The Theranos Story

We kicked off the in-person event with Tyler’s account of Silicon Valley’s biggest scandal – the Theranos story.

Founded in 2003, Theranos was thought to be revolutionizing healthcare with a product that made blood testing faster and less painful – the Edison. Theranos’ founder and CEO, Elizabeth Holmes, raised approximately $724 million of capital from venture capitalists and private investors and at one stage, the company was valued at $9 billion. Tyler was a biology major at Stanford University who joined Theranos as a research engineer. He is also the grandson of the late George Shultz, former US Secretary of State, who was a Board member at Theranos. In 2015, Tyler was one of the former employees that exposed to the world that the Edison device wasn’t what it was claimed to be after he had expressed his concerns internally. The SEC charged Theranos, Elizabeth Holmes, and former President Ramesh “Sunny” Balwani with fraud. In January 2022, a jury convicted Holmes on four charges: one count of conspiracy to defraud investors, and three counts of wire fraud against investors.

Tyler gave the audience fascinating insight into his experience of being a whistleblower; how it felt to be in a position where speaking up internally fell on deaf ears, and what went through his head when deciding to report his concerns externally.

Lessons Learned

The panel went on to explore what good corporate compliance means in today’s workplace and how organizations can strive to get there. So what lessons can compliance professionals and Corporate Counsels learn from the Theranos case?

Value Those Who Choose To Speak Up

Whistleblowers like Tyler can often face stigma and the threat of retaliation for reporting incidents of misconduct. But Mary highlighted that whistleblowers are like canaries in the coal mine and should actually be viewed as an organization’s most loyal employees who care enough to Speak Up about difficult truths.

Not only do whistleblowers play a critical role in identifying business risks but they also safeguard the welfare of that organization and even society. In the EU, for example, anyone who reports a breach of Union law that is harmful to the public interest is considered to be a whistleblower. Many organizations therefore need to change the way they view employees who choose to Speak Up, recognizing them as a critical front-line defense. Whistleblowers should be celebrated for their bravery in speaking up and valued for their efforts to improve the organization. This may be through positive annual performance reviews and an openness to hiring former whistleblowers, for example. Here are five tips to encourage your employees to Speak Up.

Consider the Costs

The demise of Theranos and subsequent trial is a prime example of the high costs of misconduct. For organizations that want to improve their bottom line and do the right thing, it’s crucial to put the proper strategies in place to combat misconduct and protect themselves from hefty financial costs, headline-grabbing media coverage, and other major risks.

Take An Ethical Stance

Tyler and Vault Platform’s CEO Neta Meidav talked about their own experiences as founders and why ethics should be baked into every business from the get-go, regardless of external pressures. For example, many founders are encouraged by investors to paint a picture of what their company is going to be, rather than what stage it is at that moment in time. But even as organizations seek investment and think about growth strategies, it’s important that they never lose sight of their integrity and the values that likely led to the company’s creation in the first place.

Could A Misconduct Reporting Solution Have Helped?

When asked whether Vault’s all-in-one speak-up and resolution software could have helped Theranos, Neta said: “No, I don’t believe that Vault could have helped Theranos. Our technology can only deliver results when leadership takes an active role in driving integrity. The good news is that I truly believe Theranos is an edge case; the vast majority of companies are interested in safeguarding their cultures and values, taking an ethical stance, and actively protecting their employees, investors, and customers.”

The post Compliance Lessons Learned From Our Event With Whistleblower Tyler Shultz appeared first on Vault.

In this blog post, we suggest ways your business can meet the DOJ’s expectations and elevate your ethics and compliance (E&C) programs to truly deter wrongdoing beyond simple compliance.

Heed The Call

Deputy Attorney General Lisa Monaco’s remarks came on 15th September 2022 at a New York University event. As part of her wider policy announcements, she called for corporations to disclose in a timely fashion relevant facts and records about all potentially culpable individuals involved in misconduct. 

There are two significant parts to this call worth delving into; i) both companies and individuals will be held more accountable for workplace misconduct and ii) the speed at which misconduct is resolved and reported to the DOJ. Bad apples can exist in any organization but it’s how they’re dealt with and how quickly your organization reacts that really matters to the DOJ.

i) Rooting Out Problems

If your organization not only wants to comply with the DOJ’s plan but also set industry-high standards for business integrity, it must have efficient policies and programs that get to the root cause of misconduct.

When it comes to identifying culpable individuals, Vault’s GoTogether® feature enables employees to surface a report under the condition they’re part of a pattern, including when another Vault app user in their organization names the same specific individual as an alleged perpetrator.

Even if specific individuals aren’t named as perpetrators in misconduct reports, ethics and compliance professionals can use the data available in Vault’s Resolution Hub to spot trends and identify high-risk areas. It may be that there are specific departments where incidents occur more often, for example, or specific types of misconduct that are more prevalent. It’s then up to case managers to investigate and take action based on their findings.

ii) Time For A Change

Monaco urged organizations to report misconduct to the DOJ quickly and made it clear that penalties will be enforced on those that don’t turn over information fast enough.

Modern resolution platforms like Vault offer organizations insights that can drastically reduce the time between report submission and resolution. When data is decentralized, such as when it comes from incumbent solutions and spreadsheets, it makes data gathering and analysis a time-heavy nightmare. Audit logs need to be created manually, which leaves a lot of room for oversight and manual error. Vault on the other hand centralizes all data and allows you to export audit reports from within the Resolution Hub. This in turn speeds up the process of reporting to the DOJ, meaning your organization remains fully compliant and is able to demonstrate its commitment to proactively tackling misconduct, all in a timely fashion.

Rewarding Transparency And Honesty

According to a U.S. Sentencing Commission report, the number of guilty pleas by corporations has trended downward from a high of 304 in 2000 to just 90 in 2021. Coupled with this is the overall decline in corporate criminal prosecutions over the last decade, which Monaco called out. She added, “We need to do more and move faster.”

The memo issued alongside Monaco’s announcement directs enforcement sections of the DOJ to develop policies that encourage companies to voluntarily disclose misconduct. Organizations should be prepared to discuss their full record of past criminal and regulatory misconduct when resolving a case with the DOJ. Those that choose to disclose incidents of misconduct to the DOJ willingly will be eligible for deferred prosecution agreements. Critical to Monaco’s plan is encouraging organizations to be more honest and transparent with their misconduct reporting.

This extends into the preservation of communications as well. Firstly, compliance leaders must ensure the DOJ’s new approach to compensation is communicated internally. Secondly, they must establish effective policies to ensure that business-related information communicated on personal devices and third-party messaging platforms is preserved. “Cooperation credit” will be given to organizations that can collect and provide non-privileged information relevant to the investigation.

Handily, Vault facilitates communication between case managers and reporters and the uploading of documentation, such as copies of any communications from third-party channels. E&C teams can then keep track of all case materials and communications relevant to the case within the Resolution Hub and provide these to the DOJ as evidence for any ongoing investigations. 

A Picture Of Health

The DOJ’s announcement makes it clear that organizations can no longer sideline their compliance commitments or continue with ‘business as usual’. They must show that they are reactively and proactively dealing with all forms of misconduct at all levels.

The key takeaways are that organizations need to aid any ongoing DOJ investigations and ensure that ‘bad apples’ – regardless of seniority – are dealt with appropriately. Speed and transparency are essential, as is easy access to as much historical and ongoing case information and data as possible.

Above all, your organization should aim beyond compliance to really stand out from the crowd. Taking a leading stance in the ethics and compliance space can help to differentiate your organization from competitors and ensure that you make headlines for the right reasons when DOJ investigations become public knowledge.

The post Evaluating The Health Of Your E&C Programs In Light of the DOJ’s Announcements appeared first on Vault.

This blog post will focus on the positive incentives – the carrots – of the memo, mainly on the second element, Guidance on Corporate Accountability. This element is a recipe for General Counsels and Chief Compliance Officers to make their business case, demonstrate responsible corporate behavior, and a call for action to revise companies’ compliance frameworks.

Watch the relevant section of the video

A. Evaluating a Corporation’s History of Misconduct

To harmonize the way DOJ departments treat criminal histories, prosecutors should consider the corporation’s record of past misconduct, including prior criminal, civil, and regulatory resolutions, both domestically and internationally, and give due weight to it – “not all instances of prior misconduct are created equal” as Monaco emphasized.

If the conduct at issue reflects broader weaknesses in a corporation’s compliance culture or practices, it will be held against the company. For example, conduct that occurred under the same management team and executive leadership may indicate a lack of commitment to compliance or insufficient oversight. Additional indicators may be a shared root cause and remediation taken such as employee discipline, compensation clawbacks, or compliance program upgrades.

Food for Thought

Consider whether your company is equipped with powerful compliance data analytics to deter organizational health, identify shared or repetitive misconduct across the company, and measure remediation effectiveness.

B. Voluntary Self-Disclosure (VSDs) by Corporations

“We expect good companies to step up and own up to misconduct,” and will appropriately reward such companies, Monaco said. For the first time, she called on those sections in the departments that have yet to adopt a clear and predictable VDS-incentivizing program to do so in a transparent, formal, documented policy that must adhere to two core principles: (i) “Absent aggravating factors” companies that self-disclosed wrongdoings would not be pursued of indictments or sought guilty pleas; (ii) Independent compliance monitor will not be imposed for a cooperating corporation (see more about monitoring in section C).

The best way to surface corporate misconduct is through internal channels. This known fact is also quoted in the DOJ memo: “In many circumstances, a corporation becomes aware of misconduct by employees or agents before that misconduct is publicly reported or otherwise known to the Department.”

Watch the relevant section of the video

Food for Thought

More than 80% of rewarded whistleblowers knocked on their employer’s door before reaching out to external channels. Does your company empower employees to Speak Up and truly invest in compliance enabling VSD, or are you just ‘ticking the box’ with a hotline solution? 

The importance of surfacing information and Compliance Officers’ access to it was discussed earlier this year by Lauren Kootman, a senior official in the DOJ’s fraud section. A forthcoming policy will require CCOs and CEOs to certify in settlement agreements that their compliance programs have been “reasonably designed” to prevent future violations. It was explained that such certification was meant to empower Compliance Officers by ensuring they have “adequate visibility and access to information” about violations and business decisions, and guarantee “a seat at the table that all Compliance Officers should have in an organization with a functioning compliance program” as echoed again in Assistant AG Kenneth Polite’s remarks.

Food for Thought

Consider whether your company is doing smart business and empowers Compliance Officers with adequate visibility and access to business information and if it invests in a centralized internal control platform designed to support that and ensure the right information flow.

C. Evaluation of Cooperation by Corporations

The level of a corporation’s cooperation can affect the form of the resolution, the fine, and the undertakings. Companies seeking credit for cooperation must timely preserve, collect, and disclose relevant documents located both domestically and abroad. 

According to the memo’s first element (I.A – Timely Disclosures and Prioritization of Individual Investigations) a disclosure that came too long after the criminal misconduct will reduce the likelihood of adequately investigating the matter in time and will affect the eligibility for “cooperation credit”.

Food for Thought

Is your company equipped with a powerful and efficient resolution platform to reduce the investigations period and comply in a timely fashion?

D. Evaluation of a Corporation’s Compliance Program

We all know that an effective compliance program and the corporation’s commitment to fostering a strong ethical and compliance culture are evaluated by prosecutors and may have a direct and significant impact on resolution terms. In her remarks Monaco presented new metrics relevant to prosecutors’ evaluation:

1. Compensation Structures that Promote Compliance

As in real life, positive compliant behavior should be rewarded and misconduct should be penalized. Companies should demonstrate that this principle is clearly incorporated in their compensation systems and exercised in practice. Prosecutors were guided to consider whether a company’s compensation systems enable penalties to be levied against current or former employees, executives, or directors whose direct or supervisory actions or omissions contributed to criminal conduct.  

Further guidance is expected to be developed by the Criminal Division by the end of the year, the leading principle is about shifting the burden away from shareholders to those who contributed either directly or indirectly to misconduct. A day after Monaco’s remarks, Assistant AG Kenneth echoed the announcement about compensation structures and specifically clawback provisions.

Watch the relevant section of the video

Interestingly, the announcement about DOJ expectations for compensation systems rewarding compliance and imposing financial sanctions and clawbacks came out right after the Securities and Exchange Commission (SEC) signaled for more aggressive use of an existing SOX section 304 that empowers the commission to clawback certain CEOs and CFOs compensations. The expanded usage of SOX 304 will pursue the “full amount of the reimbursement that is required by the statute” as said Sam Waldon, the chief enforcement counsel at the SEC. So not only bonuses earned as a result of serious misconduct will be clawed back by the SEC, but all incentive-based pay earned in the year following a fraudulent filing. 

Food for Thought

Compliance leadership is responsible to deliver the message about the DOJ’s new approach to compensation systems internally in their companies.

2. Use of Personal Devices and Third-Party Applications

Companies must establish effective policies to ensure that business-related information communicated on personal devices and third-party messaging platforms is preserved. “cooperation credit” will be granted to companies ensuring their ability to collect and provide non-privileged information relevant to the investigation “including work-related communications (e.g. texts, messages, or chats), and data contained on phones, tablets, or other devices that are used by its employees for business purposes.”

Food for Thought

Is your company equipped with a powerful resolution platform centralizing and collecting all business communications relevant to the investigation?

Monaco’s speech previews a significant revision to DOJ’s corporate enforcement policies and calls for General Counsels and Chief Compliance Officers to revise and tighten their company’s compliance frameworks.

Borrowing Assistant AG Polite’s closing remarks about the importance of personnel and in his exact words “There is no more important legacy than the people we hire”, companies must empower their risk, legal and compliance leadership and guarantee their seat at the decision table. 

A perfect compliance framework will not have an impact on a toxic and unethical environment. To set the right corporate culture, fulfill their fiduciary duty and avoid misconduct and corporate crime, boards, companies, and executives must seek strong compliance voices in all of their business workforce and foster true and authentic speak-up culture.

Hila Petrank
Head of Legal & Compliance, Vault Platform

The post How The DOJ Changed the Recipe for Corporate Crime Enforcement appeared first on Vault.

The elements of shift cover four areas of practice guidance and call on companies to revise their compliance frameworks.

(I) Individual Accountability 

Holding individuals who commit and profit from corporate crime accountable deters future illegal activity and promotes the public’s confidence in the justice system.

A. To allow adequate investigation and seek appropriate criminal charges against individuals, corporations must disclose in a timely fashion relevant facts and records about all potentially culpable individuals involved in misconduct.

B. Going forward, prosecutors must determine whether there is a significant likelihood that the individual will be subject to effective prosecution in other jurisdictions before prosecuting in the United States.

(II) Corporate Accountability

A. “Not all instances of prior misconduct are created equal”. In determining how best to resolve an investigation, prosecutors should consider the corporation’s history and record of past misconduct and give it due weight. Monaco discusses the approach, addresses a range of factors, and outlines additional guidance for corporate recidivism evaluation.

B. DOJ will reward companies that voluntarily self-disclosed (VSD) wrongdoings and would not pursue indictments or seek guilty pleas of corporate wrongdoings absent aggravating factors. For the first time, Monaco called those sections in the DOJ that have not yet adopted a clear and predictable VSD-incentivizing program to do so.

C. Level of a corporation’s cooperation can affect the form of the resolution, the fine, and the undertakings.

D. We all know that an effective compliance program and a strong ethical and compliance culture may have a significant impact on resolution terms. Monaco presented additional new metrics relevant to prosecutors’ evaluation:

1. 1. Companies should demonstrate that the principle of shifting the burden away from shareholders to those (employees, executives, or directors) who either directly or through supervisory actions or omissions contributed to misconduct is reflected in their compensation systems and exercised in practice. The next Blog post in this series will extensively discuss the expansion shaping in the DOJ and SEC approach to holding corporate leadership more accountable to misconduct.
   2. Companies must ensure that business-related information communicated on personal devices and third-party messaging platforms is preserved.

(III) Independent Compliance Monitorships

A. The need for a monitor and its scope must depend on the facts and circumstances of a particular case. When evaluating the necessity and potential benefits of a monitor, prosecutors should refer to the (non-exhaustive list of) factors detailed in the memo.

B. In selecting a monitor, prosecutors should employ consistent and transparent procedures.

C. Continued Review of Monitorships.

IV. Commitment to Transparency in Corporate Criminal Enforcement

Transparency in the department’s work is important to encourage companies to adopt compliance programs, voluntarily disclose and cooperate in investigations. The memo outlines the desired scope of corporate criminal resolution agreements and determines that it will be publicly published.

This is the first post in an ongoing blog series as we take an in-depth look at the most critical elements of the DOJ’s announcement.

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Ethics and Compliance (E&C) professionals also rely on facts, statistics, and trends for their daily activities and responsibilities. When it comes to incidents of workplace misconduct, it’s one thing to gather data, but how can E&C professionals connect the dots to really make the most efficient use of it to combat misconduct?

1. Keep The Big Picture In Mind

E&C professionals must be proactive and reactive to misconduct through policy-making, evidence gathering, investigation, and communication. With the right tools in place (more on this later), they should be able to respond to and resolve incidents promptly as well as store key information relating to these incidents. They then need to dedicate time to analyzing this data with an eye on the bigger picture. Only once they’ve gathered and analyzed enough useful data can E&C professionals begin to see patterns and trends and start to implement more impactful changes throughout the company.

2. Streamline Your Processes

Identifying patterns of misconduct and implementing effective changes rely on having the right data and the time to analyze it. If you’re an E&C professional, one key consideration is how you’re gathering misconduct information and how much time and effort this process requires. If you’re using an incumbent reporting solution such as a hotline or spreadsheets, these processes require a significant amount of manual input, eating up valuable time that could be spent on data analysis and misconduct prevention.

It’s also worth noting that 71% of office-based workers are more likely to report an incident of workplace misconduct if they do not have to talk to anyone to report it. This tells us that not only are legacy reporting solutions eating up E&C professionals’ valuable time but they aren’t even supported by the employees expected to use them in the first place.

3. Get Everyone Onboard

Another component of connecting the dots is to actually have faith that you have all the data you need and the full support of the business to resolve incidents following an investigation. On average, only 37% of workplace misconduct incidents are reported by those who have personally experienced or witnessed an incident. However, 86% of office workers believe that businesses should find secure ways to collect and leverage misconduct data to support long-term strategies to combat it. For this, the company needs to have a thriving speak-up culture in place where employees feel trusted, valued, and know for a fact that they won’t face retaliation for reporting. Here are five top tips to encourage employees to Speak Up.

4. Prioritize Next Steps

Next, consider what details and data form trends and patterns you feel require further investigation. For example, are there numerous reports pertaining to the same named offender? Are the reports consistent in any other way, such as within a particular department or location? The incident data tells you granular details that paint a picture of your wider risk areas. This helps you identify those people that require further training or support and whether a named offender is a ‘bad apple’. Your next steps will vary on a case-by-case basis but ultimately, any actions taken should always be in the best interest of protecting employees and the business’s reputation.

5. Invest In The Right Tools

Threaded throughout the above considerations is the simple fact that connecting the dots with data requires E&C professionals to adopt the right tools for the job. Employees need a solution that allows them to submit incident reports either named or anonymously and provide as much evidence as they feel comfortable sharing. It also needs to fit into their everyday life. For example, 74% of employees would be more likely to use an app-based channel to report an incident of misconduct, such as Vault. You also want to encourage reporters to provide as much information as they can and leave the door open for further communication, should you require more evidence from the reporter.

For E&C professionals, the right technology allows them to record and track individual reports and drive operational efficiencies with automated triage. With Vault, you can transform your case resolution with easy collaboration between teams and connect the dots and identify risk patterns before they become problems. Above all, automating as much of the data gathering and analysis as possible saves you time and allows you to make fast and efficient use of this data to proactively and reactively deal with misconduct patterns as early and often as possible.

Looking for an all-in-one system of record where all reports can be safely captured, tracked, and resolved centrally? Book a demo today.

The post Connecting The Dots: Combat Misconduct With Real Insights appeared first on Vault.

1. Ticking the Compliance Box Isn’t Enough

While many organizations opt for compliance ‘solutions’ that simply meet the minimum regulatory requirements, the panel discussed how companies should be aiming higher. To truly move the needle on workplace culture, we collectively need to redefine the modern workplace.

Organizations should be trying to create a thriving speak-up culture where employees feel trusted, valued, and know for a fact that they won’t face retaliation for reporting. Here are our top tips to encourage employees to Speak Up.

2. Platform Parallels

Interestingly, Vault Platform and Ethena share quite a lot of similarities, both having been founded by female leaders with a passion for revolutionizing the modern workplace and creating compliance tools that promote trust.

Roxanne was formerly an active-duty Army Officer. She talked about how the US military’s approach to day-to-day training consists of repeating actions and routines until perfected and how this is at odds with the army’s compliance training, which was relegated to a tick-box exercise. She then discovered that the corporate world has a similar approach to compliance and recognized the need for a compliance training revolution.

Neta’s journey that led to the founding of Vault also revealed to her that misconduct reporting in corporate environments is often a tick-box exercise that only addresses minimum compliance and regulatory standards. Solutions like Vault and Ethena go beyond ticking boxes, helping organizations to develop truly ethical and compliant cultures.

3. The Critical Role of Trust

One of the key elements missing from modern workplaces is trust. Frances talked about the findings of Edelman’s annual trust and credibility survey and how – despite our collective understanding of how trust breaks down – we’ve yet to significantly move the needle in the right direction. 

Businesses today are expected to take an active approach to build trust and this expectation comes from customers, stakeholders, and employees. Once an organization understands how trust has broken down, it can start to take actionable steps to rebuild trust. Frances highlighted that she’s seen positive results almost immediately from organizations that have invested time and resources to trust, but that it needs to be a ‘fire prevention’ approach rather than ‘firefighting’.

4. Painkillers and Vitamins

Another hot topic that arose more than once during the webinar was the importance of technology and how it goes a long way to helping organizations build trust with their employees.

As CEOs of compliance tech solutions, Roxanne and Neta both touched on the importance of solving customer pains and improving customer experience with the help of technology. One common way to talk about products during their development is whether they’re a painkiller or a vitamin, the former solving unmet customer needs while the latter improves on an existing solution. Vault and Ethena are now building upon their initial products with all of the ‘vitamin’ solutions and features that customers crave. In the case of Vault, this is all about data analytics tools that help compliance leaders save time and gain valuable insights into what’s happening in their organizations and where their areas of expertise are needed most.

If you didn’t get the chance to join us for the webinar, you can now watch it on demand on our website.

The post 4 Top Takeaways: Modern Compliance Tools that Build Trust Webinar appeared first on Vault.

In this blog post, we take a look at how and why you should consider the full supply chain when building and improving your ethics and compliance strategy.

The Global Picture

Today, the vast majority of enterprise and mid-market businesses have global supply chains, which adds an extra level of complexity when it comes to monitoring their wider impact on the environment and the communities in which they operate. This broad, complex landscape also allows for serious ethical violations to occur without the brand’s knowledge.

Companies are under increasing pressure to ensure they’re taking action even if the issues in question fall outside of their everyday operations. This stems not only from the organization’s own push to do the right thing but also from regulatory bodies, investors, and consumers, all of whom are increasingly concerned by issues relating to income inequality, forced labor, discrimination, and climate change. Organizations can also retain employees if the business’ policies and actions demonstrate that they share the ethical beliefs of their workers and are committed to doing the right thing.

Fixing Kinks in the Supply Chain

With so many eyes on ESG performance, it’s no surprise that these areas have become critical strategic components for a growing number of organizations. Some businesses choose to greenwash, downplay, or disregard their true ESG performance. But if Volkswagen, Deutsche Bank, and other headline-grabbing scandals can teach us anything, it’s that the fallout and subsequent costs – financial and reputational – just aren’t worth the risks.

Instead, forward-thinking organizations are hyper-focused on the mission to do the right thing: act ethically; treat their employees with respect; nurture a speak-up, listen-up culture; meet customer expectations; and ensure their supply chain is just as ethical and sustainable as their own operations. Here are three lessons we can all learn from forward-thinking organizations and those falling behind when it comes to ESG and supply chain compliance:

1. Visibility

Firstly, you need to know who your suppliers are, what they provide to your business, how they operate, and who are your suppliers’ suppliers. With a clearer picture of the chain as it stands now, you can start to map frameworks and set expectations for your product and service providers.

2. Frameworks

The aim of E&C supply chain frameworks is to create a cascade of ethical practices. You may choose to only work with suppliers that adhere to the same ethical and environmental standards as your organization, for example. You may also choose to assess and stipulate cultural and social responsibilities into the operations and ecosystems throughout your supply chain.

3. Communication

As you put your suppliers and their suppliers to work for your company’s goals, it’s important to communicate your intentions with them, as well as to internal and external stakeholders. Firstly, this may be via email or newsletter setting out your intentions and deadlines. You might then decide to include information in monthly board reports and your company’s annual reports, keeping everyone abreast of any progress made and how it impacts your company’s goals.

Setting high ethical standards throughout your supply chain as well as in your own operations sends an unequivocal message to your investors, Board members, customers, employees, and other suppliers bidding for your business. You conduct business honestly and ethically, strive to be the best business you can be, and drive comparable standards of behavior throughout your supply chain.

Create a speak-up culture with our innovative misconduct reporting app and Open Reporting solution today! Book a demo now.

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Our ‘Trust Gap’ survey revealed that nearly a third of workers believe that workplace misconduct is or would be ignored by their employer. The figures suggest a huge number of employees simply don’t feel safe in the workplace or trust their employer to do the right thing – an indictment of organizational culture.

Why Trust is Important in the Workplace

Establishing trust between employer and employee is crucial for any organization to function at its best. If not, the organization will face greater employee turnover, higher costs, and more risks as a result.

People are quitting their jobs at a higher than usual rate, choosing environments where they can feel safe, valued, and more empowered to make choices. Employers that are failing to prioritize trust and transparency are struggling to retain their talent, leading to greater costs. We found that ​​office-based employers in both the UK and US are likely to have spent over $20.2 billion in re-hiring costs over a 12-month period.

Productivity is also affected by the Trust Gap. Employees with low morale and a lack of trust in their employer may experience increased stress and a lack of motivation, which greatly impacts their productivity and that of the wider business.

When you trust your employees, you empower them to succeed. It means employees enjoy a culture of honesty and a sense of belonging. This makes them feel more secure in their jobs, which can help to reduce turnover and the costs that come with it. When there is a net of psychological and physical safety in place, employees will also feel more comfortable raising concerns about workplace misconduct. They’ll be confident that the company will pay attention to their concerns and are assured of protection from retaliation. This in turn protects the organization from the risks and high costs of misconduct.

The Building Blocks of Trust

So how can organizations demonstrate that they trust their employees? The key considerations here are autonomy and empowerment. Here are five ways organizations can establish a greater sense of autonomy and empowerment in the workplace. 

1. Listen to and Act on Feedback

Leaders, E&C professionals, and People and HR teams should be encouraging employees to come forward and Speak Up as well as demonstrating that the business is listening through both its actions and by developing policies based on feedback. A good place to start would be to introduce methods of measuring employee satisfaction and gathering feedback, such as pulse surveys. With enough data on the areas of concern, your organization can prove to employees that it values and acts upon their feedback, strengthening areas before they become serious problems.

2. Coaching and Training

Leaders and managers play a critical role in building trust and bridging the gap between the employer and its employees. Training programs and coaching opportunities are a great way to boost your leadership and management teams and ensure they have the right skills and knowledge to support and nurture employees.

3. Communicate Results

Be sure to communicate the actions and results of your employee surveys and any feedback gathered promptly and continue to work with employees to determine what further actions could improve their experience in the workplace. This open, transparent approach shows that you trust employees intimately, and they’ll repay you in kind.

4. Provide Psychological and Physical Safety 

Employees also need easy access to, knowledge of, and confidence in the digital reporting tools and escalation path when it comes to reporting incidents of misconduct. Good awareness of their rights and obligations under company policies, including confidentiality and non-retaliation, and an understanding of the company’s investigation protocol all contribute to psychological and physical safety. 

Vault Platform is the misconduct reporting and resolution platform designed for the modern workplace and the psychological safety of reporters, replacing outdated hotlines with mobile-first, digital native reporting and case management tools.

5. Set a High Bar

Many of the world’s most ethical companies historically outperform their peers and competitors financially. By aiming for the ‘gold standard’ of employee engagement and rebuilding trust, your organization can actually get an edge over competitors and strengthen its reputation internally and externally.

Discover more about the importance of rebuilding trust with employees in our game-changing Trust gap survey.

The post The Importance of Rebuilding Trust Between Employers and Employees appeared first on Vault.

The majority of ESG data is collected from the top-down, but more and more companies are beginning to understand that reducing the risk of ESG violations comes from every level of the business.

In this blog post, we take a closer look at the ESG violations that have dominated headlines and provide some key considerations for organizations looking to stay on the right track.

What is ESG?

ESG can be defined as three non-financial dimensions: an organization’s impact on the environment, social institutions and human relationships, and the way the organization governs itself and makes decisions. Many investors use ESG metrics to determine a business’s long-term sustainability and potential risk areas, aiding their decision-making process.

When it comes to measuring their environmental impact, some organizations choose to ‘greenwash’ their results. The term ‘greenwashing’ was introduced in 1986, initially used to describe the actions of a beach resort in Samoa. Reusable towels were being provided as a way to help the environment but at the same time, the resort was expanding its facilities, leading to a greater negative environmental impact. Today, greenwashing is used to describe statements that exaggerate, mislead, or highlight certain facts and omit others in relation to environmental impact.

The ‘s’ of ESG should hold organizations to account for social issues within the company, such as harassment, racism, and discrimination. These areas hinder the career progression of underrepresented employees and are amongst the most common forms of workplace misconduct. If the organization is being run in such a way that violations and cover-ups are commonplace, this is an issue with the way the organization governs itself and makes decisions.

Making Headlines

One of the most notable incidents of ESG violation came in 2015 when the Environmental Protection Agency (EPA) found that many Volkswagen diesel engine cars were being sold with software that could detect when they were being tested, changing the performance to improve results. Similar investigations followed in Europe in what became known as Dieselgate and by 2019, Volkswagen’s costs associated with the scandal were estimated to be over $32 billion. Interestingly, one of the outcomes of the federal investigation into Dieselgate was a recommendation to improve the internal whistleblowing mechanisms within Volkswagen. 

A 2021 analysis of advertising related to the COP26 climate summit discovered ‘rampant greenwashing’ by companies on social media platforms. The same year, a unanimous decision by the UK Supreme Court found that Uber must classify its drivers as workers, entitling them to better workplace conditions and protections for the first time. In the US, the release of ‘The Facebook Papers’ proved that Facebook was well aware that its business practices were harming the public, causing considerable brand reputational issues.

In May 2022, the offices of Deutsche Bank and its asset management subsidiary DWS were raided over allegations that the firm had overstated the green credentials of its investments. DWS CEO Asoka Woehrmann subsequently resigned in the aftermath.

Goldman Sachs Group Inc is the latest institution facing a probe by the US Securities and Exchange Commission (SEC) into investments using ESG criteria. The investigation is specifically focused on the Wall Street giant’s mutual-funds business and whether some investments were in breach of ESG metrics promised in marketing materials.

What’s Driving This?

Social inequality, unethical operations, carbon emissions, and climate change are just some of the key issues we’re all facing, and society’s focus on these areas extends into investment decisions. Bloomberg reported that ESG assets are on track to exceed $53 trillion by 2025, with climate accounting for about 25% of ESG funds. Inevitably, some companies attempt to ‘game the system’ in order to benefit from green credentials and additional investment. A 2021 study by Quilter found that greenwashing was the biggest concern for 44% of investors when it comes to responsible investing, demonstrating that it’s a systemic problem.

ESG has also been linked to top-line growth and productivity as more and more consumers make purchasing decisions based on how ethical an organization is while employees gain a greater sense of purpose working there. Marketing activities that promote the environmental and social interests of an organization – whether real or greenwashed – will therefore catch the eye of prospective customers and employees.

Added to this are the potential loopholes in regulations and ESG metrics that allow companies to greenwash their performance. Procter & Gamble, for example, committed to reducing its annual emissions by 50 percent by 2030. However, it was reported in 2019 that these only included Scope 1 and 2 emissions, not Scope 3. P&G’s climate commitment, therefore, applied to just 2% of its supply chain emissions.

Things Need to Change

So, what can we do to combat ESG violations and the growth of greenwashing? As consumers and investors, we can be selective in the products and services we buy from and invest in, choosing responsibly based on the actual environmental and social output of companies. 

Regulators can set the standards for what ESG metrics offer the most value and continue to crack down on violations, increasing the risks to companies choosing to do so.

Organizations, meanwhile, need to take note of the violations being discovered and the huge costs associated in the aftermath, including the risk of soiling the brand’s reputation. 

An organization’s environmental and social impact shouldn’t solely sit with marketing departments that can mislead consumers. While dedicated individuals such as ethics and compliance professionals can take a lead in measuring the successes and shortcomings of their policies and activities, ultimately ESG should be a shared concern for the whole business. Organizations need to move to active integrity models and enable every person in the organization to report on ESG violations and keep the company honest.

Continuous improvements will help to raise the bar for what an ethical organization is, what is considered to be a positive ESG performance, why it’s so important to be truthful and transparent, and why doing good is good for business.

Keen to build a world-class E&C program that demonstrates your commitment to ESG? Book a demo to discover how Vault can be the most important asset in your toolbelt.

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Frequently asked questions

What is ESG?

ESG can be defined as three non-financial dimensions: an organization’s impact on the environment, social institutions and human relationships, and the way the organization governs itself and makes decisions.

Why is ESG important?

As well as being good for the planet and society, many investors use ESG metrics to determine a business’s long-term sustainability and potential risk areas, aiding their decision-making process.

What is greenwashing?

The term ‘greenwashing’ was introduced in 1986, initially used to describe the actions of a beach resort in Samoa. Reusable towels were being provided as a way to help the environment but at the same time, the resort was expanding its facilities, leading to a greater negative environmental impact. Today, greenwashing is used to describe statements that exaggerate, mislead, or highlight certain facts and omit others in relation to environmental impact.

What is ESG reporting?

It’s important to be truthful and transparent when detailing a company’s impact on the environment, society and its inner workings by sharing accurate data and dealing with ESG violations.

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