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Sep 27

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Surprising Survey Covering SEC Whistleblower Program

Accounting and consulting firm BDO USA, LLP conducted an August 2011 annual national telephone survey entitled “The 2011 BDO Board Survey”. Interviewers spoke directly to 101 board members for public companies with revenues ranging from $250 million to $750 million.

Although the survey covered other corporate governance matters, this post involves required whistleblower reporting systems. When asked their main concern, if any, with the SEC’s new whistleblower bounties, more than three-quarters (78%) of the board members focus on the negative impact of increased false allegations. As a firm that offers whistleblower reporting systems, this came as a bit of a surprise. Our experience is that fabricated claims are not a rampant problem. If the intake process is handled correctly, false claims should be identified promptly and without undue enormous aggravation.

41% cited the damage false allegations can have to a business’s reputation and another 38 percent cite the cost, in both dollars and time, of responding to false allegations.

Only 15% of respondents identified the potential negative impact that the SEC program would have on the internal whistle-blower programs their companies put in place. This is in notable contrast to much of the public complaints that have been made against the SEC’s program. Similarly, despite a great deal of criticism when they were announced, two-thirds (66%) of board members reported that the SEC’s whistle-blower bounties do not undermine the internal anti-fraud and compliance programs mandated by previous legislation.

Similar amounts (68%) of directors are in favor of legislation that would require whistle-blowers to report complaints internally in order to collect any reward from the SEC. Although the SEC considered this requirement, the SEC decided against including this in as part of the SEC’s program.

 

About the author

David Nolte

I am a founding principal of Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I am a Certified Public Accountant (CPA) and an Accredited Senior Appraiser (ASA), as well as having other professional credentials. I regularly serve as an expert witness involving damages measurement. My litigation-oriented resume is on Fulcrum's website.

Permanent link to this article: http://betweenthenumbers.net/2011/09/surprising-survey-covering-sec-whistleblower-program/

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