2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT. An Expanded Analysis of Enterprise Incident Reporting Activity from The Network

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1 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT An Expanded Analysis of Enterprise Incident Reporting Activity from The Network

2 A Message from the CEO When The Network released our first benchmarking report back in 2006, we analyzed more than 200,000 incidents covering a four-year period, with a goal of identifying emerging best practices and providing readers with a framework by which to assess their own compliance programs. The 2011 Corporate Governance and Hotline Benchmarking Report covers more than a half a million incidents over a five-year period. We are proud of the progress we have made in expanding our analysis, providing additional data points, identifying trends and assessing the variables that impact hotline activity and its results. Since 2006, the Governance, Risk and Compliance industry has seen tremendous growth in its implications and impact on organizations throughout the world. The number of organizations implementing GRC programs is rising, and organizations that have GRC programs in place are adding new elements to improve results. There are several key elements influencing organizations and their decisions to develop and manage GRC programs: 1. Economic Downturn: No other element has had a stronger impact on organizational health and hotline activity than the current state of the global economy. While some would argue that the economy has stabilized in terms of the U.S. Gross Domestic Product (GDP), the continued high unemployment rate is continuing to have a significant impact on employee behavior throughout the workforce. As the economy began its decline, incident reports increased across all industries as employees clamored for job security and a renewed effort to strengthen their role along with their company s success. Of particular concern to many organizations has been the rising incidence and costs of fraud. While we expect to see improvement as the economy improves, all indications are that fraud remains at very high levels. And unfortunately, according to our partner, BDO Consulting, fraud does not appear to be abating despite improvement in GDP. 2. Domestic and Global Legislation: While the Sarbanes-Oxley Act (SOX) was in full-force by 2006, many other pieces of legislation were just coming onto the horizon. Throughout Europe, committees such as The Commission Nationale de l Informatique et des Libertes (CNIL) in France, the Spanish Data Protection Agency (Agencia Espanola de Proteccion de Datos) in Spain, the German Ad Hoc Working Group in Germany and the Article 29 Working Party for the European Union were just starting to pass opinions and create legislation. In Asia, the Financial Services Agency of Japan (the FSA), enacted the Financial Instruments & Exchange Law, furthering the complexity of an organization s compliance program CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT i

3 Enacted in 2010 and coming into enforcement in 2011, the UK Bribery Act and the U.S. Dodd-Frank Act are heavily influencing how organizations train and certify employees as well as how they implement GRC initiatives. The UK Bribery Act insists on adequate training and program knowledge to potentially avoid harsh penalties in light of bribery activity. The Dodd- Frank Act introduces the potential for employees to receive substantial monetary awards with the proper identification of SEC-related acts of fraud when reported directly to the SEC. The challenge for organizations is to identify issues internally and respond to them effectively before the SEC becomes involved. 3. Improved Technology: GRC initiatives continue to see a positive impact from technology advancements. The ease of developing and implementing interactive training videos that employees can view online has increased certification levels, and organizations are leveraging social media, text, YouTube, online meetings, etc. to ensure all employees are aware of GRC programs. That said, these technological advancements have also introduced new types of risks into organizations. For example, social media programs such as Facebook and Twitter allow for immediate communication of potentially harmful incidents and rumors that can take days, weeks or years for an organization to overcome. We have made every effort to create a report that helps you support your organization s GRC initiatives. In the compilation of the data, The Network has taken careful measures to adhere to legal, ethical and contractual obligations to protect client and participant confidentiality. The data set utilized for this report contains only summary and aggregated information, such as incident categories, organizational sizes and business sectors. As you explore the rich data outlined in the report, we encourage you to take a thorough review of your own internal GRC programs including the types of issues you capture, the methods by which you capture incidents, and the processes for resolving and remediating those issues. As the world of compliance constantly evolves, The Network will continue to explore new ideas and develop new methods to help our clients identify trends, reduce risk and instill an ethical culture. Our hope is that these solutions will enhance your ability to improve your organization s ethical health. Thank you, Luis D. Ramos CEO, The Network, Inc CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT ii

4 Table of Contents ANALYSIS METHODOLOGY...2 EXECUTIVE SUMMARY...4 WHAT THIS REPORT MEANS FOR YOUR COMPLIANCE PROGRAM...8 COMPREHENSIVE HOTLINE BENCHMARKING RESULTS...11 Measuring Organizational Health Through Benchmarking...11 Rate Data Analyses Overview...13 Hotline Program Data...17 DATA ANALYSIS BY INDUSTRY...25 Construction...26 Finance, Insurance & Real Estate...32 Manufacturing...38 Mining...44 Public Administration...50 Retail Trade...57 Service Industries...63 Transportation, Communication & Utilities...70 Wholesale Trade...76 CATEGORIES AND TERMINOLOGY...83 Incident Category (Type) Descriptions...83 Terminology...84 About The Network, Inc...85 About BDO Consulting...85 Acknowledgements CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 1

5 Analysis Methodology The 2011 Benchmarking Report includes the review of the past five years of data collected by The Network. It also includes the expanded analysis of employee numbers across all industries and group sizes. The five years of data provides an in-depth look at trends and key findings for a variety of aspects, including a shift in anonymity and how an increase in web reports may have an impact on results. DATA Beginning in 2006, the current five-year period reviewed for the 2011 Report reflects our largest pool of data to date, an expansion that has occurred every year that this report has been created. The report provides an analysis of 564,438 reports made during the data review period. In 2010, 122,318 reports were pulled from 1,178 organizations representing more than 15 million employees. The reports, or incidents as we refer to them throughout this document, were received from a wide variety of people associated with each organization including employees, ex-employees, vendors, shareholders and the public. There are times when data appears within an other or unknown category. This is due to the fact that organizations may have differing communication methods for means for awareness or participants may have provided an answer not found within the reporting mechanisms. We also have recalculated data for case outcomes and dispositions by eliminating responses when information not available was the response. By removing this data, we were able to provide a more user-friendly depiction of case outcomes and case dispositions. There are many possibilities why information not available occurs, for example, culture of the business or long time lags from report inception to resolution. At times there are also discrepancies from organization to organization on the definition of terms. REPORT DETAILS The goal of this annual benchmarking report is to identify emerging best practices for hotlines and other reporting mechanisms and to provide a framework by which readers can assess their own compliance programs. Keep in mind, this report should serve as a starting point in your efforts to evaluate your program results and assess your organizational health and that corporate culture, communications, and other factors may influence your results. As you review the data presented in this report, be sure to 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 2

6 drill down carefully to determine what these numbers mean in relation to the specific activities and environment within your industry and organization. This data does not represent every organization it is representative of reports received by The Network. All efforts have been made to report the data in a manner that allows readers to easily make comparisons to their industry. However, readers should remember that existing data sources might have slightly different interpretations. While most of the records contained all necessary data, there were some instances where the records did not contain every data element. This can occur for many reasons depending on the participant making the report, how a report is submitted, the requirements of the organization for which the report is being filed, the situation or the incident being reported, etc. This is not a random sample of all industries and reports; therefore, certain variables may not be fully representative of the population at large. Also, all reports are allegations and are treated in a befitting manner. The Network does not decide the outcome of cases; final outcome of cases is designated by its organization. The incidents tallied in this report are submitted via phone calls with information collected by a live operator. They are also submitted via web-based reporting forms. Throughout the report there are instances when the data does not total to 100% and/or incident rate figures do not total up to match industry totals. This is due to rounding. USER INPUT This report is a snapshot of the state of business ethics by industry as assessed by hotline reports. We encourage suggestions from readers for use in future studies. What data should be added? What should be different? Are there other variables that should be collected? Send us your feedback to benchmarking@tnwinc.com. LEGAL OBLIGATIONS AND PRIVACY In compiling the benchmarking report, The Network took exhaustive measures to adhere to legal, ethical and contractual obligations. The data set for this report contains only summary information that is useful for understanding reporting activity. The data set does not contain the names of any organizations or individuals. The goal is to provide useful information that will benefit all organizations and the greater compliance community, while at the same time protecting the confidentiality of all program participants. The Network will never disclose the identity of individuals who submit reports, the identity of the individual(s) who are the subject of a report, or any other data that may reveal the identity of any individual or organization. To further protect the identities of participants, this report only utilizes aggregate, non-specific data and data ranges CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 3

7 Executive Summary The 2011 Corporate Governance and Compliance Hotline Benchmarking report is a compilation of more than 564,000 reports throughout the five-year period covering 2006 to The data represents a wide variety of organizations and employees from around the world, thereby allowing the report to deliver accurate information across all factors. The steady increase in organizations implementing governance, risk and compliance (GRC) solutions throughout the 2000s, both as a result of legislation for public companies and in an effort to improve overall organizational health, has provided a steady flow of data for the benchmarking reports. The aggregate data for this report clearly shows that incident levels across most categories have remained relatively steady for the last few years. This is in line with two major contributing factors: 1. Although the recession has ended, the slow growth in GDP and even slower decline in the high unemployment rates are keeping rates at a standstill. 2. Response to legislation such as the Sarbanes-Oxley Act, the UK Bribery Act and the Dodd-Frank Act. The next step in the aggregation of such data is to improve the ease of technology-based programs so that more information is gathered, even when faced with long periods of times to resolve cases. The improved data will then be used for the identification of risk so that programs, policies, training methods and physical attributes can be modified to further reduce and/or eliminate risks. While each industry varies in their findings, a few highlights and trends arising from the data are highlighted below. KEY FINDINGS Anonymity Beginning in 2009 and continuing in 2010, there was a shift in many categories with more people choosing to remain anonymous instead of revealing their identity. In some cases, the shift was greater than 10%. This shift may be attributed to the increase in web reports as compared to hotline/phone reports. While there are advantages associated with both types of reports: a person-to-person call typically results in the gathering of more detailed material that not only aids in determining the next steps associated with the incident report, but also a more familiar setting for the participant submitting the report, therefore 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 4

8 creating a more comfortable environment for them to reveal their identity. The shift to more participants choosing to remain anonymous occurred in the Finance, Insurance & Real Estate; Manufacturing; Mining; Public Administration; and Service Industries. The Retail Trade and Transportation, Communications & Utilities industries both showed a shift to less people choosing to remain anonymous during the same time period. Public Administration The Public Administration industry employee base increased by 51% or nearly 140,000 employees while at the same time the total number of reports decreased by 15%. The 2011 report marks the first time a full five years of data for Public Administration has been available for analysis. This is important to readers of the report and to the analysis of the data as it provides a sufficient time frame to review patterns as well as potential anomalies. It also supports the overall breadth of the report, providing a solid base to the findings as well as a strong point of reference. Fraud-Related Incidents The fraud-related incident rate has remained relatively steady for the past two years, hovering just above and just below 20%. Fraud-related incidents (those being inclusive of reports on corruption and fraud, misuse of assets or information, conflicts of interest, Foreign Corrupt Practices Act (FCPA) violations, etc.) that were reported during the first quarter of each year from 2006 through 2010 surged from 10.9 % to 20.6% but have now stabilized. To further explore this trend, a closer examination was given to the breakdown of fraud-related incidents reported during the first quarter of each year from 2007 through The level of fraud has increased throughout the period from 14.3% in Q to 20.3% in Q It did remain steady and even slightly decreased through 2010 but in Q4 of 2010 and Q1 of 2011 increased back to 2009 levels. While the economy has experienced a degree of stabilization and some growth, the fraud-related incident level has not subsided. One element that helps provide some insight into these rates is that the time period from the mid- to late-2000s saw an increase by organizations to encourage the reporting of fraud-related incidents through advanced GRC solutions. The downturn in the economy also found employees more likely to report witnessed fraudulent activity as they were more invested in the overall health of their company and to protect their position. This healthy growth in the reporting of fraud-related incidents may have now reached its peak and current efforts to eliminate fraud and resolve incidents will hopefully show substantial results in the upcoming years. Regardless, the leveling off from the sharp upward spike will provide a strong basis for future reporting and analysis. A new perspective on the fraud report is to view it when compared to the rise and fall of the U.S. GDP. Below we compare the two results from Q to Q The quarterly fraud rate fluctuated as expected in association with the GDP from Q to Q as the GDP increased and the economic outlook improved, the fraud report rate 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 5

9 decreased. This held true until Q and Q when the fraud report increased alongside the GDP. This will be an area The Network continues to monitor to establish additional trends and comparisons. Means of Awareness Quarter Fraud Reports GDP Increase/ Decrease Q % -- Q % -- Q % 6.4% decrease Q % 0.7% decrease Q % 2.2% increase Q % 5.6% increase Q % 3.7% increase Q % 1.7% increase Q % 2.6% increase Q % 3.1% increase Q % 1.9% increase The Poster continues to be the most popular means of hotline awareness; however, there has been an uptick in the number of participants choosing an unknown or other option. This may be due to how employees access company information, such as through social media tools such as Facebook and Twitter, or the physical tools they use such as a SmartPhone and tablet device. For the majority of the industries, the number of responses in the Unknown category has increased in 2009 and This increase may be attributed to participants unable to determine which of several means of awareness most appropriately applies to their situation or to organizations choosing not to allow the reporting of that particular response to outside parties. Prior Management Notification and Anonymity In 2009 and 2009, there was a significant shift in the decision of participants choosing to remain anonymous when not previously reporting the incident. The basis for this shift may be the increase in incidents submitted via web reports or the increased awareness of hotline programs and their ease of use for participants. It also may be the result of the downturn in the economy as employees feel that their anonymity will help protect their current position CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 6

10 Industry Trends The industries with the highest overall incident rates continue to be Retail Trade; Service Industries; and Transportation, Communication & Utilities. However, all three of those industries experienced a decrease in their incident rate in 2010 with Retail Trade falling below Transportation, Communication & Utilities for the second straight year. Leading Incident Category Personnel Management has been the leading incident category across all industries. This category covers a variety of human resources matters including wages and management interaction and thereby is relevant to all employees. Beyond the Personnel Management category, the next most commonly reported incidents regardless of industry in 2010 were Corruption & Fraud, Employment Law Violation and Company/Professional Code Violation. Web Reports The traditional and the most popular method of capturing an incident is the telephonic hotline, but organizations have started to focus on additional options in how they capture the information, with a focus on web intake. While the web intake form has been a part of many organization s incident capturing tools, it has picked up traction over the past two years. In 2008, only 5.58% of all incidents were submitted within a web form but that grew to 8.31% in Based on preliminary tracking of data in 2011, that level is continuing to grow. By the end of 2011, it is anticipated that 10-15% of all incidents will be reported via a web form. This is attributed to the younger workforce and their high comfort level with transferring information through web-based forms. As Generation Y continues to expand in today s workforce, the use of web forms, texting and social media will continue to increase. It is important to note that the increase in web reports has not resulted in an increase in incidents. It will, however, have an impact on the data collected in the report. A web form, while complete, does not allow for an exchange with a live operator but it does provide a stronger veil of anonymity to the participant, which may encourage more fruitful material as an incident is investigated. Role of the Chief Compliance Officer As new legislation continues to present itself to organizations, leadership is faced with the challenge of properly collecting, analyzing and escalating incidents without fear of government intervention. The recently established role of Chief Compliance Officer is becoming more popular among organizations in an effort to allow for the proper flow and sheltering of sensitive information, such as names of internal whistleblowers or their respective reports. In years past, compliance issues were handled within Human Resources or other existing internal departments, and incidents were in turn escalated to 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 7

11 a Vice President or CEO/COO. This left organizations vulnerable to internal malfeasance or at the very least, the appearance of cover-up or wrongdoings. As a separate department led by a high-level executive, compliance departments have a voice that leads directly to the Board of Directors and allows for proper channeling of reports to ensure that the organization is adhering to compliance legislation. Compliance Legislation As the data for report is presented, it is natural to consider how that data will change in the coming years and what influences will have the most impact on the future of governance, risk and compliance issues throughout the workforce. In 2011, two major pieces of legislation are having a significant impact on organizations throughout the world. The UK Anti-Bribery Act, enacted in July 2011, will hold not only the employee(s) participating in the illegal act of bribery responsible but also the parent company. The result of this Act is for organizations to implement additional training and certification programs throughout all levels of their company and across all borders. The implication of global compliance laws will have an even stronger impact on organizations as those laws must be weaved through all of the new programs. Turning to U.S. legislation, the Dodd-Frank Act has a provision that effectively incents employees to report securities violations directly to the SEC rather than following their company s guidelines for reporting violations internally through their established hotline program. This legislation puts a large hurdle in an organization s path to handling incidents internally as the legislation provides a financial incentive for reports that result in prosecuted violations. Organizations must continue to create open communication programs with employees to support their initiative to achieve success together instead of at the individual level CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 8

12 What This Report Means for Your Compliance Program Reporting mechanisms, such as hotlines, for detecting and managing misconduct have become valuable compliance and monitoring tools for organizations in the United States and abroad. While legislation from the U.S. Federal Sentencing Guidelines and the Sarbanes-Oxley Act (SOX) requires corporations and publicly traded companies to maintain reporting mechanisms, and to regularly assess their effectiveness, more and more companies see the value in instituting a strong GRC initiative to provide for the overall well-being of their organization. However, organizations have struggled to accurately assess hotline performance as they were unable to compare their results to the results of other organizations. They could collect data on their own hotlines to see how many reports had been received and what action had been taken based on those reports, but with no way of knowing how those numbers stacked up against those of comparable organizations, they could not draw any reliable conclusions about the quality of their hotlines and reporting programs. Even if they benchmarked against willing peers, their overall sample was often too small to yield reliable results. In 2006, The Network released its first Corporate Governance and Compliance Hotline Benchmarking Report, which compiled hotline data from organizations of various types and sizes to provide statistics on the nature and number of hotline reports, anonymity, awareness and follow-up. The subsequent 2007 report provided even more extensive hotline benchmarking data by breaking out the data by industry and by year, and it presented several data points in the form of rates instead of percentages, which controls data variations between industries and business sizes. The reports provide both an overall picture of hotline program results as well as an industry-by-industry breakdown. In 2011, the report includes additional insight into the breakdown of the number of organizations that fall into each group size and how those breakdowns relate to incident rates. HOW TO USE THIS REPORT This report is a benchmark and thus provides the starting point for assessing the performance of your organization s hotline and in turn, your GRC initiatives. However, comparing the numbers alone won t provide you with a complete picture of your hotline s performance. A thorough analysis into the potential explanations of why your 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 9

13 program results may vary from the average can help you discover critical insights that could change the direction of your program assessment. For example, the number of reports submitted to your hotline program may be significantly smaller than the industry average. This may be due to the success of your internal compliance programs or, to the contrary, because your awareness program has not been communicated properly throughout your organization and employees are therefore not reporting troublesome situations. The data in this report should serve as potential indicators of problems or successes, but without deeper investigation, the numbers alone cannot provide a reliable evaluation of your hotline program. COMMUNICATING THE RESULTS Upon studying the benchmark data presented here and considering why your numbers are higher or lower in various categories, share what you have found with your partners in other business units. Many of the issues examined in this study will impact several corporate departments. Human resources, legal, IT, and corporate security and safety, among others, may have an operational stake in your findings. In 2010 and 2011, new legislation will have a broad impact on the overall picture of GRC and hotline compliance program. But new challenges exist in an organization s day-to-day lifecycle: increased regulation, advancing technology, demands to improve efficiencies and efforts to reduce costs. It is important for an organization to meet those daily challenges but at the same time not turn away from internal issues such as employee fraud or enforcing its code of conduct, thus making it more difficult to monitor organizational health. The key is generating the right metrics and utilizing proper benchmarking techniques CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 10

14 Comprehensive Hotline Benchmarking Results MEASURING ORGANIZATIONAL HEALTH THROUGH BENCHMARKING HOTLINES AS KEY REPORTING MECHANISMS The implementation of an anonymous employee hotline program is a powerful tool for gathering critical organizational feedback. While hotlines are not new tools, they have proven to be exceedingly effective for monitoring and measuring an organization s health. The Sarbanes-Oxley Act (SOX), enacted in 2002, requires publicly traded corporations to provide a mechanism for reporting financial irregularities that enables employees who report information to remain anonymous. It jumpstarted the implementation of hotline programs in public as well as private companies. The positive results realized from this requisite have prompted other organizations to recognize the value of the hotline for reporting unethical activities and as a means for reducing corporate culpability. In 2010 and 2011, new legislation, specifically the UK Bribery Act and the Dodd-Frank Act require and/or strongly encourage organizations to implement additional training and certification methods. This increases the needs for advanced technology-based GRC programs. Corporate governance legislation has swiftly become a global issue. Beyond these three key pieces of legislation, similar hotline-related regulations, compliance guidelines and legislation have been enacted in Canada, France, Germany, Japan and other leading industrial countries. The global impact of differing compliance guidelines and restrictions are challenging for organizations that conduct business throughout the world. THE DYNAMIC NATURE OF HOTLINES The use of hotlines has evolved significantly over the last 25 years. These reporting programs will continue to change in response to the changing nature of business. Factors such as workforce diversity and cultural initiatives will play a significant role in how hotlines and compliance programs will be implemented and operated. The culture of an organization is driven by the values and behaviors of its leaders and employees. As these factors change, so does the direction of the organization, either on the path to a more ethical culture, or toward a culture where misconduct thrives CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 11

15 Technology is also playing a significant role in the dynamic nature of hotlines. In terminology alone, hotlines are now a generic term for a reporting system that includes traditional phone calls, web-based forms, texts and social media communications. An analysis of culture has become a key factor in reducing organizational risk. In fact, the U.S. government now recognizes how culture can affect the results of an organization s compliance program. Amendments to the Federal Sentencing Guidelines in 2004 require organizations to periodically assess their risk of misconduct as well as the effectiveness of their ethics and compliance program. Because hotlines are such key components in an organization s compliance efforts, they need a reliable way to measure the effectiveness of these and all other reporting mechanisms. ONGOING ANALYSIS Organizations will find benchmarking data a valuable asset in determining if changes are needed and help drive future GRC program enhancements. The continual monitoring of benchmarking information is an important tool in the ongoing health of your organization by helping to assess the success of new programs, such as the implementation of a new communication tool or a change in reporting guidelines. This report will be a valuable tool for comparing the performance of key internal controls and documenting the true value of your ethics and compliance program CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 12

16 RATE DATA ANALYSES OVERVIEW In order to provide organizations with the most useful information in analyzing their hotline program, we are delivering the report s results in rate data form. By using rate data, a control is put into place to account for the variations of companies and employees represented in the database. Incident reporting rates (per 1,000 employees) were calculated for different organizational sizes as identified by the number of employees. The number of reported incidents was divided by the number of employees and multiplied by 1,000. The tables below provide the number of employees, the number of reported incidents and the reporting rates for the years REPORT FREQUENCY RATE PER 1,000 EMPLOYEES BY ORGANIZATION SIZE While there was a steady increase in 2007 and 2008 in overall incident reports, the overall incident rate has fallen in 2009 and 2010 to a five-year low of 8.1. In fact, incident rates fell in three of the five organizational size categories. Organizations with between 20,000 and 50,000 employees experienced a decrease while organizations with 5,001 to 20,000 employees experienced slight increases. On average over the past five years, organizations with fewer than 5,000 employees experienced the highest number of reported incidents. This trend is most likely attributed to the lack of segregation of duties that is prominent in smaller organizations and therefore provides for fewer checks and balances throughout an organization. Employee Range Group 1 (0-5,000) Group 2 (5,001-10,000) Group 3 (10,001-20,000) Group 4 (20,001-50,000) Group 5 (50,001 +) Overall Note: Incident rate figures may not total up to match industry totals due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 13

17 NUMBER OF EMPLOYEES The 2011 study shows an increase in the number of overall employees providing data for the report. The table below provides a breakdown of employee pool by industry by year: The 10.6% increase in the number of employees from 2009 to 2010 is relatively large when compared to the 7.1% increase in the number of organizations. Industry Agriculture, Forestry & Fishing 2,500 5,900 4,935 4,900 4,900 Construction 359, , , , ,899 Finance, Insurance & Real Estate 1,200,551 1,414,708 1,420,233 1,633,462 1,824,490 Manufacturing 3,243,163 3,111,771 3,433,801 3,572,967 3,774,278 Mining 323, , , , ,814 Public Administration 103, , , , ,351 Retail Trade 3,004,412 3,820,279 3,602,894 3,741,077 3,785,395 Service Industries 1,480,579 1,606,654 1,734,601 1,961,863 2,890,794 Transportation, Communications & Utilities 1,095,823 1,140,064 1,193,455 1,299,544 1,182,951 Wholesale Trade 608, , , , ,075 Overall 11,421,754 12,320,632 12,719,434 13,677,183 15,131,947 Employee Range Group 1 (0-5,000) 597, , , ,685 1,084,151 Group 2 (5,001-10,000) 710, , , ,052 1,002,726 Group 3 (10,001-20,000) 1,248,764 1,229,406 1,529,689 1,394,288 1,491,917 Group 4 (20,001-50,000) 2,416,505 2,471,364 2,677,769 2,912,563 2,955,540 Group 5 (50,001 +) 6,448,694 7,189,069 6,548,473 7,442,595 8,597,613 Overall 11,421,754 12,320,632 12,719,434 13,677,183 15,131, CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 14

18 NUMBER OF ORGANIZATIONS The number of organizations providing data for this year s benchmarking report increased by 7.1%. The largest increases were within a) the smallest group of employees (less than 5,000), and b) the Finance, Insurance & Real Estate and Service Industries categories. Industry Agriculture, Forestry & Fishing* n/a n/a n/a n/a n/a Construction Finance, Insurance & Real Estate Manufacturing Mining Public Administration Retail Trade Service Industries Transportation, Communications & Utilities Wholesale Trade Overall ,110 1,100 1,178 Employee Range Group 1 (0-5,000) Group 2 (5,001-10,000) Group 3 (10,001-20,000) Group 4 (20,001-50,000) Group 5 (50,001 +) Overall ,110 1,100 1,178 * The Agriculture, Forestry & Fishing industry was not included in the individual industry analyses due to the low volume of organizations represented CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 15

19 REPORT RATES PER 1,000 EMPLOYEES BY INDUSTRY When viewing the five-year data, the most significant change was within the Public Administration industry, which experienced a decrease of nearly four percentage points. In 2010, only two industries, Wholesale Trade and Finance, Insurance & Real Estate, increased over their 2009 levels. For the third straight year, Transportation, Communications & Utilities had the highest incident rate, yet it has experienced two straight years of steady decreases. After Public Administration, Service Industries experienced the largest decrease in 2010 from its 2009 level. Industry Agriculture n/a n/a n/a Construction Finance, Insurance & Real Estate Manufacturing Mining Public Administration Retail Trade Service Industries Transportation, Communications & Utilities Wholesale Trade Overall Note: Incident rate figures may not total up to match industry totals due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 16

20 HOTLINE PROGRAM DATA The data provided throughout this benchmarking report results from individual incident reports. To clarify the data presented, an initial report (phone/fax/web/ /written complaint) is termed an allegation. Each allegation then receives a classification based on its incident components this is referred to as an incident type. To assist in interpreting the data, the many different specific incident types were consolidated into broader categories. The eight incident category descriptions below are based on The Network s more than 25 years of incident reporting experience. FREQUENCY OF INCIDENT TYPES REPORTED The following chart is a look at the percent of allegations across all industries from the past five-year period. While most categories have remained consistent through the years, there have been slight changes in 2010 in Company/Professional Code Violations, Corruption & Fraud incidents and Employment Law Violation incidents. Throughout the five-year period, the majority of reports are within the Personnel Management category. This incident category covers a wide variety of human resources matters and thus impacts every employee type, a significant attributing factor to its high level of reports. Incident Type Company/Professional Code Violation 15% 14% 10% 11% 12% Corruption & Fraud 11% 12% 12% 13% 12% Customer/Competitor Interaction 2% 3% 4% 4% 4% Employment Law Violation 12% 12% 12% 12% 13% Environment, Health & Safety 5% 5% 5% 5% 5% Misuse of Assets/Information 1% 1% 1% 2% 2% Personnel Management 49% 47% 50% 48% 48% Other/Unresolved 6% 5% 5% 5% 4% A view of incident reports by industry can be found at the beginning of each industry category. Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 17

21 Incident Types (Categories) Company/Professional Code Violation: Any departure from company policy of facility procedures such as a code of conduct violation. Corruption & Fraud: An attempt to deceive the organization or others on behalf of the organization to receive gain such as arranging for a kickback or knowingly altering an accounting document. Customer/Competitor Interaction: The display of poor customer service or courtesy or the improper interaction with competitive organizations. Employment Law Violation: Any act or omission that does not meet the standards of the Equal Employment Opportunity Commission, such as an act of discrimination or harassment. Environment, Health & Safety: A potentially hazardous or unsanitary condition that could affect the well-being of an employee, customer, facility or general public. Misuse of Assets/Information: The conveying of sensitive information and/or the misuse of company property. Personnel Management: Any act or omission that is perceived to be detrimental to an employee s well-being. This category includes concerns over wages, hours, benefits, promotions, etc. Examples include wage and hour issues and employee relations CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 18

22 FREQUENCY OF MEANS OF AWARENESS Determining how participants learned about the hotline or other reporting mechanisms allows organization to review communication methods and determine which ones are most effective and what changes should be made to improve program awareness. While companies provide a variety of communication tools, the effectiveness of those tools vary based on the structure of an organization. When an awareness method was provided, the Poster has consistently been the most popular communication method. Increasing in popularity throughout the years is the organizational Intranet, especially within industries in which employees rely upon a computer to conduct their day-to-day responsibilities. The wide distribution of data among the majority of the communication methods clearly indicates the importance of communication reporting mechanisms through multiple channels. It is important to note that since participants were only given one choice, other mechanisms that may have contributed to their awareness may not be recognized or available. As employees and employers continue to expand their use of social media as a communications tool, means of awareness responses may dramatically shift in future reports, especially within industries where employees use a computer, SmartPhone or tablet to complete their daily business tasks. Means of Caller Awareness * 2010 Brochure 3% 2% 3% 2% 1% Employee 15% 16% 14% 11% 12% HR 4% 4% 4% 4% 4% Handbook 10% 9% 10% 8% 7% Intranet 5% 7% 9% 9% 9% Manager 5% 6% 5% 4% 4% Poster 37% 35% 31% 27% 29% Sign 2% 2% 2% 1% 1% Video 0% 0% 0% 0% 0% Wallet Card 5% 4% 5% 3% 2% Other 13% 13% 15% 12% 13% Unknown 2% 2% 2% 19% 18% * The 2009 statistic provided in last year s report has been revised. Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 19

23 PRIOR MANAGEMENT NOTIFICATION One of the key pieces of data for the benchmarking report is whether or not a participant (person submitting the allegation via the hotline program) had notified either their direct manager or another member of the management team of the incident. This is referred to as prior management notification to submit their report. Frequency of Prior Management Notification Over the past five years, there have been small fluctuations in whether or not participants notified management of their concerns prior to making their hotline report. The high percentage of participants not informing management indicates a preference among the majority of employees to use a reporting mechanism other than a face-to-face conversation with management. Many employees are emboldened to submit a report when anonymity is available via non-personal interfaces such as a web form. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 71% 73% 70% 71% 71% 29% 27% 30% 29% 29% Yes Management Previously Notified No Management Not Previously Notified 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 20

24 Prior Management Notification By Anonymity Another perspective on prior management notification is how it relates to the participant remaining anonymous when using the hotline. For the five-year period of the report, those participants that had given prior management notification were much more likely to remain anonymous when using the hotline. This trend has grown slightly year over year but has remained basically unchanged. Note: The 2009 statistic provided in last year s report has been revised. In addition, this chart has been simplified to reflect only those reports made anonymously via the hotline after a prior report was made to management CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 21

25 ANONYMITY A key aspect of a hotline program is allowing participants to remain anonymous. Outlined by the Sarbanes-Oxley Act, public companies are required by law to provide this functionality. Along with public companies and led by the Federal Sentencing Guidelines for Organizations (FSGO), private companies have also implemented hotlines providing anonymity for their employees. Frequency of Anonymous Reports Over the past five years, the level of anonymity amongst participants has remained relatively steady with a slightly higher percentage of participants choosing to remain anonymous. In 2009 and 2010 across all industry categories, participants are equally divided in choosing to reveal or not reveal their identity when submitting an incident CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 22

26 CASE OUTCOME & DISPOSITION For the purpose of this report, every incident reported through the hotline is considered an allegation. At the point of conducting an investigation, the issue becomes a case. The final case outcome is determined by the affected organization. Case Outcome A downward shift in the number of cases not warranting an investigation commenced in 2008 and the trend continued in 2009 and In relation to that change, the number of investigated cases that resulted in a corrective action being taken has increased during the same three-year period. At the case outcome stage, a large number of reports across all industries do not have any information available. This may be the result of the culture of the business or significant time lags from call inception to resolution. In order to provide an accurate picture of results for case outcomes, the data not available results were removed from the calculations throughout this report. This follows the same process taken for the 2010 report and therefore provides for an accurate comparison. Case Outcome No Investigation Warranted 30% 30% 18% 17% 16% Investigated, Corrective Action Taken 45% 44% 38% 40% 41% Investigated, No Corrective Action Taken 20% 21% 33% 33% 27% Referred/Advised 3% 2% 4% 7% 5% Other 2% 3% 8% 3% 11% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 23

27 Case Disposition A final step in the hotline reporting process is that of determining a case disposition. This is typically the resulting activity once a case outcome has been determined, such as the enactment of a disciplinary action, termination or in some cases, prosecution. As the number of reports that reach this stage decreases, the level of unknown actions in relation to the case increases, thus accounting for the high percentage in the other/ unresolved category. The number of active reports reaching case disposition is relatively small and therefore a relatively small number of reports can account for a large percentage within the chart. The leading action for case dispositions across five years is the disciplined/counseled action. Case Disposition Cleared/No Action 8% 9% 10% 10% 9% Disciplined/Counseled 11% 11% 15% 14% 15% Terminated 3% 3% 4% 4% 3% Prosecuted 0% 0% 0% 0% 0% Other/Unresolved 78% 77% 71% 72% 72% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 24

28 Data Analysis by Industry The 2011 Report details hotline activity in the following industries: Construction Finance, Insurance & Real Estate Manufacturing Mining Public Administration Retail Trade Service Industries Transportation, Communication & Utilities Wholesale Trade 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 25

29 CONSTRUCTION OVERALL INCIDENT REPORT RATES PER 1,000 EMPLOYEES In 2010, the overall incident rate for the Construction industry has declined slightly from its highest level in 2009 throughout the five-year period. However, at 6.52, the incident rate for Construction is still low when compared to the other industries outlined in the report. INDUSTRY: Construction REPORT RATES BY TYPE PER 1,000 EMPLOYEES From 2006 to 2009, the incident rate increased steadily in the Construction industry, with the increase in fraud reports mirroring the increase in the unemployment rate within the Construction industry. In 2010, the industry experienced a slight decrease, most noticeably in the Corruption & Fraud and Employment Law Violation categories. Several incident categories, including Company/Professional Code Violation and Customer/ Competitor Interaction, experienced slight increases in Incident Category Company/Professional Code Violation Corruption & Fraud Customer/Competitor Interaction Employment Law Violation Environment, Health & Safety Misuse of Assets/Information Personnel Management Overall Note: Incident rate figures may not total up to match industry totals due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 26

30 FREQUENCY OF INCIDENT TYPES Throughout the past five-year period, the distribution of incident types has remained relatively flat with only a 2% decrease in the Corruption & Fraud category and a 2% increase in Personnel Management reports in 2010 from their previous 2009 levels. Incident Category Company/Professional Code Violation 11% 13% 11% 8% 9% Corruption & Fraud 9% 10% 12% 13% 11% Customer/Competitor Interaction 3% 2% 2% 1% 2% Employment Law Violation 14% 17% 17% 18% 17% Environment, Health & Safety 4% 5% 5% 7% 6% Misuse of Assets/Information 0% 1% 0% 0% 0% Personnel Management 58% 52% 53% 53% 55% INDUSTRY: Construction MEANS OF AWARENESS For the Construction industry, the Poster continues to rise as the leading means of awareness for learning about available reporting options, more than doubling from 21% to 48% since In a departure from most other industries cited in this report, the Intranet has declined in a means of awareness. Most likely this is due to the nature of the majority of Construction jobs. In 2009 and 2010, the next most often cited method was another employee. Means of Awareness Brochure 5% 5% 4% 2% 2% Employee 16% 12% 13% 12% 14% HR 8% 8% 7% 6% 4% Handbook 10% 8% 8% 5% 7% Intranet 15% 8% 7% 4% 3% Manager 4% 3% 2% 2% 2% Poster 21% 34% 38% 45% 48% Sign 1% 2% 3% 3% 1% Video 0% 0% 0% 0% 0% Wallet Card 5% 2% 3% 2% 3% Other 15% 17% 12% 13% 13% Unknown 0% 1% 3% 6% 2% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 27

31 PRIOR MANAGEMENT NOTIFICATION Prior to submitting a hotline report, the percentage of Construction industry participants that notified management has remained relatively consistent. Its five-year peak occurred in 2009 at 35% and has decreased slightly in 2010 to 33%. This leads to the possible conclusion that participants in the Construction industry increasingly prefer reporting mechanisms that offer the option of anonymity over face-to-face conversations with management. INDUSTRY: Construction PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY At 61% in 2010, participants in the Construction industry were most likely to notify management prior to making a hotline report when the incident was a Personnel Management concern. This remains consistent throughout the past five years of reports. Construction participants also showed a higher tendency to report incidents of Employment Law Violations and Corruption & Fraud to management before initiating a hotline report. Prior management notification was least likely to occur with Customer/ Competitor Interaction incidents and Misuse of Assets/Information incidents. Incident Category Company/Professional Code Violation 5% 7% 8% 5% 5% Corruption & Fraud 7% 7% 8% 11% 9% Customer/Competitor Interaction 2% 2% 1% 1% 1% Employment Law Violation 16% 20% 22% 19% 17% Environment, Health & Safety 3% 6% 8% 9% 7% Misuse of Assets/Information 0% 0% 0% 0% 0% Personnel Management 67% 58% 53% 55% 61% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 28

32 ANONYMITY The past two years have seen the greatest numbers of participants choosing to reveal their identity when submitting a report, at 55%. However, throughout the five-year period, the Construction industry has seen only slight fluctuations. INDUSTRY: Construction 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 29

33 CASE OUTCOME In 2010, with available data, the percentage of cases that warranted an investigation reached its highest level in the five-year-period, at 96%. These numbers have been steadily increasing throughout the five-year-period. The increase in cases warranting an investigation may be attributed to an increase in the quality of intake information throughout the reporting process and a high level of involvement by organizational management. It also follows the overall industry trend of an increase in cases being investigated but with no corrective action being taken. INDUSTRY: Construction Case Outcome No Investigation Warranted 25% 26% 17% 5% 4% Investigated, Corrective Action Taken 29% 24% 41% 54% 58% Investigated, No Corrective Action Taken 46% 50% 35% 40% 38% Referred/ Advised 0% 0% 7% 1% 0% Other 0% 0% 0% n/a n/a CASE DISPOSITION When reviewing the data available outside of the Other/Unresolved category, the most common case disposition for Construction for all five years was the Disciplined/Counseled category. The high number of cases that fall into the Other/Unresolved category is due to the wide array of perspectives used by different customers to close cases. Also, many times once a case is resolved, managers are guilty of not closing out the case or taking the time to provide the specific reason. The reasons may also vary too much for such data to be efficiently recorded. Case Disposition Cleared/No Action 0% 0% 0% 0% 0% Disciplined/Counseled 4% 6% 8% 8% 6% Terminated 5% 6% 1% 1% 1% Prosecuted 0% 0% 0% 0% 0% Other/Unresolved 91% 88% 91% 91% 93% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 30

34 CONSTRUCTION BY ORGANIZATION SIZE For the past four years, there has been little fluctuation in the distribution of reports as they relate to their organizational size. For organizations in Groups 3 and 4, there was a dramatic drop from 2006 to 2007 but this has since then flattened out with a slight increase in 2010 to 23% in Group 3. In 2007, Group 5 (more than 50,000 employees) saw a dramatic rise which has also flattened out. INDUSTRY: Construction Employee Range Group 1 (0-5,000) 18% 8% 11% 12% 11% Group 2 (5,001-10,000) 0% 0% 0% 2% 2% Group 3 (10,001-20,000) 50% 23% 19% 15% 23% Group 4 (20,001-50,000) 21% 6% 1% 2% 0% Group 5 (50,001 +) 11% 63% 69% 69% 63% CONSTRUCTION BY NUMBER OF ORGANIZATIONS IN EACH GROUP* For Construction, the largest number of organizations fall within the smallest group companies with less than 5,000 employees. *New to the 2011 benchmarking report, this chart simply provides an indication of the number of organizations that fall within each group range. Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 31

35 FINANCE, INSURANCE & REAL ESTATE INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES For the past four years, the overall incident rate for the Finance, Insurance & Real Estate industry has been on the rise. The largest increase was from 2007 to 2008, followed by two years of slight increases. In 2010, the rate reached 8.34, the highest in the past five years. INDUSTRY: Finance, Insurance & Real Estate INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES In 2010, the types of incident report rates remained relatively stable as compared to 2009 rates. Over the five-year period, Company/Professional Code Violation reports have increased dramatically from 0.91 to This dramatic increase is not apparent in any of the other categories with only Misuse of Assets/Information showing an increase across all five years. All other categories have fluctuated up and down throughout the period. Incident Category Company/Professional Code Violation Corruption & Fraud Customer/Competitor Interaction Employment Law Violation Environment, Health & Safety Misuse of Assets/Information Personnel Management Other Overall Note: Incident rate figures may not total up to match industry totals due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 32

36 FREQUENCY OF INCIDENT TYPES For Finance, Insurance & Real Estate organizations, three categories dominate the incident reports, especially when compared to the other industries outlined throughout this report. Those categories are Company/Professional Code Violation, Personnel Management and Corruption & Fraud. Throughout the five-year period, Company/ Professional Code Violation has experienced a steady increase while both Corruption & Fraud and Personnel Management have decreased from 2006 to Incident Category Company/Professional Code Violation 15% 17% 28% 37% 40% Corruption & Fraud 22% 25% 15% 15% 14% Customer/Competitor Interaction 3% 6% 7% 6% 4% Employment Law Violation 7% 7% 6% 6% 7% Environment, Health & Safety 2% 1% 2% 1% 2% Misuse of Assets/Information 1% 1% 1% 2% 2% Personnel Management 35% 28% 29% 24% 24% Other 15% 15% 12% 9% 8% INDUSTRY: Finance, Insurance & Real Estate MEANS OF AWARENESS In 2010, the number of participants sighting the Intranet as the source for being aware of the reporting mechanism decreased slightly, but it is still the most common means of awareness for the Finance, Insurance & Real Estate industry. It accounts for nearly onequarter of all reports and is followed by alternative methods as well as a fellow Employee. When compared to other industries, this is a departure from the norm; however, it is in line with the industry s employee base and the constant access to their company s Intranet via computers, tablets and SmartPhones. Means of Awareness Brochure 5% 1% 2% 1% 1% Employee 13% 14% 14% 11% 12% HR 6% 8% 7% 6% 6% Handbook 10% 15% 11% 10% 8% Intranet 16% 24% 26% 26% 24% Manager 5% 8% 7% 7% 7% Poster 20% 9% 11% 9% 11% Sign 1% 0% 0% 0% 0% Video 0% 0% 0% 0% 0% Wallet Card 4% 1% 1% 1% 1% Other 15% 17% 17% 14% 14% Unknown 5% 3% 4% 15% 16% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 33

37 PRIOR MANAGEMENT NOTIFICATION Only 31% of participants in the Finance, Insurance & Real Estate industry notified management prior to submitting a hotline report in 2009 and This has remained relatively consistent at around 30% throughout the five-year period. This result may indicate that participants in the Finance, Insurance & Real Estate industry prefer reporting mechanisms to face-to-face conversations with management, possible due to the monetary aspect of the industry. INDUSTRY: Finance, Insurance & Real Estate PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY In 2010, Company/Professional Code Violation continued its steady increase over the fiveyear period, rising from 14% in 2006 to 39% in 2009 and now 40% for The other two categories that experienced an increase in 2010 were Employment Law Violation and Personnel Management. The increase in Personnel Management reports was the first increase throughout the five-year period. For that entire time period, it dropped 10 percentage points, or 29.4%. Incident Category Company/Professional Code Violation 14% 17% 27% 39% 40% Corruption & Fraud 27% 27% 16% 15% 14% Customer/Competitor Interaction 3% 6% 7% 5% 4% Employment Law Violation 7% 7% 5% 6% 7% Environment, Health & Safety 2% 2% 2% 2% 2% Misuse of Assets/Information 1% 1% 2% 2% 3% Personnel Management 34% 29% 29% 22% 24% Other 12% 11% 12% 8% 8% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 34

38 ANONYMITY In 2009 and 2010, the number of participants choosing to remain anonymous took a sharp turn from the three previous years outlined in this year s study. From , the number of participants choosing to remain anonymous was 39% and 42% respectively. In 2009 and 2010, 58% and 59% chose to remain anonymous, a significant increase. This change in remaining anonymous may be attributed to several factors, including change in legislation, organizational policies, and the increase in web reports that do not allow for a discussion between the participant and the person taking the report. The person-to-person reporting method is more intimate and may lead to the disclosure of the participant s name to allow for more advanced follow-up. INDUSTRY: Finance, Insurance & Real Estate 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 35

39 CASE OUTCOME In 2010, the number of cases resulting in being referred or advised decreased while the other category experienced an increase. In 2010, 24% of all cases, where information is available, resulted in an investigation followed by a corrective action taken. Throughout the five-year period, the number of cases resulting in no investigation being warranted has decreased from 12% to 7% and an investigation warranting no corrective action has decreased from 31% to 16%. Again, this is most likely due to the increased focus on the legislation that governs this industry. The increase in the Other category throughout the five-year period is most likely the result of actions being taken based on informal investigations and the handling of the situation on an informal level. This is positive as it means that reports are being responded to throughout the organizations, but more emphasize needs to be placed on the capturing of information outcomes. Case Outcome No Investigation Warranted 12% 14% 5% 5% 7% Investigated, Corrective Action Taken 26% 31% 22% 23% 24% Investigated, No Corrective Action Taken 31% 36% 17% 17% 16% Referred/ Advised 31% 14% 21% 28% 20% Other 1% 5% 35% 27% 35% INDUSTRY: Finance, Insurance & Real Estate CASE DISPOSITION In 2010, when revealing the data available outside of the Other/Unresolved category, the most common case disposition category across all five years for Finance, Insurance & Real Estate was the Disciplined/Counseled category. This category increased 2% from its 2009 level but is still down from its highest level of 17% in 2006 and The terminated category increased 1% along with the cleared/no action category. Case Disposition Cleared/No Action 1% 2% 0% 0% 1% Disciplined/Counseled 17% 17% 9% 9% 11% Terminated 3% 6% 2% 3% 4% Prosecuted 0% 1% 0% 0% 0% Other/Unresolved 79% 74% 89% 88% 84% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 36

40 FINANCE, INSURANCE & REAL ESTATE BY SIZE The distribution of submitted reports by organizational size has remained consistent throughout the five-year period of the report with the majority of organizations belonging to the largest group size of 50,001+ employees. Employee Range Group 1 (0-5,000) 6% 7% 9% 8% 9% Group 2 (5,001-10,000) 2% 5% 4% 3% 4% Group 3 (10,001-20,000) 14% 18% 13% 9% 8% Group 4 (20,001-50,000) 9% 10% 10% 11% 11% Group 5 (50,001 +) 69% 60% 64% 69% 68% FINANCE, INSURANCE & REAL ESTATE BY NUMBER OF ORGANIZATIONS IN EACH GROUP* INDUSTRY: Finance, Insurance & Real Estate For Finance, Insurance & Real Estate, the largest number of organizations fall within the smallest group companies with less than 5,000 employees. *New to the 2011 benchmarking report, this chart simply provides an indication of the number of organizations that fall within each group range. Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 37

41 MANUFACTURING OVERALL INCIDENT REPORT RATES PER 1,000 EMPLOYEES Following a steady increase for the first three years of the period, in 2009 and 2010 the Manufacturing industry experienced slight decreases down from 4.47 in 2008 to 4.1 in 2009 and 4.05 in INDUSTRY: Manufacturing INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES The 2010 incident reports are nearly identical to the 2009 rates, representing very little change industry-wide. In reality, the Manufacturing incident report rates have experienced very little change in the five-year period of this report. This is not typical when compared to report rates for other industries. The leading incident category is Personnel Management at 2.17 followed by Employment Law Violation at Incident Category Company/Professional Code Violation Corruption & Fraud Customer/Competitor Interaction Employment Law Violation Environment, Health & Safety Misuse of Assets/Information Personnel Management Other Overall Note: Incident rate figures may not total up to match industry totals due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 38

42 FREQUENCY OF INCIDENT TYPES When viewed as a percentage of overall reports, Personnel Management, Employment Law Violation and Corruption & Fraud led the incident category breakdown with 54%, 15% and 12% respectively in Each of the incident categories fluctuated by only slightly from last year s statistics. Incident Category Company/Professional Code Violation 10% 9% 9% 10% 9% Corruption & Fraud 10% 10% 12% 12% 12% Customer/Competitor Interaction 2% 2% 3% 2% 3% Employment Law Violation 13% 14% 14% 14% 15% Environment, Health & Safety 6% 7% 7% 6% 7% Misuse of Assets/Information 1% 0% 1% 0% 0% Personnel Management 58% 57% 53% 55% 54% Other 0% 1% 1% 1% 1% INDUSTRY: Manufacturing MEANS OF AWARENESS The Poster continued its position as the leading awareness method for all five years, followed by a fellow Employee, alternative options, and an employee Handbook respectively. The employee Intranet site experienced a decrease from the previous year. Means of Awareness Brochure 6% 4% 4% 3% 3% Employee 14% 15% 14% 13% 13% HR 5% 5% 5% 5% 5% Handbook 10% 11% 11% 10% 9% Intranet 5% 6% 8% 8% 6% Manager 3% 3% 2% 3% 2% Poster 36% 35% 33% 33% 36% Sign 2% 2% 2% 2% 1% Video 0% 0% 0% 0% 0% Wallet Card 6% 5% 5% 4% 3% Other 12% 12% 14% 12% 12% Unknown 1% 2% 2% 7% 10% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 39

43 PRIOR MANAGEMENT NOTIFICATION The number of participants in the Manufacturing industry that notify management of an incident prior to using the organizational hotline has remained relatively steady over the five-year period with more than 71% of participants not giving prior management notification each year. It peaked in 2007 with 75% of participants not providing prior management notification. INDUSTRY: Manufacturing PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY For participants reporting a Personnel Management or Employment Law Violation incident, there was a higher likelihood of those participants having notified a manager about the situation. There were no significant increases or decreases from year to year across all incident categories. Incident Category Company/Professional Code Violation 8% 6% 7% 7% 7% Corruption & Fraud 8% 9% 9% 8% 9% Customer/Competitor Interaction 1% 1% 1% 2% 2% Employment Law Violation 15% 16% 16% 16% 17% Environment, Health & Safety 7% 9% 10% 8% 9% Misuse of Assets/Information 0% 1% 0% 0% 0% Personnel Management 59% 58% 55% 55% 55% Other 2% 0% 2% 1% 2% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 40

44 ANONYMITY Beginning in 2009, there was a shift from less than half of participants remaining anonymous to more than half choosing to remain anonymous. In 2009, 53% remained anonymous and in 2010 it increased to 55% choosing not to reveal their identity. INDUSTRY: Manufacturing 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 41

45 CASE OUTCOME In 2010, when information was available, 40% of case outcomes resulted in an investigation with a corrective action. This is consistent with the previous four years. In 28% of cases, they were investigated but resulted in no corrective actions. Another 23% of cases did not warrant an investigation. Case Outcome No Investigation Warranted 16% 22% 26% 20% 23% Investigated, Corrective Action Taken 40% 42% 42% 42% 40% Investigated, No Corrective Action Taken 35% 28% 25% 29% 28% Referred/Advised 6% 6% 6% 7% 6% Other 3% 2% 1% 2% 2% CASE DISPOSITION INDUSTRY: Manufacturing In 2010, upon the review of data in cases reaching the disposition level, 21% resulted in discipline/counseling, 3% resulted in termination, and 13% resulted in the case being cleared or no action taken. The majority of cases at 63% remained unresolved or were resolved with a different method. Case Disposition Cleared/No Action 14% 12% 12% 12% 13% Disciplined/Counseled 21% 18% 20% 23% 21% Other/Unresolved 61% 66% 64% 60% 63% Terminated 4% 4% 4% 5% 3% Prosecuted 0% 0% 0% 0% 0% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 42

46 MANUFACTURING BY SIZE Throughout the five-year period, the report rate has decreased for the largest group by organizational size. In 2010, that group increased in size over 2009 while the second largest group decreased in size as compared to the previous year. The additional groups showed relatively no change. Employee Range Group 1 (0-5,000) 6% 5% 11% 8% 8% Group 2 (5,001-10,000) 5% 6% 8% 7% 7% Group 3 (10,001-20,000) 20% 17% 18% 15% 16% Group 4 (20,001-50,000) 18% 16% 15% 31% 27% Group 5 (50,001 +) 51% 56% 48% 39% 41% MANUFACTURING BY NUMBER OF ORGANIZATIONS IN EACH GROUP* INDUSTRY: Manufacturing For Manufacturing, the largest number of organizations fall within the smallest group companies with less than 5,000 employees with 49% of all organizations. The remaining 51% are distributed fairly equally among the four larger categories. *New to the 2011 benchmarking report, this chart simply provides an indication of the number of organizations that fall within each group range. Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 43

47 MINING OVERALL INCIDENT REPORT RATES PER 1,000 EMPLOYEES The overall incident rate for Mining sharply increased in both 2007 and 2008, peaking at 5.78, but decreased in 2009 to 3.81 and continued that drop in 2010 to The Mining industry has the lowest incident rate among all industries profiled in this report. INDUSTRY: Mining INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES As the overall incident rate has decreased for two consecutive years, naturally the individual incident categories have decreased in almost all categories. The only area that saw an increase is Environment, Health and Safety. The leading categories are Personnel Management and Corruption & Fraud, both which experienced decreases in 2010 and Incident Category Company/Professional Code Violation Corruption & Fraud Customer/Competitor Interaction Employment Law Violation Environment, Health & Safety Misuse of Assets/Information Personnel Management Other Overall Note: Incident rate figures may not total up to match industry totals due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 44

48 FREQUENCY OF INCIDENT TYPES In 2010, Personnel Management continued to lead in the frequency of incident types in Mining with more than half of the reports attributed to this category. There was very little movement across all incident types with the only notable change being a 5% increase in Environment, Health & Safety from 2009 to its 2010 level of 11%. Incident Category Company/Professional Code Violation 12% 10% 14% 11% 9% Corruption & Fraud 12% 10% 10% 14% 12% Customer/Competitor Interaction 0% 1% 2% 3% 2% Employment Law Violation 14% 12% 10% 9% 10% Environment, Health & Safety 8% 10% 8% 6% 11% Misuse of Assets/Information 0% 1% 0% 0% 0% Personnel Management 54% 57% 53% 56% 55% Other 0% 0% 2% 2% 2% INDUSTRY: Mining MEANS OF AWARENESS The Poster continues to be the leading method of awareness among participants in the Mining industry, with 29% of participants citing it on their report. This is typical with participants in an industry where workers do not routinely use computers as a part of their daily work activities. However, the Poster did slightly decrease in popularity in 2010 while a fellow Employee and alternative methods increased slightly. Means of Awareness Brochure 4% 2% 3% 1% 2% Employee 14% 19% 15% 16% 18% HR 7% 5% 4% 4% 5% Handbook 7% 8% 8% 6% 7% Intranet 9% 9% 9% 11% 10% Manager 5% 6% 3% 4% 2% Poster 32% 23% 23% 32% 29% Sign 1% 1% 1% 1% 1% Wallet Card 4% 11% 15% 7% 6% Other 17% 14% 16% 15% 18% Unknown 0% 2% 3% 3% 3% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 45

49 PRIOR MANAGEMENT NOTIFICATION In 2010, the number of participants that notified management prior to reporting their incident via an incident report increased slightly to 27% from 25%. Throughout the fiveyear period, the numbers have fluctuated between 22% and 35%. INDUSTRY: Mining PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY Across all five years, Mining participants reporting Personnel Management, Employment Law Violation, and Environment, Health & Safety related incidents were more likely to have notified a manager prior to using the hotline, with Personnel Management leading all categories by a substantial margin. Incident Category Company/Professional Code Violation 8% 7% 9% 5% 4% Corruption & Fraud 12% 7% 9% 8% 9% Customer/Competitor Interaction 0% 0% 1% 2% 1% Employment Law Violation 17% 17% 12% 11% 10% Environment, Health & Safety 8% 11% 10% 10% 11% Misuse of Assets/Information 0% 2% 0% 0% 0% Personnel Management 55% 56% 59% 63% 64% Other N/A N/A 0% 1% 0% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 46

50 ANONYMITY In 2009, the Mining industry experienced a shift in the level of participants choosing to remain anonymous. It has increased substantially since 2007 and experienced an additional incremental increase to reach 61% in 2010, the highest level during the five-year span. The increase may be attributed to new training and communications programs implemented throughout organizations in the Mining industry that highlight the option to remain anonymous and to encourage web-based reporting which typically leads to more anonymity. INDUSTRY: Mining 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 47

51 CASE OUTCOME In 2010, 84% of all cases, when information was available, warranted an investigation. This is an slight increase from the 2009 level of 81%. Of those 84%, 48% resulted in a corrective action while 36% resulted in no corrective action. Throughout the five-year period, the number of cases being investigated but resulting in no corrective action has decreased substantially while the no investigation warranted level has fluctuated but returned to its 2006 levels. The number of cases being investigated where corrective action was taken has increased since 2006 but fell year over year. The increase in alternative or unknown outcomes was 2%. Case Outcome No Investigation Warranted 8% 17% 9% 13% 7% Investigated, Corrective Action Taken 38% 29% 54% 53% 48% Investigated, No Corrective Action Taken 54% 54% 37% 28% 36% Referred/Advised 0% 0% 0% 0% 0% Other 0% 0% 0% 6% 8% INDUSTRY: Mining CASE DISPOSITION When reviewing the data available outside of the Other/Unresolved category, the 2010 level of Disciplined/Counseled category dropped 10% in 2010 from the peak level in 2009 of 17% throughout the five-year period. The Other/Unresolved category increased in 2010 but is still lower than its previously high level of 87% in Case Disposition Cleared/No Action 0% 0% 0% 8% 7% Disciplined/Counseled 8% 8% 12% 17% 7% Other/Unresolved 87% 82% 79% 69% 78% Terminated 5% 10% 9% 6% 8% Prosecuted 0% 0% 0% 0% 0% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 48

52 MINING BY SIZE Following a shift in reports throughout organizations in 2009 that resulted in a dramatic increase in Group 2 and a decrease in Group 1 and Group 3, the levels remained relatively steady in Employee Range Group 1 (0-5,000) 5% 17% 26% 12% 19% Group 2 (5,001-10,000) 6% 13% 12% 35% 30% Group 3 (10,001-20,000) 22% 40% 36% 21% 21% Group 4 (20,001-50,000) 0% 0% 0% 2% 3% Group 5 (50,001 +) 67% 30% 26% 30% 28% MINING BY NUMBER OF ORGANIZATIONS IN EACH GROUP* For Mining, the largest number of organizations, at 60%, falls within the smallest group companies with less than 5,000 employees. INDUSTRY: Mining *New to the 2011 benchmarking report, this chart simply provides an indication of the number of organizations that fall within each group range. Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 49

53 PUBLIC ADMINISTRATION Note: This is the first year that five years of data are available for the Public Administration industry. OVERALL INCIDENT REPORT RATES PER 1,000 EMPLOYEES In 2010, there was a significant decrease in incident report rates for the Public Administration industry. The drop of nearly four percentage points from a five-year high in 2009 of 8.66 to a 2010 figure of 4.85 brings its level back in line with previous year results. (The number of reports per 1,000 employees had nearly doubled from 2006 to 2009.) While last year s report incident rate ranked Public Administration in line with other industries, the 2010 statistic now places Public Administration well below the overall incident rate average. INDUSTRY: Public Administration 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 50

54 INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES Throughout the five-year period, the incident rate reports by category have fluctuated reaching high levels across all category levels in 2009 and then returning to typical levels in The leading categories each year are Corruption & Fraud and Company/ Professional Code Violation. When compared to other industries, the Personnel Management incident rate is low while the Corruption & Fraud rate is high, especially in 2008 and Incident Category Company/Professional Code Violation Corruption & Fraud Customer/Competitor Interaction Employment Law Violation Environment, Health & Safety Misuse of Assets/Information Personnel Management Other n/a n/a n/a Overall Note: Incident rate figures may not total up to match industry totals due to rounding. FREQUENCY OF INCIDENT TYPES INDUSTRY: Public Administration In 2009 and 2010, Corruption & Fraud accounted for 47% of all incident reports. This category also led all categories for the five years of available data. It is followed, respectively, by Company/Professional Code Violation and Personnel Management. Interestingly, the fraud category saw the largest increase over the five-year period while the Company/Professional Code Violation and Personnel Management categories saw the largest decreases. Incident Category Company/Professional Code Violation 24% 16% 21% 20% 17% Corruption & Fraud 28% 40% 43% 47% 47% Customer/Competitor Interaction 8% 7% 8% 7% 7% Employment Law Violation 7% 6% 4% 5% 5% Environment, Health & Safety 4% 4% 4% 4% 5% Misuse of Assets/Information 2% 4% 3% 3% 4% Personnel Management 27% 23% 17% 14% 13% Other n/a n/a n/a 0% 1% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 51

55 MEANS OF AWARENESS For Public Administration, the Intranet along with a fellow Employee account for the most frequently reported method of learning about the reporting hotline, with the exception being the alternative or unknown methods. This is a departure from the trends set within the other industries where either the Intranet or Poster is typically the most popular method of awareness. This is consistent across all five years of data and may be attributed to the public aspect of Public Administration as government employees may more closely guard their information. Means of Awareness Brochure 8% 4% 4% 2% 3% Employee 15% 17% 15% 13% 16% HR 2% 3% 1% 3% 2% Handbook 1% 3% 1% 1% 1% Intranet 6% 9% 14% 14% 15% Manager 3% 1% 2% 1% 1% Poster 11% 13% 8% 7% 8% Sign 1% 1% 1% 0% 1% Video 0% 0% 0% 0% 0% Wallet Card 5% 2% 3% 5% 2% Other 31% 36% 42% 39% 38% Unknown 16% 9% 9% 15% 13% INDUSTRY: Public Administration Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 52

56 PRIOR MANAGEMENT NOTIFICATION The number of participants in the Public Administration industry who provided management prior notification in 2010 remained relatively unchanged at an industrywide low of 17%. When compared to industry-wide data, the Public Administration participants have a lower rate of providing prior management notification and have remained very consistent even with the increase in the number of employees in this industry for the 2010 report. INDUSTRY: Public Administration 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 53

57 PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY In the five-year period, the percentage of Corruption & Fraud reports where participants notified management prior to submitting their report increased marginally, from 33% in 2006 to 43% in Contrary to that category is the decrease in prior management notification for the Personnel Management category, falling from 33% in 2006 to 17% in The other categories remained relatively unchanged throughout the five-year period. Incident Category Company/Professional Code Violation 10% 12% 19% 16% 11% Corruption & Fraud 33% 40% 38% 41% 43% Customer/Competitor Interaction 6% 5% 10% 7% 9% Employment Law Violation 7% 9% 8% 7% 8% Environment, Health & Safety 7% 6% 4% 7% 9% Misuse of Assets/Information 4% 1% 1% 2% 3% Personnel Management 33% 27% 20% 20% 17% Other 0% 0% 0% 0% 0% Note: Data totals may not equal 100% due to rounding. ANONYMITY Along with several other industries, a significant shift in anonymity occurred in 2009 when compared to In 2009, 57% of participants remained anonymous, a substantial increase from This trend continued in 2010 with 61% choosing anonymity. INDUSTRY: Public Administration 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 54

58 CASE OUTCOME In 2009 and 2010, 38% and 40% of cases respectively, when outcome data was available, provided adequate information to warrant an investigation. Of those investigated, 12% of cases in 2009 resulted in a corrective action but that percentage decreased in 2010 to 9%. In 2009, 26% of investigated cases resulted in no corrective actions but that number increased in 2010 to 31%. For 23% of all cases in 2010, the outcome was unknown or fell into an alternative category while 16% of cases resulted in no investigation. Case Outcome No Investigation Warranted 17% 7% 14% 15% 16% Investigated, Corrective Action Taken 12% 8% 9% 12% 9% Investigated, No Corrective Action Taken 34% 47% 36% 26% 31% Referred/Advised 3% 18% 13% 17% 21% Other 34% 20% 28% 30% 23% CASE DISPOSITION The percentage of cases in Public Administration falling into the Other/Unresolved category has steadily increased during the five-year period, with 95% of all cases not being sufficiently closed in This leaves little data for case disposition as 3% of cases were cleared and 1% resulted in a party being disciplined or counseled. Case Disposition Cleared/No Action 11% 28% 11% 6% 3% Disciplined/Counseled 6% 4% 3% 4% 1% Other/Unresolved 80% 68% 86% 90% 95% Terminated 3% 0% 0% 0% 0% Prosecuted 0% 0% 0% 0% 0% INDUSTRY: Public Administration Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 55

59 PUBLIC ADMINISTRATION BY SIZE Throughout the five-year period, the number of reports within organizations with less than 5,000 employees increased substantially. For organizations with 5,001 to 10,000 employees, reports fell from 35% to 15%. This shift may be due to organizations falling prey to the economic downturn and losing people and the fact that smaller companies tend to have less checks and balances for dealing with fraud as individuals have multiple job roles. An interesting note regarding Public Administration is that the majority of reports are from the smallest organizations. This is a reversal from the trend set with all other industries in the report, as the highest number of reports are found within the larger organizations. Employee Range Group 1 (0-5,000) 15% 16% 26% 38% 36% Group 2 (5,001-10,000) 35% 24% 16% 18% 15% Group 3 (10,001-20,000) 47% 22% 28% 22% 25% Group 4 (20,001-50,000) 3% 38% 30% 22% 25% Group 5 (50,001 +) 0% 0% 0% 0% 0% PUBLIC ADMINISTRATION BY NUMBER OF ORGANIZATIONS IN EACH GROUP* For Public Administration, the largest number of organizations, at 73%, falls within the smallest group companies with less than 5,000 employees. The smallest group has seen an increase from 62% in 2006 to 73% in This may be an attribute to the increased number of reports within this group size. INDUSTRY: Public Administration *New to the 2011 benchmarking report, this chart simply provides an indication of the number of organizations that fall within each group range. Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 56

60 RETAIL TRADE OVERALL INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES In 2010, the incident rate for the Retail Trade has decreased more than seven percentage points since At 10.5%, the incident rate falls more in line with other industry rates, but is still the second highest among all industries. At its peak in 2006 at 17.88%, the Retail Trade incident rate far outpaced other industries. INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES INDUSTRY: Retail Trade The incident report rates fell among almost every incident category in 2010, with the exception of a slight increase in the Company/Professional Code Violation category. This is reflective of the overall incident report decrease. Mirroring other industries incidents rates, the Personnel Management category out distanced all other categories at 5.64 in Incident Category Company/Professional Code Violation Corruption & Fraud Customer/Competitor Interaction Employment Law Violation Environment, Health & Safety Misuse of Assets/Information Personnel Management Other Overall Note: Incident rate figures may not total up to match industry totals due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 57

61 FREQUENCY OF INCIDENT TYPES Capturing 54% of all incident types in 2010, Personnel Management is the leading category in Retail Trade. The Employment Law Violation category is a distant second, accounting for 13% of all 2010 reports. Throughout the five-year period, Company/ Professional Code Violation experienced an marginal decrease from 19% to 8%. Incident Category Company/Professional Code Violation 19% 18% 8% 8% 8% Corruption & Fraud 10% 11% 12% 12% 10% Customer/Competitor Interaction 1% 3% 3% 2% 2% Employment Law Violation 11% 11% 12% 13% 13% Environment, Health & Safety 5% 5% 5% 5% 5% Misuse of Assets/Information 1% 1% 0% 0% 0% Personnel Management 46% 44% 50% 52% 54% Other 7% 7% 9% 8% 7% MEANS OF AWARENESS Following industry-wide trends, the leading methods of awareness in 2010 for Retail Trade participants were the Poster, a fellow Employee and the employee Handbook. While slightly decreasing throughout the five-year period, the Poster still remains the leading means of awareness for Retail Trade incident reports, followed by alternative or unknown options. The 3% attributed to the Intranet is relatively low when compared to industry-wide figures; however, this statistic is understandable given that most retail employees do not have ready online access during their regular job duties. INDUSTRY: Retail Trade Means of Awareness Brochure 2% 1% 2% 1% 1% Employee 15% 16% 12% 9% 10% HR 3% 3% 3% 3% 3% Handbook 9% 8% 11% 8% 7% Intranet 2% 3% 3% 3% 3% Manager 6% 7% 7% 6% 5% Poster 43% 41% 39% 35% 36% Sign 2% 3% 3% 2% 1% Video 0% 0% 0% 0% 0% Wallet Card 5% 5% 6% 4% 3% Other 12% 11% 13% 10% 12% Unknown 1% 2% 1% 19% 17% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 58

62 PRIOR MANAGEMENT NOTIFICATION Retail trade participants are remarkably consistent in their prior management notification. In three out of five years, only 31% of Retail Trade participants had notified management prior to submitting a report. This is a low percentage when compared to other industries. However, it may be attributed to the transient nature of retail business employees. They are more likely to submit reports during off-hours and may not have access to managers in a one-on-one setting that would facilitate the communication of such a report. PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY INDUSTRY: Retail Trade After reporting a Personnel Management incident to a manager, 54% of such reports were submitted through the hotline. This is followed by Employee Law Violation and Corruption & Fraud respectively. The percentages are consistent throughout the five-year period from Incident Category Company/Professional Code Violation 18% 16% 6% 5% 6% Corruption & Fraud 12% 16% 14% 13% 11% Customer/Competitor Interaction 1% 1% 1% 2% 1% Employment Law Violation 11% 12% 13% 14% 13% Environment, Health & Safety 6% 7% 7% 7% 7% Misuse of Assets/Information 2% 1% 1% 1% 0% Personnel Management 45% 42% 49% 51% 54% Other 5% 5% 9% 7% 7% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 59

63 ANONYMITY Beginning in 2009, the percent of participants choosing to remain anonymous showed a significant decrease from previous levels. This shift continued in 2010 with the same number, 45%, choosing not to disclose their identity. INDUSTRY: Retail Trade 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 60

64 CASE OUTCOME Based on available data regarding outcomes, there was a noticeable shift in 2008 in regard to an increase in the number of cases that warranted an investigation. This resulted in more than 80% of cases leading to an investigation for the years 2008, 2009 and 2010, establishing a three-year trend. In 2010, 84% of reports, based on available data, warranted investigations with 54% resulting in a corrective action being taken. Case Outcome No Investigation Warranted 34% 35% 17% 13% 14% Investigated, Corrective Action Taken 50% 48% 43% 45% 54% Investigated, No Corrective Action Taken 16% 17% 38% 37% 30% Referred/Advised 0% 0% 1% 1% 2% Other 0% 0% 1% 4% 0% CASE DISPOSITION A positive trend for Retail Trade is that the Other/Unresolved category has decreased significantly from 2006 to In 2010, 21% of all cases the parties involved were disciplined or received counsel. This is a slight increase from 2009 and a margin increase from An additional 5% of all cases in 2010 resulted in a party cited in the report being terminated. Case Disposition Cleared/No Action 8% 7% 9% 10% 9% Disciplined/Counseled 8% 9% 17% 17% 21% Other/Unresolved 81% 80% 68% 67% 66% Terminated 3% 4% 6% 6% 5% Prosecuted 0% 0% 0% 0% 0% INDUSTRY: Retail Trade Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 61

65 RETAIL TRADE BY SIZE For the last two years, 2009 and 2010, there has been relatively little change in the distribution of reports among the five groups, with the highest percentage residing in Group 5. Throughout the five-year period, it has experienced a marginal decrease. Employee Range Group 1 (0-5,000) 4% 4% 10% 10% 10% Group 2 (5,001-10,000) 2% 4% 8% 4% 4% Group 3 (10,001-20,000) 10% 10% 17% 11% 12% Group 4 (20,001-50,000) 20% 19% 24% 25% 22% Group 5 (50,001 +) 64% 63% 41% 50% 53% RETAIL BY NUMBER OF ORGANIZATIONS IN EACH GROUP* For Retail Trade, the largest number of organizations, at 59%, falls within the smallest group companies with less than 5,000 employees. INDUSTRY: Retail Trade *New to the 2011 benchmarking report, this chart simply provides an indication of the number of organizations that fall within each group range. Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 62

66 SERVICES INDUSTRIES OVERALL INCIDENT REPORT RATES PER 1,000 EMPLOYEES Following a steady period of significant increases in the Service Industries incident rate, the 2009 and 2010 levels have established a downward trend. While services industries is still high when compared to other industries (the third highest overall), the 2010 level of 9.23 is down nearly two percentage points from the 2008 high of INDUSTRY: Service Industries 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 63

67 INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES Incident report rates for the Service Industries are led by the Personnel Management category at This category leads the second and third most frequent report types, Employment Law Violations and Corruption & Fraud, by a wide margin but fell by nearly a full point year over year. It is noteworthy that Corruption & Fraud experienced an increase of more than 100% from 2007 to 2009 and then fell back below its 2008 level in Incident report rates for the Employment Law Violation and Environment, Health and Safety categories have doubled from 2006 to Incident Category Company/Professional Code Violation Corruption & Fraud Customer/Competitor Interaction Employment Law Violation Environment, Health & Safety Misuse of Assets/Information Personnel Management Other Overall Note: Incident rate figures may not total up to match industry totals due to rounding. INDUSTRY: Service Industries 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 64

68 FREQUENCY OF INCIDENT TYPES In line with other industries, Personnel Management accounted for 52% of cases in 2010, while Employment Law Violation and Corruption & Fraud represented 14% and 11% respectively. Throughout the five-year period, there has been relatively little fluctuation across all categories. Incident Category Company/Professional Code Violation 10% 6% 7% 6% 7% Corruption & Fraud 10% 9% 10% 13% 11% Customer/Competitor Interaction 2% 5% 6% 7% 6% Employment Law Violation 14% 11% 9% 10% 14% Environment, Health & Safety 5% 5% 5% 4% 4% Misuse of Assets/Information 1% 4% 5% 6% 5% Personnel Management 58% 60% 58% 54% 52% Other 0% 0% 0% 0% 0% MEANS OF AWARENESS In 2009, there was an anomaly in the data for means of awareness a tremendous jump in the Unknown category. The rest of the data followed industry-wide trends with the leading means of categorized awareness option being the Poster, a fellow Employee, the employee Handbook and the Intranet. The anomaly has turned into a two-year trend with 32% of all participant reports in 2010 providing an unknown means of awareness. Means of Awareness Brochure 5% 4% 3% 2% 1% Employee 15% 17% 17% 10% 11% HR 4% 5% 5% 3% 3% Handbook 16% 15% 13% 8% 7% Intranet 6% 5% 7% 5% 6% Manager 4% 3% 4% 3% 3% Poster 30% 31% 29% 21% 24% Sign 2% 2% 2% 1% 1% Video 0% 0% 0% 0% 0% Wallet Card 5% 3% 4% 2% 2% Other 12% 13% 14% 9% 10% Unknown 1% 2% 2% 36% 32% INDUSTRY: Service Industries Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 65

69 PRIOR MANAGEMENT NOTIFICATION The rate of prior management notification for Service Industries participants remained relatively steady throughout the five years, with 2010 returning to its 2008 level of 32% for participants notifying a member of management prior to submitting a report. Service Industries, similarly to the Retail Trade industry, is consistent in their prior management notification rates. This may be reflective of the similar nature of their employees and workforce structure. PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY In 2010, service industry participants in 57% of all notifications contacted management before making hotline reports for Personnel Management incidents. This was followed by Employment Law Violation and Corruption & Fraud reports. In the five-year period, Misuse of Assets/Information has gone from 0% in 2006 to 5% in 2010, while other categories have remained steady. INDUSTRY: Service Industries Incident Category Company/Professional Code Violation 10% 6% 7% 4% 5% Corruption & Fraud 10% 10% 10% 11% 9% Customer/Competitor Interaction 2% 5% 6% 7% 5% Employment Law Violation 14% 11% 9% 9% 13% Environment, Health & Safety 5% 5% 5% 5% 5% Misuse of Assets/Information 0% 4% 5% 6% 5% Personnel Management 59% 59% 58% 58% 57% Other 0% 0% 0% 0% 1% Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 66

70 ANONYMITY The shift in anonymity levels in 2009 has been supported by similar results in In 2010, participants choosing to remain anonymous decreased slightly to 53%. INDUSTRY: Service Industries 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 67

71 CASE OUTCOME In 2010, the percentage of cases warranting an investigation increased from 61% in 2006 to 75% in As a result of those investigations in 2010, 43% resulted in a corrective action taken with 32% resulting in no corrective action being taken. Also in 2010, 21% of cases did not warrant an investigation. Case Outcome No Investigation Warranted 39% 26% 22% 23% 21% Investigated, Corrective Action Taken 38% 37% 40% 38% 43% Investigated, No Corrective Action Taken 23% 33% 34% 35% 32% Referred/Advised 0% 2% 2% 2% 2% Other 0% 2% 2% 2% 2% CASE DISPOSITION In the Service Industries, more than three out of four cases fall into the Other/Unresolved category. The most common case disposition category (other than the Other/Unresolved category) across all five years for the Service Industries was the disciplined/counseled category. In 2010, 12% of cases were disciplined/counseled, followed by 9% of cases that resulted in the involved parties being cleared with no action taken and finally 3% resulting in termination. Case Disposition Cleared/No Action 0% 16% 17% 12% 9% Disciplined/Counseled 13% 13% 10% 13% 12% Terminated 3% 3% 3% 3% 3% Prosecuted 0% 0% 0% 0% 0% Other/Unresolved 84% 68% 70% 72% 76% INDUSTRY: Service Industries Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 68

72 SERVICE INDUSTRIES BY SIZE In 2010, the distribution of reports among the five groups remained consistent with the previous years, with half of all reports coming from organizations with more than 50,000 employees. Employee Range Group 1 (0-5,000) 18% 10% 21% 20% 18% Group 2 (5,001-10,000) 18% 10% 9% 10% 9% Group 3 (10,001-20,000) 9% 6% 4% 7% 8% Group 4 (20,001-50,000) 11% 18% 19% 17% 15% Group 5 (50,001 +) 44% 56% 47% 46% 50% SERVICE INDUSTRIES BY NUMBER OF ORGANIZATIONS IN EACH GROUP* For the Service Industries, the largest number of organizations, at 73%, falls within the smallest group companies with less than 5,000 employees. *New to the 2011 benchmarking report, this chart simply provides an indication of the number of organizations that fall within each group range. INDUSTRY: Service Industries Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 69

73 TRANSPORTATION, COMMUNICATIONS & UTILITIES OVERALL INCIDENT REPORT RATES PER 1,000 EMPLOYEES Following a peak in the incident rate in 2008 of 13.9, the Transportation, Communications & Utilities industry has realized a small decrease in 2009 and However, the rate in 2010 is still higher than the 2007 rate and significantly higher than the 2006 level of It is also the highest among all industries outlined in this report. INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES Reflecting the slight 0.46 decrease in the overall incident rate, there were no significant changes in individual categories, just minimum increases or decreases. While the incident reporting rate decreased by 0.22, Personnel Management remains the leading category with an incident rate of The next most reported categories in 2010 were Employee Law Violation at 2.19 and Corruption & Fraud at Incident Category Company/Professional Code Violation Corruption & Fraud Customer/Competitor Interaction Employment Law Violation Environment, Health & Safety Misuse of Assets/Information Personnel Management Other Overall INDUSTRY: Transportation, Communications & Utilities Note: Incident rate figures may not total up to match industry totals due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 70

74 FREQUENCY OF INCIDENT TYPES Throughout the five-year period, there have been no significant changes among incident types. Holding nearly half of all reports, Personnel Management leads in frequency, followed by Employee Law Violation and Corruption & Fraud. Incident Category Company/Professional Code Violation 10% 9% 9% 8% 8% Corruption & Fraud 9% 10% 11% 9% 9% Customer/Competitor Interaction 2% 2% 4% 3% 5% Employment Law Violation 13% 18% 17% 17% 18% Environment, Health & Safety 7% 7% 7% 8% 7% Misuse of Assets/Information 1% 1% 1% 1% 1% Personnel Management 56% 52% 50% 48% 48% Other 2% 1% 1% 6% 4% MEANS OF AWARENESS Following industry-wide trends, the leading named methods of awareness in 2010 for Transportation, Communication & Utilities participants were the Poster, Intranet and a fellow Employee. In 2009, there was a marked increase in the Unknown category from 2% in 2008 to 17% in This result continued to increase in 2010 with 20% of reports stating an unknown means of awareness. Means of Awareness Brochure 4% 3% 3% 2% 1% Employee 18% 18% 19% 15% 14% HR 5% 7% 5% 4% 4% Handbook 10% 7% 7% 5% 4% Intranet 18% 20% 20% 17% 17% Manager 5% 6% 5% 4% 4% Poster 19% 17% 18% 18% 17% Sign 1% 1% 1% 1% 1% Video 0% 0% 0% 0% 0% Wallet Card 2% 2% 2% 1% 1% Other 17% 17% 18% 16% 17% Unknown 1% 2% 2% 17% 20% INDUSTRY: Transportation, Communications & Utilities Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 71

75 PRIOR MANAGEMENT NOTIFICATION The rate of prior management notification for participants remained relatively steady throughout the five years, with 2010 producing identical results to the prior year. In 2007, only 18% of participants notified a manager prior to submitting their incident report. PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY Transportation, Communication & Utilities industry participants were most likely to notify management before submitting hotline reports about Personnel Management concerns for more than 52% of all notifications covering all five years of the report. The next two leading incident categories were Employment Law Violation and Environment, Health & Safety. Misuse of Assets/Information and Customer/Competitor Interaction are the least likely incident categories in which participants have notified management prior to submitting their report. Incident Category Company/Professional Code Violation 8% 6% 7% 6% 6% Corruption & Fraud 8% 7% 8% 7% 8% Customer/Competitor Interaction 2% 2% 2% 3% 4% Employment Law Violation 13% 19% 18% 20% 19% Environment, Health & Safety 10% 10% 9% 10% 10% Misuse of Assets/Information 1% 0% 0% 1% 0% Personnel Management 58% 55% 55% 52% 52% Other 0% 1% 1% 1% 1% INDUSTRY: Transportation, Communications & Utilities Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 72

76 ANONYMITY Beginning in 2007, there was a shift in the level of participants willingness to reveal their identity when submitting a report. In 2007, 61% chose to remain anonymous; in 2009, that dropped to 45%. The decrease in anonymity continued in 2010 to a five-year low of 41%. INDUSTRY: Transportation, Communications & Utilities 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 73

77 CASE OUTCOME In 2010, 18% of cases, when information was available, resulted in no investigation warranted, while 39% of reports provided enough relevant information to warrant investigations. Of those, 21% of cases resulted in a corrective action and 18% resulted in no corrective actions. From 2006 to 2010, there was a significant decrease in the number of cases warranting an investigation. During that same time period, there was a similar increase in the number of cases that fell into the Other category. Case Outcome No Investigation Warranted 18% 21% 20% 21% 18% Investigated, Corrective Action Taken 31% 27% 27% 24% 21% Investigated, No Corrective Action Taken 26% 22% 29% 26% 18% Referred/Advised 0% 0% 0% 0% 0% Other 25% 30% 24% 29% 43% CASE DISPOSITION When reviewing the data available outside of the Other/Unresolved category, the most common case disposition category for Transportation, Communication & Utilities was the Cleared/No Action category with 18% of all cases, followed by 4% of cases that fell within the Disciplined/Counseled category. Case Disposition Cleared/No Action 18% 16% 13% 12% 18% Disciplined/Counseled 8% 9% 9% 7% 4% Terminated 2% 2% 2% 1% 1% Prosecuted 0% 0% 0% 0% 1% Other/Unresolved 72% 73% 76% 80% 76% Note: Data totals may not equal 100% due to rounding. INDUSTRY: Transportation, Communications & Utilities 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 74

78 TRANSPORTATION, COMMUNICATION & UTILITIES BY SIZE The majority of reports in this industry were from Group 5 organizations with 50,000+ employees; however, that group also has the largest swing, reaching 61% in 2007 and decreasing significantly by There were slight increases in the groups with fewer than 20,000 employees, while Group 4 experienced a small decrease in 2010 from Employee Range Group 1 (0-5,000) 4% 8% 7% 8% 11% Group 2 (5,001-10,000) 1% 2% 2% 5% 7% Group 3 (10,001-20,000) 11% 3% 3% 3% 4% Group 4 (20,001-50,000) 46% 26% 31% 37% 33% Group 5 (50,001 +) 38% 61% 57% 47% 46% TRANSPORTATION, COMMUNICATION & UTILITIES BY NUMBER OF ORGANIZATIONS IN EACH GROUP* For Transportation, Communications & Utilities, the largest number of organizations, at 68%, falls within the smallest group companies with less than 5,000 employees. *New to the 2011 benchmarking report, this chart simply provides an indication of the number of organizations that fall within each group range. Note: Data totals may not equal 100% due to rounding. INDUSTRY: Transportation, Communications & Utilities 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 75

79 WHOLESALE TRADE OVERALL INCIDENT REPORT RATES PER 1,000 EMPLOYEES For five years, the wholesale trade incident rate has fluctuated between a low of 6.57 in 2007 and a high of 8.8 in Following a decrease in 2009, the rate has increased back to its near high level in 2010 to INDUSTRY: Wholesale Trade 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 76

80 INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES Personnel Management continues to lead the incident category with an increase in 2010 to This category is followed by the Employment Law Violation and Corruption & Fraud categories. There were increases across all categories except Misuse of Assets/ Information which remained unchanged. Incident Category Company/Professional Code Violation Corruption & Fraud Customer/Competitor Interaction Employment Law Violation Environment, Health & Safety Misuse of Assets/Information Personnel Management Other Overall Note: Incident rate figures may not total up to match industry totals due to rounding. FREQUENCY OF INCIDENT TYPES In 2010, the distribution of incident types has experienced little variation throughout the five-year period. Personnel Management leads for wholesale trade participants, representing 54% of all reports. This is a decrease from the 58% level established in 2006 and Incident Category Company/Professional Code Violation 9% 8% 7% 7% 7% Corruption & Fraud 9% 10% 9% 10% 9% Customer/Competitor Interaction 1% 3% 3% 3% 5% Employment Law Violation 18% 17% 17% 19% 19% Environment, Health & Safety 5% 5% 6% 6% 7% Misuse of Assets/Information 0% 0% 0% 0% 0% Personnel Management 58% 57% 58% 55% 54% Other 0% 0% 0% 0% 0% INDUSTRY: Wholesale Trade Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 77

81 MEANS OF AWARENESS The Poster was the leading method of awareness for Wholesale Trade participants at 52% in 2010, which mirrors the 2009 results. The next two most popular awareness categories were a fellow Employee, an alternative method and the employee Handbook. Means of Awareness Brochure 4% 2% 2% 2% 1% Employee 12% 15% 13% 13% 15% HR 3% 3% 3% 3% 3% Handbook 10% 8% 9% 7% 6% Intranet 3% 4% 5% 5% 5% Manager 4% 4% 3% 2% 2% Poster 49% 49% 49% 52% 52% Sign 2% 2% 3% 2% 1% Video 0% 1% 0% 0% 0% Wallet Card 2% 1% 2% 2% 2% Other 11% 10% 10% 10% 13% Unknown 0% 1% 1% 2% 1% Note: Data totals may not equal 100% due to rounding. INDUSTRY: Wholesale Trade 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 78

82 PRIOR MANAGEMENT NOTIFICATION The rate of participants notifying management prior to submitting a hotline report reached its highest level throughout the five-year period in 2010 at 33%, which is only a slight increase from its 2009 level of 31%. For Wholesale Trade participants in 2010, a total of 68%* chose not to discuss their incident with management prior to submitting their report. * Percentage totals do not equal 100% due to rounding. PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY Over the five-year period, the Employment Law Violation category experienced an increase in participants notifying management prior to submitting a report, from 15% in 2006 to 21% in The leading category, Personnel Management, experienced a slight decrease during the five-year period, from 61% in 2006 to 57% in This was followed by Employment Law Violation, Environment, Health & Safety reports, and Corruption & Fraud. Incident Category Company/Professional Code Violation 7% 5% 5% 5% 4% Corruption & Fraud 9% 12% 9% 8% 7% Customer/Competitor Interaction 1% 1% 2% 1% 2% Employment Law Violation 15% 18% 18% 20% 21% Environment, Health & Safety 7% 6% 7% 8% 9% Misuse of Assets/Information 0% 0% 0% 0% 0% Personnel Management 61% 58% 59% 58% 57% Other 0% 0% 0% 0% 0% INDUSTRY: Wholesale Trade Note: Data totals may not equal 100% due to rounding CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 79

83 ANONYMITY The wholesale trade participants recorded a 50/50 balance in 2009, and in 2010 participants choosing to reveal their identity increased only slightly. Throughout the fiveyear period, the level of anonymity has only fluctuated within a three-point window. INDUSTRY: Wholesale Trade 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 80

84 CASE OUTCOME Throughout the five-year period, when information was available, there was a significant increase in the number of cases not warranting an investigation from 5% in 2006 to 18% in Also in 2010, 82% of cases warranted an investigation with 40% of those cases resulting in a corrective action and 42% resulted in no corrective actions. The 2010 numbers represent continued decreases in the corrective action taken category. These changes could be attributed to an increase in the quality of the data received during the intake process. Case Outcome No Investigation Warranted 5% 5% 6% 13% 18% Investigated, Corrective Action Taken 45% 49% 39% 44% 40% Investigated, No Corrective Action Taken 50% 46% 54% 42% 42% Referred/Advised 0% 0% 1% 0% 0% Other 0% 0% 0% 1% 0% CASE DISPOSITION The most common case disposition category for the wholesale trade industry was the Disciplined/Counseled category at 22%; however, this is a slight decrease from the 2009 level and a marginal decrease from the beginning of the set time period. This category is followed by parties involved in the report being terminated at 8%. Another 5% of all cases resulted in a cleared or no action taken outcome while 65%, a small increase from 2009, were either unresolved or had a separate outcome. Case Disposition Cleared/No Action 10% 13% 16% 5% 5% Disciplined/Counseled 34% 31% 24% 27% 22% Terminated 5% 6% 5% 6% 8% Prosecuted 0% 0% 0% 0% 0% Other/Unresolved 51% 50% 55% 62% 65% Note: Data totals may not equal 100% due to rounding. INDUSTRY: Wholesale Trade 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 81

85 WHOLESALE TRADE BY SIZE In 2010, there were very slight changes in the three smallest categories and no changes at all in the two largest organizational size groups. Employee Range Group 1 (0-5,000) 5% 9% 15% 12% 14% Group 2 (5,001-10,000) 14% 19% 14% 13% 11% Group 3 (10,001-20,000) 13% 7% 14% 8% 7% Group 4 (20,001-50,000) 16% 24% 15% 21% 21% Group 5 (50,001 +) 52% 41% 42% 46% 46% WHOLESALE TRADE BY NUMBER OF ORGANIZATIONS IN EACH GROUP* For wholesale trade the largest number of organizations, at 65%, falls within the smallest group companies with less than 5,000 employees. Only 4% of all organizations fall within the largest group with more than 50,000 employees. *New to the 2011 benchmarking report, this chart simply provides an indication of the number of organizations that fall within each group range. Note: Data totals may not equal 100% due to rounding. INDUSTRY: Wholesale Trade 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 82

86 Categories and Terminology INCIDENT CATEGORY (TYPE) DESCRIPTIONS To assist in interpreting the data, specific incident types were consolidated into broader categories. The incident category descriptions are based on The Network s 29 years of incident reporting experience and also align with the classifications set forth by the Open Compliance and Ethics Group. Company/Professional Code Violation: Employees have a duty to their employer to act in the best interest of their employer when carrying out the duties of their employment. Any departure from company policy or facility procedures constitutes a Company/ Professional Code Violation: Examples include conflicts of interest, corporate compliance policy violations and code of conduct violations. Corruption & Fraud: Attempts to deceive the organization or others on behalf of the organization in order to receive gain such as a fraudulent refund or transaction, misstatement or destruction of an accounting document, taking of money or merchandise, kickbacks, etc. Examples include theft of any kind, accounting irregularities, insider trading and improper loans to executives. Customer/Competitor Interaction: Display of poor customer service or courtesy exhibited by employees through their actions, or inattention to customers. This category includes poor workmanship and outdated or defective products. Examples include customer complaints and product quality concerns. This category also includes improper interaction with competitive organizations. Employment Law Violation: Any act or omission that fails to meet the standards of the Equal Employment Opportunity Commission, which includes all types of discrimination. It also includes any adverse treatment related to a person s employment, career, profession, trade or business, including retaliation. Examples include harassment and labor law violations. Environment, Health & Safety: Any potentially hazardous or unsanitary condition that could affect the well being of an employee, customer, facility, or the general public. This category includes acts that cause physical injury or other acts or statements that jeopardize physical well-being. Examples include unsafe working conditions, workplace violence and product contamination CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 83

87 Misuse of Assets/Information: The conveying of information considered sensitive to another person, organization or entity by any person. Examples include release of proprietary information and misuse of computers, property or networks. Personnel Management: Any act or omission that is perceived to be detrimental to an employee s well-being. This category includes concerns over wages, hours, benefits, promotions, etc. Examples include wage and hour issues and employee relations. TERMINOLOGY Case Outcome: The case outcome refers to the overall conclusion of the case in terms of the determination of the final step for example, if an investigation was warranted and if corrective action was taken. Case Disposition: The case disposition refers to the final ruling for a case, for example, whether an employee who was alleged to have committed a wrongdoing was cleared or terminated. Reporting Mechanisms: Reporting mechanisms are ways in which an individual can report an issue or concern within the organization. These include phone calls, Web forms, s, written letters or conversations with managers and others, including ethics or compliance officers, human resources executives, Ombudsmen or other executives. Hotline vs. Helpline: Some organizations have adopted the term helpline due to its more positive perception or the fact that employees can use the process to ask questions about ethical issues. In this report, the terms hotline and helpline are used interchangeably. Hotline Report: A hotline report refers to the actual report received from the hotline via any method (phone, fax, web form, , etc.). Once an organization begins to investigate a report, it becomes a case. Incident Category: The classification of the allegations reported through the hotline. Participants: Participants are those individuals that file the actual report. Participants can be current employees, ex-employees, vendors, a member of the general public or any other stakeholder CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 84

88 ABOUT THE NETWORK, INC. The Network is a technology-based company that for more than 29 years has helped clients collect information and address critical issues such as ethics, risk management and compliance. Our leading governance, risk and compliance solutions enable organizations to mitigate risk and promote organizational compliance. Through the integration of on-demand software and services, The Network helps clients identify, communicate, resolve and mitigate risk issues and incidents. The Network serves thousands of organizations in every industry, including nearly 50 percent of the Fortune 500 and key members of the FTSE. ABOUT BDO CONSULTING BDO Consulting provides litigation, investigation, business restructuring and risk advisory services to clients in the United States and internationally. Our highly experienced and well-credentialed professionals leverage the global industry and accounting knowledge of the BDO international network, providing rapid, strategic advice to assist our clients. BDO Consulting is a division of BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of BDO International Limited. BDO International Limited is a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. ACKNOWLEDGMENTS Special thanks to the following individuals for their contributions to this publication: Luis Ramos, The Network Tom Kelly, The Network Tim Mohr, BDO Consulting Gina Goodenow, BDO Consulting Beth Freeman, Freeman Communications 2011 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT 85

89 For more information about this benchmarking report or the services provided by The Network, please call or The Network, Inc. TNW-BM11