Business and Society 9th Edition by Archie Carroll,Ann Buchholtz

Exercise 10

When Ethics Hotlines Don't Work Ethics and compliance "hotlines" are designed to give employees an opportunity to internally "blow the whistle" on wrongdoing. Many of them are designed by corporate compliance and ethics offices and some of them are contracted out to independent firms to give employees a greater sense of confidentiality when they report what they see or think is going wrong in the company.
A major corporation that created such a compliance hotline was Olympus Corp., the Japanese camera maker. Olympus Corp. started its compliance hotline soon after Japan passed a whistle-blower protection law in 2004. The hotline office was to handle the receipt of phone calls, letters, e-mails and other forms of reporting from employees. These were to be reports of violations of the law or the company's code of conduct.
Upon investigation, The Wall Street Journal learned that the company created an independent panel to look into the use of the hotline and other company irregularities. It was discovered that there were significant problems with how the hotline was being used. It was found, for example, that the two executives who were in charge of the company's hotline were also allegedly behind the concealment of $1.5 billion in company losses. The panel's report noted that the company's corporate culture was characterized by serious problems. The panel observed a stuffy atmosphere that inhibited employees from speaking openly.
The panel concluded that compliance systems were significantly disabled. One employee who used the hotline to report on wrongdoing claimed he was transferred to a less desirable job after issuing a complaint via the hotline. The hotline required employees to report their names in case complaints needed to be investigated further.
When the hotline was initially set up, some recommended that it be administered by external parties so that those reporting complaints would feel more secure about their anonymity. The manager in charge strongly opposed using an outside party to administer the hotline. It was later revealed by a Japanese consumer affairs agency that about two thirds of the large firms did use outside parties to administer their hotlines.
1. What ethics issues do you see in the company's culture and administration of the hotline?
2. As an employee, would you feel uncomfortable filing an ethics complaint in a system run by the company itself? Could anything be done to ensure your confidentiality?
3. What principles should be followed in designing a company ethics or compliance hotline?