tracing or call recording technology is utilized. At the conclusion of the report you will be provided with a unique Report ID and Passcode allowing you to follow-up on your report, provide additional details, or obtain a response to your concern.

How it works

1. You will be guided through a series of questions to provide information regarding the incident. Again, this is completely confidential, and personal information is not required to file a report.
2. At the completion of the questionnaire, you will be provided with a unique Report ID and Passcode. You will then be directed to follow up on the status of your report via web or telephone. Important: Please record your confirmation number and case number carefully and keep it in a safe place. You will not be able to access your report without these numbers.
3. Your report will be submitted to the appropriate personnel at Demo Sample Account to begin researching the incident.
4. Account Personnel or Counsel will review the report and they have the option to add status updates or ask additional questions
5. By calling 555-555-5555 or visiting this website and selecting Follow-up On a Report (Link) and providing your Report ID and Passcode, you will then be provided with the status update, additional questions, and/or feedback left by the reviewing party. You are also able to add comments to your original report.”

Source: CMS Ethcomp Demo

Example 3: Corporate ethics and compliance program website

KPMG is a multinational professional services network and one of the Big Four accounting organizations. They have a website dedicated to their ethics and compliance program.

The website reads:

“Ethics and Compliance Hotline is an anonymous reporting mechanism that facilitates reporting of possible illegal, unethical, or improper conduct when the normal channels of communication have proven ineffective, or are impractical under the circumstances.

The Hotline is available to firm partners and employees, as well as clients, contractors, vendors and others in a business relationship with KPMG, including other member firms whose partners and employees may be working with the U.S. firm on engagements with U.S.- based clients. If you are unsure about where to go with your concerns, or you feel uncomfortable reporting through normal channels of communication, or wish to raise the issue anonymously, you should access the Ethics and Compliance Hotline.

The Ethics & Compliance Hotline operates 24 hours a day, seven days a week, and is run by an independent, third-party provider. The Ethics and Compliance Hotline is designed to protect your confidentiality, and your anonymity, if requested. The Hotline provides a web-based reporting capability as well as a toll-free telephone-based service. Regardless of how a report is made, KPMG prohibits retaliation against anyone who, in good faith, reports a possible violation or who participates in an investigation, even if sufficient evidence is not found to substantiate the concern. KPMG will take appropriate action against any individual determined to be engaging in retaliatory conduct.

To access the Ethics and Compliance Hotline via the web, visit www.kpmgethics.com

To access the Ethics and Compliance Hotline via the telephone, dial 1-877-576-4033 (Non-US callers, click here for international dialing instructions.)

If you believe that your concerns cannot be addressed by the KPMG LLP (U.S.) Ethics and Compliance Hotline, you may contact the KPMG International Hotline at 1-866-246-9224″

Source: https://home.kpmg/us/en/home/about/ethics-and-compliance-hotline.html

How to set up a low-cost ethics hotline

Are you establishing an ethics and compliance program? CMS offers a low-cost, minimalist solution for organizations looking to set up an ethics hotline.

Most organizations only need the basics — a means for employees and other stakeholders to safely report misconduct 24 hours a day and a case management tool to facilitate two-way communication. CMS provides this service at a fraction of the cost of other solutions.

To learn more about ethics hotline solutions from CMS, click here or review our plans and pricing.