2012 Corporate Governance and Compliance Hotline Benchmarking Report. An expanded analysis of enterprise incident repor ng ac vity from The Network

Transcription

1 Industry Report 2012 Corporate Governance and Compliance Hotline Benchmarking Report An expanded analysis of enterprise incident repor ng ac vity from The Network

2 2012 Corporate Governance and Compliance Hotline Benchmarking Report INDUSTRY REPORT JULY 2012 An expanded analysis of enterprise incident repor ng ac vity from The Network. TABLE OF CONTENTS Le er from the CEO... 1 Methodology... 3 Report Details... 3 Execu ve Summary... 4 Key Findings... 5 The Importance of Compliance Hotlines... 8 Using this Report... 8 Ongoing Analysis... 9 Summary Benchmarking Analysis Number of Employees Number of Organiza ons Rate Data Overview Report Frequency Rate per 1,000 Employees by Organiza on Size Report Rates per 1,000 Employees by Industry Frequency of Incident Types Reported Report Intake Method Retalia on Frequency of Means of Awareness Prior Management No fica on Anonymity Case Outcome & Disposi on Reports by Geography Data Analysis by Industry Construc on Finance, Insurance & Real Estate Manufacturing Mining Public Administra on Retail Trade Services Industries Transporta on, Communica ons & U li es Wholesale Trade Appendix: Defini ons & Terminology Incident Categories Terminology Summary User Input Legal Obliga ons & Privacy About The Network, Inc About BDO Consul ng Acknowledgments CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page i

3 Letter from the CEO Every year when we begin preparing for this annual benchmarking report, I m reminded of how important this data is, not just to our clients, but to all compliance execu ves. In a rela vely short period of me, we ve established a report that delivers an across-theboard look at how comprehensive governance, risk and compliance (GRC) programs are impac ng corporate behavior and influencing bo om lines. While the data presented in the report may change only slightly from year to year, the five-year review provides great insight into trending as well as to how new programs, the economy and legisla on all work to impact results. For example, our current report provides data from , during which the United States and most of the global community was in a recession, and while the recession technically came to a close during the same period, organiza ons are s ll suffering from a troublesome economic climate amidst high unemployment rates. The upside throughout this me period is that many organiza ons found a renewed energy to implement and improve compliance programs and ethics training, crea ng a strong base for future growth. We see companies taking a strong interest in improved ethics training and communica on in order to heighten awareness of fraud and ethical issues. It is always a primary goal of these efforts to drive down cash leakage that results from employee misconduct, but that cash is even more important to the bo om line, because of the economic struggles over the past five years. At The Network, we ve no ced several hot topics within our industry during the past year. For example, many organiza ons are struggling with check-the-box compliance. While these organiza ons are establishing typical compliance ac vi es a hotline, a few basic policies, some ethics training and maybe pu ng up some awareness posters they are failing to establish an integrated and holis c program. This siloed approach o en results in li le to no coordina on of ac vi es, with very li le oversight or monitoring, and leaves organiza ons with a false sense of security which fails them when true compliance issues arise. Managing policies and ensuring the message gets out to your employees and business partners is the next fron er. Organiza ons are working harder to address their policies, largely because of the disastrous and well-publicized consequences both financial and reputa onal that have resulted from founda onal policy issues. Organiza ons are realizing that policies establish boundaries for risk and lead employees to desired behaviors and that it is impera ve that employees have a strong understanding of their organiza on s policies as a key indicator of risk exposure. We re also seeing companies becoming much focused on proac ve compliance. Innova ve companies are looking for ways to iden fy areas of concern before issues arise and get a head start on the remedia on process. Companies want to address training on-the-spot for specific issue at hand, maybe even for a par cular manager, because they realize that employees con nue to be the best line of defense. Ensuring employees know how to spot non-compliant or unethical behavior and what to do about it increases the chance that you can quickly and effec vely respond. A final thought on a topic we discuss frequently: whether or not we ve reached the pping point on the increase of workplace fraud. While fraud index con nues to climb, we believe there is a silver lining in the data. While there may in fact be more fraud occurring, it is becoming clear that much of the increase in repor ng is coming from 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 1

4 more engaged employees who are refusing to sit idly by while fraud is perpetrated on their organiza ons. The key, however, will be to keep these employees mo vated to report issues through internal channels in an era of substan al new incen ves to report externally. I hope you find this year s report useful to your organiza on s analysis of its GRC program and ini a ves. We welcome your feedback and sugges ons for future reports at benchmarking@tnwinc.com. Thank you, Luis D. Ramos CEO, The Network, Inc CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 2

5 Methodology The 2012 Benchmarking Report includes a review of five years of data collected by The Network between It also includes the expanded analysis of employee numbers across all industries and group sizes. The data collected throughout this period provides an in-depth look at trends and key findings within industries and across all categories, providing users with the necessary tools to compare their organiza ons results to those of similar industries and determine what changes need to be made in their governance, risk and compliance programs in order to further reduce fraud and implement change. The goal of this annual benchmarking report is to iden fy emerging best prac ces for hotlines and other repor ng mechanisms and to provide a framework by which readers can assess their own compliance programs. Keep in mind that this report should serve as a star ng point in your efforts to evaluate your program results and assess your organiza onal health and that corporate culture, communica ons and other factors may influence your results. As you review the data presented in this report, be sure to drill down carefully to determine what these numbers mean in rela on to the specific ac vi es and environment within your industry and organiza on. REPORT DETAILS This report contains an analysis of nearly 600,000 reports, the report s largest pool of data to date. In 2011, almost 130,000 reports were taken from more than 1,100 organiza ons represen ng more than 15 million employees. The reports, or incidents, were received from a wide variety of people associated with each organiza on including employees, exemployees, vendors, shareholders and the public. There are mes when data appears within an other or unknown category. This is due to the fact that organiza ons may have differing communica on methods regarding the means of awareness or par cipants may have provided an answer not found within the repor ng mechanisms. We also have recalculated data for case outcomes and disposi ons by elimina ng responses when informa on not available was the response. By removing this data, we were able to provide a more useful depic on of case outcomes and case disposi ons. There are many possibili es why informa on not available occurs, for example, culture of the business or long me lags from report incep on to resolu on. At mes there are also discrepancies from organiza on to organiza on on the defini on of terms. This data does not represent every organiza on; it is representa ve 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 exis ng data sources might have slightly different interpreta ons. 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 par cipant making the report, how a report is submi ed, the requirements of the organiza on for which the report is being filed, the situa on or the incident being reported, etc. This is not a random sample of all industries and reports; therefore, certain variables may not be fully representa ve of the popula on at large. Also, all reports are allega ons and are treated in a befi ng manner. The Network does not decide the outcome of cases; final outcome of cases is designated by the individual organiza on. The incidents tallied in this report are submi ed via phone calls with informa on collected by a live operator or captured via web-based repor ng forms. Throughout the benchmarking 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. Data analysis for this benchmarking report was performed and verified by BDO Consul ng CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 3

6 Executive Summary The 2012 Corporate Governance and Compliance Hotline Benchmarking report is a compila on of 599,162 reports throughout the five-year period covering 2007 to In 2011, 129,199 reports were taken from 1,128 organiza ons represen ng 15,052,215 employees. The report delivers accurate informa on across all factors as its data represents a wide variety of organiza ons and employees from around the world. As organiza ons con nue to either implement or improve their GRC solu ons, their ability to detect and prevent fraud grows. Organiza ons have to stay not one but three steps ahead of the fraud curve. Internal and external factors fluctuate in how they influence employee behavior. One thing to note is that compliance behavior and ac vity within organiza ons is s ll rela vely young. Strong compliance legisla on started with the Sarbanes-Oxley Act of 2002 but it has only been the past five or six years that organiza ons have implemented programs to ac vely engage in the compliance procedures. Compliance best prac ces are beginning to gain ground on misconduct, but it is a long process. It may take a year or more for a complaint to complete the GRC lifecycle and then even longer to create precedents, benchmarks, policy changes and rules. So, the me for organiza ons to review their GRC lifecycle and implement changes based on key findings is now. One of the most essen al compliance best prac ces is employee ethics training, which requires a thorough, ongoing review of an organiza on s training program. Having employees who are well aware of boundaries, laws and how to engage in the compliance lifecycle makes for a robust and proac ve fraud control measure. Training has evolved and cannot be a watch a video and check box sta ng that it was understood. It must be interac ve, challenging employees to engage and retain the informa on presented to them. Based on an organiza on s employee makeup, training methods and tools will be different. For a young employee base, it may be heavily weighted in social media-like methods, while a more mature employee base will typically respond be er to classes and tradi onal teaching methods. The ac vity benchmarked in this report makes it clear that employees want to come forward when they witness bad behavior, but organiza ons must con nue to prac ce due diligence in their compliance efforts. According to the 2011 Na onal Business Ethics Survey, 77% of employees say they are prepared to handle situa ons that could lead to a viola on of company policies, a drop of nine percentage points from This es directly into the effec veness of an organiza on s training and policy management programs, along with their leadership team s commitment to crea ng an ethical workforce. As the economy con nues to improve, it is important that organiza ons con nue to focus on their compliance and ethics programs as fraud and non-ethical behavior typically increases during strong economic periods. The data in this report is the first to cover both the beginning and end of the recession (generally considered to be ). A few key influences throughout the period are: 1. A high unemployment rate. While the recession has ended and consumer confidence and bo om lines are slowly on the rise, the unemployment rate remains high. For employees, this impacts on-the-job behavior due to insecurity. 2. The Corporate Fraud Index (fraud repor ng percentage), at 21.2% for 2011, is at a five-year high; in fact it is at an all- me high since The Network began repor ng the index. It had fallen slightly in 2010 in what appeared to be a reflec on of the slowly improving economy but jumped sharply in This may be a reflec on of the improvements that organiza ons have made in their ethics and compliance hotlines programs and training of employees to be er understand and iden fy acts of fraud. 3. Compliance, especially in terms of an integrated approach, is a rela vely young industry, and many programs that organiza ons have put into place within the last ten years primarily to adhere to legisla on such as the Sarbanes- Oxley Act, Dodd-Frank Act, the UK Bribery Act and the FCPA are under review. These programs are being adjusted and improved to be er suit their internal needs in iden fying and comba ng fraud CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 4

7 KEY FINDINGS Increase in Incident Rate Following two years of decline, the incident rate increased slightly in While this could typically be a ributed to a jump in one industry or another, there were only two industries in which the incident rate decreased, leaving all other industries with an increase. There are many contribu ng factors, including the slight improvement in the unemployment rate and the expansion of compliance and ethics programs as they do a be er job at detec ng fraud. Largest Incident Rate Increase The industry that experienced the largest incident rate increase was Transporta on, Communica ons & U li es with a jump from in 2010 to in Upon review of the breakdown of incident categories, the majority of the increase stems from two categories: Employment Law Viola ons, which saw an increase to 3.06 from 2.19; and Company/Professional Code Viola on with an increase to 1.26 from Employment Law Viola on Incident Category As noted within the Transporta on, Communica ons & U li es incident rate spike, Employment Law Viola ons experienced an increase in five of the nine industries outlined in this report. These include Construc on, Mining, Retail Trade and Services Industries. This may be in response to the two pieces of legisla on that went into effect in 2011, the Dodd-Frank Act and the UK Bribery Act. Leading Incident Category While Employment Law Viola on experienced an increase in 2011, the leading incident category for all industries con nues to be Personnel Management. This category covers a variety of human resources ma ers, including wages and management interac on, and thereby is relevant to all employees. Beyond the Personnel Management category, the next most commonly reported incidents regardless of industry in 2011 were Employment Law Viola on, Corrup on & Fraud and Company/Professional Code Viola on. Anonymity Throughout the report, anonymity rates vary from industry to industry, but when viewed as part of the big picture, the overall rate remains close to equal from year to year in terms of par cipants choosing to remain anonymous or reveal their iden ty. In 2009 and 2010, the overall anonymity levels were 50/50 and in 2011, there was a small increase (2 percentage points) in par cipants choosing to reveal their iden ty. In the few areas outlined within this report when a larger shi was realized (>5 percentage points in either direc on) the shi can be a ributed to an increase in web reports as compared to hotline/phone reports, as a person-to-person call typically results in the gathering of more detailed material and in a rela onship between par cipant and hotline employee that aids in a par cipant s willingness to reveal their iden ty. Fraud-Related Incidents In 2011, the cumula ve fraud index rose to a five-year high of 21.2% a er experiencing a slight decline in These results con nue to feed the argument: is fraud on the increase or simply the repor ng of fraudulent ac vity (those being inclusive of reports on corrup on and fraud, misuse of assets or informa on, conflicts of interest, Foreign Corrupt Prac ces Act (FCPA) viola ons, etc.). The assessment of this current scenario is that as organiza ons con nue to implement new policies and training programs related to iden fying fraud and protec ng those employees that report malfeasance, the fraud index will most likely con nue to rise. Another area for discussion is what cons tutes an act of fraud within an organiza on. The establishment of new policies and rules, many in response to new legisla on, widens the net of fraudulent ac vi es, thereby increasing the opportuni es for employees to detect fraud CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 5

8 In last year s report, we noted that the healthy growth in the repor ng of fraud-related incidents experienced prior to 2009 might have reached its peak. The increase in 2011, along with The Network s repor ng of the fourth quarter 2011 Fraud Index of 21.6%, a.4 percentage point increase from the year s average, has proven that predic on wrong, furthering the no on that the compliance industry is s ll maturing and results are vola le, demanding that organiza ons con nually review and tweak their internal programs. Means of Awareness Fraud Repor ng Percentage (FRP), (from The Network s Corporate Fraud Index) A similar finding first noted in 2009 has established itself as a trend in 2011: significant increases in the other category for means of awareness. There can be simple explana ons for this when it is associated with only one industry, is only a slight up ck, or organiza ons using varying terminologies or not upda ng their repor ng tools, However, when increases are seen across six of the nine industries Construc on, Finance, Manufacturing, Public Administra on, Retail Trade and Services Industries it is indeed a trend. Organiza ons are promo ng their ethics and compliance hotline programs through more channels now, including mul ple social media tools and smartphone accessibility, which could account for that increase. Another factor is that par cipants could have been made aware of the repor ng program by a variety of means and could not choose one in par cular. Retalia on Industry reports have found that retalia on against whistleblowers is on the rise and that organiza ons are increasingly concerned about the poten al impact of whistleblower claims on their organiza ons. Retalia on against those who would report incidents and allega ons can have a substan al impact on compliance ini a ves, the prevalence of an ethical culture, and the overall produc vity and success of the organiza on. In organiza ons that tend to tolerate retalia on and retribu on, employee confidence in the ethics & compliance process is much lower, reducing the possibili es that an employee will come forward with per nent informa on. This marks the first year that the occurrence or men on of retalia on captured in a given incident report has been tracked and reported via the benchmarking report. Overall, retalia on was a factor in 2.9% of all reports files in 2011, an increase from 2.1% in 2009 and 2.2% in The Construc on industry leads all other industries outlined in this report with more than 5% of all reported incidents being retaliatory in nature. In the Public Administra on, Services Industries and Transporta on, Communica ons & U li es industries, more than 4% of all reports contained an element of retalia on. In the Finance, Insurance & Real Estate industry, retalia on was a factor in less than 2% of report. The 2011 Na onal Business Ethics Survey (NBES) from the Ethics Resource Center also noted an increase in retalia on. The NBES reports that 22% of responders that reported an incident experienced some form of retalia on. This figure 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 6

9 is substan ally higher than our findings due in part to a broader defini on of retalia on. In addi on, the NBES findings were based on a subjec ve survey and not necessarily ed to an incident or ed to an official report. Incidents captured and analyzed for this benchmarking report cover a much broader slice of ethics and governance-related issues of which retalia on is a subset. Combined with the sta s cs outlined in this report, these collec ve findings support the need to con nue to monitor retalia on and to understand how it impacts repor ng and overall ethical behavior within the workforce. Web-based Repor ng While anonymous, confiden al phone-based employee hotlines are s ll the tried-and-true method for ethics repor ng, web-based repor ng is growing rapidly in popularity and usage. Online repor ng retains the secure submission features of tradi onal phone-based hotlines and o en can provide reporters with an addi onal layer of confiden ality. Plus, reporters can follow up or even amend their reports at the me of their choosing when using online methods. Organiza ons are ac vely looking at the variety of methods of incident capture available to them, most of which have some e to technology, such as social media, tex ng and smartphone apps. Last year s report predicted that the usage of web repor ng would increase significantly, and indeed the Web Repor ng Rate went from 10.3% in 2010 to 13.9% in More than 90% of reports made in 2009 were made by phone; today, that number has decreased to just slightly more than 85%. Alterna ve methods, such as or fax, accounted for only about 1% of reports made in CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 7

10 The Importance of Compliance Hotline Benchmarking Ethics & compliance repor ng mechanisms are valuable compliance and monitoring tools for organiza ons both in the United States and abroad. While legisla on such as the U.S. Federal Sentencing Guidelines for Organiza ons (FSGO), the Sarbanes-Oxley Act (SOX) and Dodd-Frank Act require publicly traded organiza ons to maintain repor ng mechanisms, and to regularly assess their effec veness, more and more companies see the value in ins tu ng a strong GRC ini a ve to provide for the overall well-being of their organiza on. Corporate governance legisla on has swi ly become a global issue. Factors such as workforce diversity and cultural ini a ves play a significant role in how hotlines and compliance programs are implemented and operated. As these factors change, so does the direc on of the organiza on, either on the path to a more ethical culture, or toward a culture where misconduct thrives. While benchmarking is essen al to iden fying and establishing trends across the compliance landscape, it can also be used to gauge the overall state of compliance of an organiza on. An analysis of corporate culture has become a key factor in reducing organiza onal risk. The culture of an organiza on is driven by the values and behaviors of its leaders and employees. In fact, the U.S. government, via the FSGO, recognizes how culture can affect the results of an organiza on s compliance program and requires organiza ons to periodically assess their risk of misconduct as well as the effec veness of their ethics and compliance program. Because hotlines are such key components in an organiza on s compliance efforts, these organiza ons need a reliable way to measure the effec veness of these and all other repor ng mechanisms. In 2006, The Network released its first Corporate Governance and Compliance Hotline Benchmarking Report, which compiled hotline data from organiza ons of various types and sizes to provide sta s cs 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 varia ons 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 2012, the report includes addi onal insight into the geographic origin of reports as well as the prevalence of retalia on in those reports. Collec vely, these benchmarking findings are designed to further help organiza ons compare their results to that of their industry. USING THIS REPORT In the past, organiza ons have struggled to accurately assess hotline performance as they were unable to compare their results to the results of other organiza ons. They could collect data on their own hotlines to see how many reports had been received and what ac on had been taken based on those reports, but with no way of knowing how those numbers stacked up against those of comparable organiza ons, they could not draw any reliable conclusions about the quality of their hotlines and repor ng programs. Even if they benchmarked against willing peers, their overall sample was o en too small to yield reliable results. This report is a benchmark and thus provides the star ng point for assessing the performance of your organiza on s hotline and in turn, your GRC ini a ves. However, comparing the numbers alone won t provide you with a complete picture of your hotline s performance. A thorough analysis into the poten al explana ons of why your program results may vary from the average can help you discover cri cal insights that could change the direc on of your program assessment. For example, the number of reports submi ed 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 organiza on and employees are therefore not repor ng troublesome situa ons. The data in this report should serve as poten al indicators of problems or successes, but without deeper inves ga on, the numbers alone cannot provide a reliable evalua on of your compliance hotline program CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 8

11 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, audit, and corporate security and safety, among others, may have an opera onal stake in your findings. In 2010 and 2011, new legisla on had a profound impact on the overall picture of GRC and hotline compliance programs. As organiza ons move forward, the new challenges affec ng their day-to-day GRC lifecycle include increased regula on increased regula on, advancing technology, demands to improve efficiencies and efforts to reduce costs. It is important for an organiza on to meet those daily challenges but at the same me not turn away from internal issues such as employee fraud or enforcing its code of conduct, thus making it more difficult to monitor organiza onal health. The key is genera ng the right metrics and u lizing proper benchmarking techniques. ONGOING ANALYSIS Organiza ons will find benchmarking data a valuable asset in determining if changes are needed and help drive future GRC program enhancements. The con nual monitoring of benchmarking informa on is an important tool in the ongoing health of your organiza on by helping to assess the success of new programs, such as the implementa on of a new communica on tool or a change in repor ng guidelines. This report will be a valuable tool for comparing the performance of key internal controls and documen ng the true value of your ethics and compliance program CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 9

12 Summary Benchmarking Analysis NUMBER OF EMPLOYEES In 2011, there was a slight decline in the number of employees within the organiza ons that provided reports, but with more than 15 million employees in 2011, the number remains very high and provides a sa sfactory base for a report of this nature. 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 rela vely large when compared to the 6% increase in the number of organiza ons in that same me period. Industry Agriculture, Forestry & Fishing 5,900 4,935 4,900 4,900 4,900 Construction 302, , , , ,090 Finance, Insurance & Real Estate 1,414,708 1,420,233 1,633,462 1,824,490 2,080,703 Manufacturing 3,111,771 3,433,801 3,572,967 3,774,278 3,488,214 Mining 156, , , , ,775 Public Administration 259, , , , ,251 Retail Trade 3,820,279 3,602,894 3,741,077 3,785,395 3,780,323 Service Industries 1,606,654 1,734,601 1,961,863 2,890,794 2,703,384 Transportation, Communications & Utilities 1,140,064 1,193,455 1,299,544 1,182,951 1,378,173 Wholesale Trade 503, , , , ,402 Overall 12,320,632 12,719,434 13,677,183 15,131,947 15,052,215 Employee Range Group 1 (0-5,000) 656, , ,685 1,084,151 1,065,602 Group 2 (5,001-10,000) 774, , ,052 1,002, ,912 Group 3 (10,001-20,000) 1,229,406 1,529,689 1,394,288 1,491,917 1,403,967 Group 4 (20,001-50,000) 2,471,364 2,677,769 2,912,563 2,955,540 2,584,111 Group 5 (50,001 +) 7,189,069 6,548,473 7,442,595 8,597,613 9,024,623 Overall 12,320,632 12,719,434 13,677,183 15,131,947 15,052, CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 10

13 NUMBER OF ORGANIZATIONS In 2010 and 2011 the number of organiza ons providing data for the report remained rela vely stable (less than a onepercent decrease), providing a strong pla orm for comparison and to support the benchmarking aspect of the report. 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 698 1,110 1,100 1,178 1,128 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 698 1,110 1,100 1,178 1,128 Note: The Agriculture, Forestry & Fishing industry was not included in the individual industry analyses due to the low volume of organiza ons represented CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 11

14 RATE DATA OVERVIEW In order to provide organiza ons with the most useful informa on 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 varia ons of companies and employees represented in the database. Incident repor ng rates (per 1,000 employees) were calculated for different organiza onal sizes as iden fied by the number of employees. The number of reported incidents was divided by the number of employees and mul plied by 1,000. The tables below provide the number of employees, the number of reported incidents and the repor ng 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 fell in 2009 and 2010 to a five-year low of 8.1. In 2011, the incident rate rose to 8.6, most significantly in organiza ons with 20,011-50,000 employees. On average over the past five years, organiza ons with fewer than 5,000 employees experienced the highest number of reported incidents. This trend is most likely a ributed to the lack of segrega on of du es that is prominent in smaller organiza ons which provides for fewer checks and balances. 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. REPORT FREQUENCY RATES PER 1,000 EMPLOYEES BY INDUSTRY A er a two-year decline in the repor ng rate, the rate went up in In fact, the rate only decreased in two industries: Finance, Insurance & Real Estate and Construc on. It increased among all other industries with the most significant increase occurring in Transporta on, Communica ons & U li es. For the fourth straight year, Transporta on, Communica ons & U li es had the highest incident rate. A er experiencing the most notable decrease between 2009 and 2010, Public Administra on increased nearly half a point from 2010 to The increased scru ny resul ng from vola lity in financial areas could have a possible influence on these results. Industry Agriculture 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 THE NETWORK page 12

15 FREQUENCY OF INCIDENT TYPES REPORTED The data provided throughout this benchmarking report results from individual incident reports. To clarify the data presented, an ini al report (phone/fax/web/ /wri en complaint) is termed an allega on. Each allega on then receives a classifica on based on its incident components this is referred to as an incident type. To assist in interpre ng the data, the many different specific incident types were consolidated into broader categories. The incidents reviewed in this report fall into seven dis nct categories that are outlined in the chart below. If an incident is unable to be categorized into one of the incident types, it falls into the other/unresolved category. Throughout the five years of data reviewed for this report, the breakdown of percentages has remained rela vely consistent with the majority of reports falling within the Personnel Management category, which spans a wide number of human resources ma ers and thus impacts every employee type. In 2011, there were slight changes in Customer/Compe tor Interac on, Employment Law Viola on and Personnel Management. A breakdown of incident reports by industry can be found at the beginning of each industry category. Incident Type Company/Professional Code Violation 14% 10% 11% 12% 12% Corruption & Fraud 12% 12% 13% 12% 12% Customer/Competitor Interaction 3% 4% 4% 4% 3% Employment Law Violation 12% 12% 12% 13% 14% Environment, Health & Safety 5% 5% 5% 5% 5% Misuse of Assets/Information 1% 1% 2% 2% 2% Personnel Management 47% 50% 48% 48% 47% Other/Unresolved 5% 5% 5% 4% 4% REPORT INTAKE METHOD Phone-based repor ng con nues to be the de facto method for Incident capture via a compliance hotline, but web intake is gaining ground substan ally. Online repor ng retains the secure submission features of tradi onal phone-based hotlines and o en can provide reporters with an addi onal layer of anonymity. Plus, reporters can follow up or even amend their reports at the me of their choosing when using online methods. Web-based repor ng, as expected, con nued to rise, from 10.3% in 2010 to 13.9% in In 2009, almost 91% of all reports were made by phone; today, that number has decreased to just over 85%. Only about 1% of reports made in 2011 came in through alterna ve methods such as or fax. Intake Method % 1.1% 0.9% Fax 0.1% 0.2% 0.2% Online (Web-based) 7.8% 10.3% 13.9% Phone 90.9% 88.5% 85.0% For 2011, the Public Administra on industry had the highest rate of web repor ng, at 30.2%. At only 5.6%, the Construc on industry had the lowest web repor ng rate CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 13

16 RETALIATION Retalia on is a major concern for par cipants repor ng an ethics or compliance viola on, whether internally or externally. A new metric for the benchmarking report, retalia on is important as it has been on the increase. The fear of any type of retalia on, from being snubbed by co-workers or labeled a whistleblower to being fired, can impact the willingness of a par cipant to report an incident at all, and certainly has a strong impact on anonymity. As organiza ons con nue to develop and improve their ethics and compliance programs, they must provide a high level of assurance to their employees that retalia on is unacceptable and that they will do everything within their ability to prevent such acts. According to the 2012 Na onal Business Ethics Survey (Ethics Resource Center), retalia on against employee whistleblowers rose sharply. More than one in five employees (22%) who reported misconduct say they experienced some form of retalia on in return. That compares to 12% who experienced retalia on in 2007 and 15% in The Li ler Mendelson Whistleblower Survey (November 2011) found that organiza ons are increasingly concerned about the poten al impact of whistleblower claims on their organiza ons; however, the level of concern has not fully peaked as companies are s ll adap ng to the new regulatory environment created by Dodd-Frank, the UK Bribery Act. In fact, the same survey reports that 73% of respondents iden fied whistleblowing and retalia on as emerging risk areas, and 96% are either very concerned or moderately concerned about poten al whistleblower claims. For repor ng purposes, an incident may be classified as a retalia on incident if the en re incident is the subject of retalia on or if it is simply one factor within the report. The sta s cs provided in the chart and graph on the next page reflect three years of retalia on data among the nine industries outlined in this report. The data reflects the percentage of overall reports, regardless of incident category, that are labeled as retaliatory in nature. The Construc on industry leads all other industries outlined in this report with more than 5% of all reported incidents being retaliatory in nature. In the Public Administra on, Services Industries and Transporta on, Communica ons & U li es industries, more than 4% of all reports contained an element of retalia on. Retaliation Construction 3.0% 3.8% 5.2% Finance, Insurance & Real Estate 1.1% 1.0% 1.6% Manufacturing 2.5% 2.4% 3.3% Mining 2.3% 2.9% 2.4% Public Administration 3.1% 1.7% 4.7% Retail Trade 1.4% 1.8% 2.3% Services Industries 2.5% 2.5% 4.1% Transportation, Communications & Utilities 3.8% 3.4% 4.1% Wholesale Trade 2.2% 2.1% 2.9% Overall 2.1% 2.2% 2.9% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 14

17 FREQUENCY OF MEANS OF AWARENESS Effec ve GRC systems take into account the ways in which the organiza on communicates and promotes the ethics & compliance program. By determining how par cipants learned about the hotline (or other repor ng mechanisms) these organiza ons can review communica on methods to determine which ones are most effec ve and what changes should be made to improve program awareness. While companies provide a variety of communica on tools, the effec veness of those tools varies based on the structure of an organiza on. When an awareness method was provided in the report, the Poster has consistently been the most popular communica on method. Increasing in popularity throughout the years is the organiza onal Intranet, especially within industries in which employees rely upon a computer to conduct their day-to-day responsibili es. The wide distribu on of data among the majority of the communica on methods clearly indicates the importance of communica on repor ng mechanisms through mul ple channels. While par cipants may have provided only one choice for means of awareness, other mechanisms that may have contributed to their awareness may not be reflected in a given report. Interes ngly, while the use of social media and technology-based devices has grown at tremendous rates, the means of awareness has stayed consistent and has not increased at the same rate of those advances. Means of Awareness Brochure 2% 3% 2% 2% 1% Employee 16% 14% 14% 14% 15% HR 4% 4% 5% 4% 4% Handbook 9% 10% 9% 9% 8% Intranet 7% 9% 11% 10% 10% Manager 6% 5% 5% 5% 5% Poster 35% 31% 32% 34% 34% Sign 2% 2% 2% 1% 1% Video 0% 0% 0% 0% 0% Wallet Card 4% 5% 4% 3% 2% Other 13% 15% 14% 16% 17% Unknown 2% 2% 2% 2% 2% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 15

18 PRIOR MANAGEMENT NOTIFICATION One of the key pieces of data for the benchmarking report is whether or not a par cipant had no fied either their direct manager or other member of the management team of the incident, prior to submi ng a report via the hotline. This is referred to as prior management no fica on to submit their report. Frequency of Prior Management No fica on Over the past five years, there have been small fluctua ons in whether or not par cipants no fied management of their concerns prior to making their hotline report. The high percentage of par cipants not informing management indicates a preference among the majority of employees to use a repor ng mechanism other than a face-to-face conversa on with management. Many employees are emboldened to submit a report when anonymity is available via non-personal interfaces such as a web form. Prior Management No fica on By Anonymity Another perspec ve on prior management no fica on is how it relates to the par cipant remaining anonymous when using the hotline. For the five-year period of the report, the percentage of anonymous par cipants that had given prior management no fica on has decreased from 36% in 2007 to only 21% in CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 16

19 ANONYMITY A key requirement of a hotline program is the ability for par cipants to remain anonymous. For public companies, this is required by law as outlined by the Sarbanes-Oxley Act. The Federal Sentencing Guidelines for Organiza ons (FSGO) has led other companies to follow suit, also implemen ng hotlines that provide for anonymity. Frequency of Anonymous Reports Throughout the past five years, the level of anonymity among par cipants has remained rela vely steady with a slightly higher percentage of par cipants choosing to remain anonymous. In 2009 and 2010 across all industry categories, par cipants are equally divided in choosing to reveal or not reveal their iden ty when submi ng an incident. In 2011, the scales pped to par cipants choosing to reveal their iden ty in 2011 with 52% of the reports. This could possibly be due to the availability of incen ves to those coming forward with informa on CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 17

20 CASE OUTCOME & DISPOSITION For the purpose of this report, every incident reported through the hotline is considered an allega on. At the point where a determina on is made as to whether the incident is inves gated or another course of ac on is taken, the issue becomes a case. The final case outcome is determined by the affected organiza on. Case Outcome In 2011, the distribu on of case outcome results was nearly iden cal to the 2010 results, with 67% of all reports warran ng an inves ga on and only 16% not warran ng an inves ga on. This is referred to as the ac onability of the report. Of the 67%, 41% resulted in a correc ve ac on being taken. In 2010 and 2011 there has been nearly a 10% increase from 2007 in the other category, which may be due to companies implemen ng varia ons in the repor ng outcomes. Case Outcome No Investigation Warranted 30% 18% 17% 16% 16% Investigated, Corrective Action Taken 44% 38% 40% 41% 41% Investigated, No Corrective Action Taken 21% 33% 33% 27% 26% Referred/Advised 2% 4% 7% 5% 5% Other 3% 8% 3% 11% 12% Case Disposi on A final step in the hotline repor ng process is that of determining case disposi on. This is typically the resul ng ac vity once a case outcome has been determined, such as the enactment of a disciplinary ac on, termina on, or in some cases, prosecu on. For the 2012 report, we have changed the way we are repor ng the Case Disposi on data to only include data from reports that did not report the case disposi on as Unknown. This was done because many organiza ons conclude their repor ng lifecycle at the Case Outcome stage and thus do not complete the Case Disposi on informa on; these organiza ons consider this an unnecessary step that does not provide them with any addi onal informa on. Therefore, these reports designate other or unknown for their case disposi on status, which skews the overall results. By only repor ng data from reports that use Case Disposi on within their repor ng lifecycle, users of this report have a clearer picture of where the data comes from and a stronger point from which to benchmark their results. Due to the manner in which this data is tracked, we are only providing data for the past three years, from The leading ac on for case disposi ons across the past three years is the disciplined/counseled ac on. For all op ons, there has been li le change throughout the three-year period. Case Disposition Cleared/No Action 24% 23% 22% Disciplined/Counseled 36% 38% 38% Terminated 10% 9% 12% Prosecuted 0% 0% 0% Other/Unresolved 30% 30% 28% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 18

21 REPORTS BY GEOGRAPHY Also new to the benchmarking report this year is a geographic breakdown showing the loca on of where the alleged incident took place. It is important to note that this loca on informa on refers to the loca on of the incident, not the loca on of the reporter or the organiza on s loca on. Data in this sec on represents the repor ng period The majority of reports originated in North America, with a substan al number of reports origina ng from an Unknown loca on. Region Africa 0.1% 0.1% 0.1% Asia 0.5% 0.5% 0.4% Caribbean 0.2% 0.2% 0.1% Central America 0.0% 0.1% 0.1% Europe 0.6% 0.7% 0.6% Middle East 0.8% 0.5% 0.2% North America 84.8% 86.6% 88.5% Oceania 0.0% 0.1% 0.1% South America 0.6% 0.6% 0.6% Declined to Report/Unknown 12.5% 10.7% 9.2% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 19

22 Data Analysis by Industry The 2012 Report details hotline ac vity across the following industries: Construc on Finance, Insurance & Real Estate Manufacturing Mining Public Administra on Retail Trade Service Industries Transporta on, Communica on & U li es Wholesale Trade 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 20

23 CONSTRUCTION OVERALL INCIDENT REPORT RATES PER 1,000 EMPLOYEES In 2011, Construc on was one of only two industries to realize a decrease in the overall incident rate. Construc on con nued its declining pa ern, falling nearly half a point to 6.08 from its 2010 level (6.52) and nearly a full point from its five-year high in 2009 (6.96). The incident rate for Construc on is more than two points below the overall incident rate of Construc on REPORT RATES BY TYPE PER 1,000 EMPLOYEES Over the past five years, the incident rate in the Construc on industry peaked in 2009 and has fallen steadily for the past two years. The incident categories having the highest incident rate are Personnel Management and Employment Law Viola on. The Employment Law Viola on and Environment, Health & Safety categories both experienced increases in their incident rate while the remaining categories experienced decreases in 2011 from their 2010 rates. Incident Category Company/Professional Code Violation Corruption & Fraud Customer/Competitor Interaction Employment Law Violation Environment, Health & Safety Misuse of Assets/Information Personnel Management Overall CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 21

24 FREQUENCY OF INCIDENT TYPES Throughout the past five-year period, the distribu on of incident types has remained rela vely flat with only a few minor changes including a 1-percentage point decrease in the Company/Professional Code Viola on category, a 2-percentage point increase in the Customer/Compe tor Interac on category, and a 1-percentage point increase in the Environment, Health & Safety category. Incident Category Company/Professional Code Violation 13% 11% 8% 9% 8% Corruption & Fraud 10% 12% 13% 11% 11% Customer/Competitor Interaction 2% 2% 1% 2% 1% Employment Law Violation 17% 17% 18% 17% 19% Environment, Health & Safety 5% 5% 7% 6% 7% Misuse of Assets/Information 1% 0% 0% 0% 0% Personnel Management 52% 53% 53% 55% 55% Construc on MEANS OF AWARENESS For the Construc on industry, the Poster, at 35%, con nues to serve as the leading means of awareness for learning about available repor ng op ons; however, it has decreased from its high in 2010 (48%). There were small increases among several other categories, including the Other category. This may indicate that Construc on organiza ons are star ng to expand the methods they use to communicate repor ng op ons. Means of Awareness Brochure 5% 4% 2% 2% 2% Employee 12% 13% 12% 14% 16% HR 8% 7% 6% 4% 6% Handbook 8% 8% 5% 7% 9% Intranet 8% 7% 4% 3% 4% Manager 3% 2% 2% 2% 3% Poster 34% 38% 45% 48% 35% Sign 2% 3% 3% 1% 1% Video 0% 0% 0% 0% 0% Wallet Card 2% 3% 2% 3% 2% Other 17% 12% 13% 13% 17% Unknown 1% 3% 6% 2% 4% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 22

25 PRIOR MANAGEMENT NOTIFICATION The percentage of Construc on industry reporters that no fied management prior to submi ng a report reached a fiveyear low in 2011 at 28%. However, the numbers are s ll rela vely consistent throughout the five-year period with the peak occurring in 2009 when 35% of reporters provided prior management no fica on. When compared to other industries, these numbers are rela vely low, leading to the possible conclusion that reporters in the Construc on industry increasingly prefer repor ng mechanisms such as online forms or hotlines to face-to-face conversa ons with management. Construc on PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY Personnel Management represents 56% of the prior management no fica on categories, dropping from 61% in At 24%, Employment Law Viola on reached a five-year high in 2011 with a 7-percentage point increase from its previous year s level of 17%. Prior management no fica on was least likely to occur with Customer/ Compe tor Interac on, Company/ Professional Code Viola ons and Misuse of Assets/Informa on incidents. Incident Category Company/Professional Code Violation 7% 8% 5% 5% 3% Corruption & Fraud 7% 8% 11% 9% 7% Customer/Competitor Interaction 2% 1% 1% 1% 0% Employment Law Violation 20% 22% 19% 17% 24% Environment, Health & Safety 6% 8% 9% 7% 9% Misuse of Assets/Information 0% 0% 0% 0% 0% Personnel Management 58% 53% 55% 61% 56% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 23

26 ANONYMITY In 2011, 60% of reporters chose to reveal their iden ty when submi ng a report, a 5-percentage point increase from the previous two years and a 13-percentage point increase from the five-year-low of 47% in This marks a significant change within the Construc on Industry in terms of their willingness to come forward and not remain anonymous. Construc on 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 24

27 CASE OUTCOME In 2011, with available data, the percentage of cases that warranted an inves ga on only decreased 1 percentage point from its 2010 level of 96%. However, the percentage of cases that resulted in a correc ve ac on being taken decreased 5 percentage points from 2010 but has s ll risen drama cally throughout the five-year period. The increase in cases warran ng an inves ga on may be a ributed to an increase in the quality of intake informa on throughout the repor ng process and a high level of involvement by organiza onal management. It also follows the cross-industry trend of an increase in cases being inves gated but with no correc ve ac on being taken. Construc on Case Outcome No Investigation Warranted 26% 17% 5% 4% 5% Investigated, Corrective Action Taken 24% 41% 54% 58% 53% Investigated, No Corrective Action Taken 50% 35% 40% 38% 42% Referred/ Advised 0% 7% 1% 0% 0% CASE DISPOSITION Throughout the three-year period, the most common Case Disposi on for the Construc on industry is the Disciplined/ Counseled category followed by the Terminated category. From 2009, the number of cases resul ng in a termina on increased from 15% to 23%. Case Disposition Cleared/No Action 0% 0% 0% Disciplined/Counseled 85% 80% 77% Terminated 15% 20% 23% Prosecuted 0% 0% 0% Other/Unresolved 0% 0% 0% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 25

28 CONSTRUCTION BY SIZE From there has been li le fluctua on in the distribu on of reports as they relate to their organiza onal size; however, in 2011 the distribu on significantly changed in Groups 3 and 5 with Group 3 experiencing a 25-percentage point increase and Group 5 experiencing a 23-percentage point decrease. Employee Range Group 1 (0-5,000) 8% 11% 12% 11% 9% Group 2 (5,001-10,000) 0% 0% 2% 2% 3% Group 3 (10,001-20,000) 23% 19% 15% 23% 48% Group 4 (20,001-50,000) 6% 1% 2% 0% 0% Group 5 (50,001 +) 63% 69% 69% 63% 40% Construc on CONSTRUCTION BY NUMBER OF ORGANIZATIONS IN EACH GROUP For Construc on, 83% of the organiza ons fall within the smallest group companies with less than 5,000 employees. CONSTRUCTION REPORTS BY GEOGRAPHY The geographical breakdown of report origina on for the Construc on industry finds the majority of reports origina ng in North America (62%) followed by the Middle East (23%), with 15% of reports coming from an unknown geographic origin. In 2011, 86% of reports in the Construc on industry originated in North America. Geographic Reporting Africa 0.1% 0.1% 0.0% Asia 0.0% 0.0% 0.0% Caribbean 0.0% 0.1% 0.0% Central America 0.0% 0.0% 0.0% Europe 0.2% 0.2% 0.0% Middle East 38.2% 30.8% 0.0% North America 39.0% 59.1% 86.1% Oceania 0.1% 0.0% 0.0% South America 0.0% 0.0% 0.0% Unknown 22.4% 9.8% 13.9% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 26

29 FINANCE, INSURANCE & REAL ESTATE INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES From 2007 to 2010, the incident rate for Finance, Insurance & Real Estate experienced a steady increase; however, in 2011 it was one of two categories that experienced a decline. Finance, Insurance & Real Estate INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES The dispersion of incident report rates has remained rela vely stable throughout the five-year period with very small changes throughout each category between 2010 and Over the five-year period, Company/Professional Code Viola on reports have experienced the largest increase from less than one in 2007 to 3.27 in This drama c increase is not apparent in any of the other categories, with only Misuse of Assets/Informa on showing an increase across all five years. All other categories show only slight increases or decreases 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 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 27

30 FREQUENCY OF INCIDENT TYPES For the en re five years of data, three categories dominate in terms of incident reports for Finance, Insurance & Real Estate organiza ons. Those categories are Company/Professional Code Viola on, Personnel Management and Corrup on & Fraud. Throughout the five-year period, Company/Professional Code Viola on has experienced a steady increase while both Corrup on & Fraud and Personnel Management have shi ed by only 1 percentage point\or remained stable over the past three years. Incident Category Company/Professional Code Violation 17% 28% 37% 40% 40% Corruption & Fraud 25% 15% 15% 14% 15% Customer/Competitor Interaction 6% 7% 6% 4% 4% Employment Law Violation 7% 6% 6% 7% 6% Environment, Health & Safety 1% 2% 1% 2% 2% Misuse of Assets/Information 1% 1% 2% 2% 4% Personnel Management 28% 29% 24% 24% 24% Other 15% 12% 9% 8% 6% Finance, Insurance & Real Estate MEANS OF AWARENESS The Intranet is the most common source for means of awareness for the Finance, Insurance & Real Estate industry in 2011, and in fact for the en re five-year period. This is the only industry in which the Intranet is the leading source for the en re five-year period (which is the first me that has happened since the data has been collected). Awareness via the Intranet accounts for nearly one-quarter of all reports and is followed by alterna ve methods as well as a fellow Employee. This is in line with the industry s more technically savvy employee base and the constant accessibility of their company s Intranet via computers, tablets and smartphones. Means of Awareness Brochure 1% 2% 1% 1% 1% Employee 14% 14% 11% 12% 12% HR 8% 7% 6% 6% 6% Handbook 15% 11% 10% 8% 8% Intranet 24% 26% 26% 24% 24% Manager 8% 7% 7% 7% 8% Poster 9% 11% 9% 11% 10% Sign 0% 0% 0% 0% 0% Video 0% 0% 0% 0% 0% Wallet Card 1% 1% 1% 1% 1% Other 17% 17% 14% 14% 16% Unknown 3% 4% 15% 16% 15% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 28

31 PRIOR MANAGEMENT NOTIFICATION In 2011, 30% of reporters in the Finance, Insurance & Real Estate industry no fied management prior to submi ng a hotline report, a rela vely consistent sta s c throughout the five-year period. This result may indicate that reporters in the Finance, Insurance & Real Estate industry prefer repor ng mechanisms to face-to-face conversa ons with management, possibly due to the sensi ve nature of allega ons and to regulatory scru ny. Finance, Insurance & Real Estate PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY Company/Professional Code Viola on con nued its steady increase in 2011 rising from 17% in 2007 to 39% in 2009 and 43% for The other two categories that experienced an increase in 2011 were Corrup on & Fraud and Misuse of Assets/ Informa on. The decrease in Personnel Management reports brings it back in line with its overall decrease throughout the five-year period. Incident Category Company/Professional Code Violation 17% 27% 39% 40% 43% Corruption & Fraud 27% 16% 15% 14% 16% Customer/Competitor Interaction 6% 7% 5% 4% 4% Employment Law Violation 7% 5% 6% 7% 6% Environment, Health & Safety 2% 2% 2% 2% 2% Misuse of Assets/Information 1% 2% 2% 3% 5% Personnel Management 29% 29% 22% 24% 20% Other 11% 12% 8% 8% 5% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 29

32 ANONYMITY Following the trend that began in 2009, the percentage of reporters choosing to remain anonymous has remained higher than for reporters choosing to reveal their iden ty. In 2007 and 2008, the number of reporters choosing to remain anonymous was 42%, but by 2011, that sta s c had completely reversed. The change in anonymity may be a ributed to several factors, including changes in legisla on (including the possibility of external boun es ), organiza onal policies, and the increase in the availability of web repor ng instead of a person-to-person repor ng. The person-to-person repor ng method is more in mate and may lead to the disclosure of the par cipant s name to allow for more advanced follow-up. Finance, Insurance & Real Estate 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 30

33 CASE OUTCOME The 2011 results have established a four-year pa ern for case outcome within the Finance, Insurance & Real Estate industry. Since 2008, the number of cases resul ng in an inves ga on or being referred or advised has remained rela vely stable. In 2011, the number of cases resul ng in being referred or advised increased 5 percentage points while the Other category experienced a decrease, but both are within the four-year results. This is most likely due to the increased focus on the various regula ons that govern this industry. Case Outcome No Investigation Warranted 14% 5% 5% 7% 9% Investigated, Corrective Action Taken 31% 22% 23% 24% 23% Investigated, No Corrective Action Taken 36% 17% 17% 16% 16% Referred/ Advised 14% 21% 28% 20% 25% Other 5% 35% 27% 35% 28% Finance, Insurance & Real Estate CASE DISPOSITION The three years of data for Case Disposi on is steady with a decrease in the number of disciplined/counseled results and increases within cleared/no ac on and termina ons. Case Disposition Cleared/No Action 1% 5% 5% Disciplined/Counseled 60% 56% 49% Terminated 10% 20% 22% Prosecuted 0% 1% 0% Other/Unresolved 20% 19% 24% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 31

34 FINANCE, INSURANCE & REAL ESTATE BY SIZE The distribu on of submi ed reports by organiza onal size has remained consistent throughout the five-year period of the report, with the majority of organiza ons belonging to the largest group size of 50,001+ employees. Compare the distribu on of reports by organiza onal size with the number of organiza ons within each employee range (below). Employee Range Group 1 (0-5,000) 7% 9% 8% 9% 8% Group 2 (5,001-10,000) 5% 4% 3% 4% 2% Group 3 (10,001-20,000) 18% 13% 9% 8% 8% Group 4 (20,001-50,000) 10% 10% 11% 11% 10% Group 5 (50,001 +) 60% 64% 69% 68% 72% FINANCE, INSURANCE & REAL ESTATE BY NUMBER OF ORGANIZATIONS IN EACH GROUP Finance, Insurance & Real Estate For Finance, Insurance & Real Estate, the largest number of organiza ons (76%) falls within the smallest group companies with less than 5,000 employees. It is interes ng to note that although there are far fewer organiza ons within Group 5, these organiza ons produce the vast majority of the reports (compare this chart with the table above.) FINANCE, INSURANCE & REAL ESTATE REPORTS BY GEOGRAPHY For the period , the vast majority of repor ng in the Finance, Insurance & Real Estate industry originated in North America (94%). Less than 1% of reports originated in Europe, with the remaining reports coming from a variety of geographic regions. The slight decrease in repor ng from Europe over the past year could possibly be a ributed to increased scru ny placed on the industry by the UK Bribery Act and other global an -corrup on legisla on. In 2011, 97% of reports in the Finance, Insurance & Real Estate industry originated in North America. Geographic Reporting Africa 0.1% 0.0% 0.0% Asia 0.4% 0.4% 0.4% Caribbean 0.2% 0.1% 0.1% Central America 0.1% 0.1% 0.1% Europe 0.8% 0.8% 0.6% Middle East 0.1% 0.1% 0.1% North America 90.6% 93.9% 97.0% Oceania 0.1% 0.0% 0.0% South America 0.3% 0.2% 0.0% Declined to Report/Unknown 7.4% 4.2% 1.6% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 32

35 MANUFACTURING OVERALL INCIDENT REPORT RATES PER 1,000 EMPLOYEES Following a spike in incident repor ng in 2008, the Manufacturing industry experienced a downward trend for the next two years. In 2011, the incident rate increased slightly to Manufacturing INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES The 2011 incident report rates by category are nearly iden cal across the en re five-year period, represen ng very li le change industry-wide. This is not typical when compared to report rates for other industries. The leading incident category is Personnel Management at 2.22 followed by Employment Law Viola on 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 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 33

36 FREQUENCY OF INCIDENT TYPES In 2011, Personnel Management, Employment Law Viola on and Corrup on & Fraud led the incident category breakdown with 54%, 13% and 11% respec vely. The incident categories have fluctuated only slightly throughout the five-year period. MEANS OF AWARENESS Incident Category Company/Professional Code Violation 9% 9% 10% 9% 9% Corruption & Fraud 10% 12% 12% 12% 11% Customer/Competitor Interaction 2% 3% 2% 3% 3% Employment Law Violation 14% 14% 14% 15% 13% Environment, Health & Safety 7% 7% 6% 7% 8% Misuse of Assets/Information 0% 1% 0% 0% 0% Personnel Management 57% 53% 55% 54% 54% Other 1% 1% 1% 1% 1% Manufacturing For Manufacturing, the Poster is the dominant means of awareness for all five years of data. It is followed by alterna ve op ons and a fellow Employee. These are similar results to the Construc on Industry, which is logical as the employee makeup is similar. Means of Awareness Brochure 4% 4% 3% 3% 2% Employee 15% 14% 13% 13% 14% HR 5% 5% 5% 5% 4% Handbook 11% 11% 10% 9% 9% Intranet 6% 8% 8% 6% 6% Manager 3% 2% 3% 2% 3% Poster 35% 33% 33% 36% 37% Sign 2% 2% 2% 1% 1% Video 0% 0% 0% 0% 0% Wallet Card 5% 5% 4% 3% 3% Other 12% 14% 12% 12% 15% Unknown 2% 2% 7% 10% 6% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 34

37 PRIOR MANAGEMENT NOTIFICATION In 2011, there was a small decrease in the number of reporters who no fied a member of management of an incident prior to submi ng a report. These numbers have fluctuated only slightly within the five-year period. For the period, the lowest level of prior management no fica on was in 2007 at 25%. Manufacturing PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY In the Manufacturing industry, employees repor ng a Personnel Management or Employment Law Viola on incident were the most likely to have no fied a manager about the situa on. There were no significant increases or decreases from year to year across all incident categories. Incident Category Company/Professional Code Violation 6% 7% 7% 7% 7% Corruption & Fraud 9% 9% 8% 9% 9% Customer/Competitor Interaction 1% 1% 2% 2% 2% Employment Law Violation 16% 16% 16% 17% 15% Environment, Health & Safety 9% 10% 8% 9% 11% Misuse of Assets/Information 1% 0% 0% 0% 0% Personnel Management 58% 55% 55% 55% 55% Other 0% 2% 1% 2% 1% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 35

38 ANONYMITY In 2011, 53% of reporters chose to remain anonymous when submi ng a report. While the data over the five-year period falls within a range of 10 percentage points, the shi in 2009 to more reporters choosing to remain anonymous than nonanonymous is significant as it represents a change in how reports are submi ed, such as repor ng via web forms instead of by phone or in person. Manufacturing 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 36

39 CASE OUTCOME In 2011, there were small shi s in two Case Outcome categories, those that were Referred/Advised and those that were inves gated but no correc ve ac on was taken. When such informa on was disclosed by the organiza on, 39% of case outcomes resulted in an inves ga on with a correc ve ac on. This is consistent with the previous four years. One-third of cases were inves gated but no correc ve ac ons were taken. Another 27% of cases did not warrant an inves ga on, an increase from CASE DISPOSITION Case Outcome No Investigation Warranted 22% 26% 20% 23% 27% Investigated, Corrective Action Taken 42% 42% 42% 40% 39% Investigated, No Corrective Action Taken 28% 25% 29% 28% 33% Referred/Advised 6% 6% 7% 6% 2% Other 2% 1% 2% 2% 0% The three years of Case Disposi on data show consistency across the ac ons taken, with 46% of cases resul ng in a par cipant being disciplined or counseled. The largest increase in 2011 was in termina ons, jumping from 5% in 2010 to 15% in Manufacturing Case Disposition Cleared/No Action 25% 28% 23% Disciplined/Counseled 47% 44% 46% Other/Unresolved 19% 22% 16% Terminated 9% 5% 15% Prosecuted 0% 0% 1% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 37

40 MANUFACTURING BY SIZE While the data has remained rela vely consistent throughout the five-year period, there was a decrease in repor ng from the largest group and an increase in the second largest group. The second largest group accounts for the largest increase throughout the five-year period while the largest group represents the most significant decrease. Employee Range Group 1 (0-5,000) 5% 11% 8% 8% 9% Group 2 (5,001-10,000) 6% 8% 7% 7% 10% Group 3 (10,001-20,000) 17% 18% 15% 16% 14% Group 4 (20,001-50,000) 16% 15% 31% 27% 30% Group 5 (50,001 +) 56% 48% 39% 41% 37% MANUFACTURING BY NUMBER OF ORGANIZATIONS IN EACH GROUP For Manufacturing, the largest number of organiza ons (52%) is found within the smallest group companies with less than 5,000 employees. The remaining 48% are distributed in a descending pa ern through the next four group sizes. Manufacturing MANUFACTURING REPORTS BY GEOGRAPHY For Manufacturing, the geographical breakdown of report origina on shows that the majority of reports (88%) originate in North America. Other regions repor ng more that 1% of reports are South America (4%), Europe (2%), and Asia (1%). Another 3% of reports are from an unknown origin. In 2011, 88% of reports in the Manufacturing industry originated in North America. Geographic Reporting Africa 0.6% 0.9% 0.8% Asia 1.1% 1.4% 1.7% Caribbean 0.3% 0.3% 0.2% Central America 0.2% 0.3% 0.4% Europe 1.5% 1.9% 1.9% Middle East 0.7% 0.7% 0.5% North America 88.4% 87.9% 88.0% Oceania 0.2% 0.20% 0.1% South America 3.6% 3.9% 3.9% Declined to Report/Unknown 3.5% 2.5% 2.4% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 38

41 MINING OVERALL INCIDENT REPORT RATES PER 1,000 EMPLOYEES The overall incident rate for Mining is back on the rise in 2011, with an increase of about 1 point from At 3.84, the incident rate for mining represents the second-highest rate throughout the five-year period. This follows two years of sharp decreases in 2009 and The Mining industry has the lowest incident rate among all industries profiled in this report (a posi on it has held for the past three years). Mining INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES While the overall industry has a low incident rate, in 2011, every incident category experienced an increase in incident report rates (the excep on was the Other category, which was unchanged). The leading categories are Personnel Management and Employment Law Viola on. 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 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 39

42 FREQUENCY OF INCIDENT TYPES In 2011, reports involving Personnel Management decreased by 5 percentage points but con nued to lead in the frequency of incident types in Mining, with half of the reports a ributed to this category. There was very li le movement across all incident types with the only notable change being a 4-percentage point increase in Employment Law Viola on from 2010 to its 2011 level of 14%. Incident Category Company/Professional Code Violation 10% 14% 11% 9% 9% Corruption & Fraud 10% 10% 14% 12% 10% Customer/Competitor Interaction 1% 2% 3% 2% 2% Employment Law Violation 12% 10% 9% 10% 14% Environment, Health & Safety 10% 8% 6% 11% 13% Misuse of Assets/Information 1% 0% 0% 0% 0% Personnel Management 57% 53% 56% 55% 50% Other 0% 2% 2% 2% 1% MEANS OF AWARENESS The Poster con nues to be the leading method of awareness among reporters in the Mining industry, with 29% of reporters ci ng it for the second consecu ve year. This is typical with reporters in an industry where workers do not rou nely use computers as a part of their daily work ac vi es. Mining Means of Awareness Brochure 2% 3% 1% 2% 1% Employee 19% 15% 16% 18% 17% HR 5% 4% 4% 5% 4% Handbook 8% 8% 6% 7% 7% Intranet 9% 9% 11% 10% 8% Manager 6% 3% 4% 2% 3% Poster 23% 23% 32% 29% 29% Sign 1% 1% 1% 1% 1% Video 0% 0% 0% 0% 0% Wallet Card 11% 15% 7% 6% 7% Other 14% 16% 15% 18% 16% Unknown 2% 3% 3% 3% 7% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 40

43 PRIOR MANAGEMENT NOTIFICATION In 2011, the number of reporters that no fied management prior to repor ng their incident via an incident report decreased to 23% from 27% in Throughout the five-year period, the numbers have fluctuated between 22% and 29%. The Mining industry has the second-highest percentage of reporters who do not file a report through management before using their repor ng hotline. PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY Mining Across all five years, Mining reporters alleging Personnel Management, Employment Law Viola on, and Environment, Health & Safety related incidents were more likely to have no fied a manager prior to using the hotline, with Personnel Management leading all categories by a substan al margin. Incident Category Company/Professional Code Violation 7% 9% 5% 4% 6% Corruption & Fraud 7% 9% 8% 9% 7% Customer/Competitor Interaction 0% 1% 2% 1% 2% Employment Law Violation 17% 12% 11% 10% 18% Environment, Health & Safety 11% 10% 10% 11% 16% Misuse of Assets/Information 2% 0% 0% 0% 0% Personnel Management 56% 59% 63% 64% 50% Other N/A 0% 1% 0% 2% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 41

44 ANONYMITY While falling by 5 percentage points in 2011, anonymous repor ng in the Mining industry has increased substan ally since 2007 and reached 61% in 2010, the highest level during the five-year span. In 2011, that number decreased to 5 percentage points but s ll reflects an upward trend. Mining 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 42

45 CASE OUTCOME In 2011, 88% of all cases, when informa on was disclosed, warranted an inves ga on. This is a slight increase from the 2010 level of 84%. Of those 88%, an astonishing 73% resulted in a correc ve ac on (a 25 percentage point increase from the 2010 data) while 15% resulted in no correc ve ac on (a decrease of 21 percentage points). Throughout the five-year period, the number of cases being inves gated but resul ng in no correc ve ac on has decreased substan ally while the no inves ga on warranted level has also decreased. Case Outcome No Investigation Warranted 17% 9% 13% 7% 4% Investigated, Corrective Action Taken 29% 54% 53% 48% 73% Investigated, No Corrective Action Taken 54% 37% 28% 36% 15% Referred/Advised 0% 0% 0% 0% 0% Other 0% 0% 6% 8% 7% CASE DISPOSITION The percentage of cases which were clear or had no ac on taken has decreased significantly (32% in 2010 to 7% in 2011). At the same me, the percentage of cases resul ng in a termina on (32% in 2011) decreased since last year (37%) but increased since 2009 (20%). In addi on, the percentage of cases resul ng in disciplining/counseling (61% in 2011) decreased since last year (32%) but increased since 2009 (53%). Mining When reviewing the Case Disposi on data for the Mining industry in conjunc on with the Case Outcome sta s cs, it can be determined that the trend within the Mining industry has been toward tougher sanc ons for wrongdoers. Case Disposition Cleared/No Action 27% 32% 7% Disciplined/Counseled 53% 32% 61% Other/Unresolved 0% 0% 0% Terminated 20% 37% 32% Prosecuted 0% 0% 0% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 43

46 MINING BY SIZE There was movement in two groups within the Mining industry in 2011: the number of reports coming from Group 2 decreased by 10 percentage points, while repor ng from Group 3 increased by 15 percentage points. Employee Range Group 1 (0-5,000) 17% 26% 12% 19% 17% Group 2 (5,001-10,000) 13% 12% 35% 30% 20% Group 3 (10,001-20,000) 40% 36% 21% 21% 36% Group 4 (20,001-50,000) 0% 0% 2% 3% 4% Group 5 (50,001 +) 30% 26% 30% 28% 23% MINING BY NUMBER OF ORGANIZATIONS IN EACH GROUP For Mining, the majority of organiza ons (57%) are found within the smallest group companies with less than 5,000 employees. The second largest number of organiza ons (29%) falls within the second smallest group. Mining MINING REPORTS BY GEOGRAPHY For the period , the majority of reports within the Mining industry originated in North America (85%). However, a small but significant percentage of reports originated in South America (5%), the Middle East (3%), Africa (2%) as well as Europe and Asia (1% each). Another 3% of reports are from an unknown origin. In 2011, 87% of reports originated in North America, while 4% originated in South America. Geographic Reporting Africa 1.6% 1.3% 2.3% Asia 0.8% 1.4% 0.0% Caribbean 0.4% 0.4% 0.3% Central America 0.0% 0.0% 0.0% Europe 1.6% 1.0% 1.0% Middle East 2.0% 1.8% 3.9% North America 81.4% 86.8% 86.5% Oceania 0.1% 0.3% 0.3% South America 6.3% 5.4% 4.2% Declined to Report/Unknown 5.9% 1.58% 1.6% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 44

47 PUBLIC ADMINISTRATION OVERALL INCIDENT REPORT RATES PER 1,000 EMPLOYEES Following a significant decrease in the incident report rate in 2010, the Public Administra on industry experienced a modest increase in While s ll below its peak level of 8.65 reached in 2009, the 2011 rate of 5.28 is solidly within the median of the five-year average. INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES Throughout the five-year period, the incident report rates by category have remained consistent when compared to the overall figures. In 2011, two categories outpaced their previous 2009 high levels: Customer/Competitor Interaction and Other. 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 Overall Public Administra on 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 45

48 FREQUENCY OF INCIDENT TYPES While decreasing slightly from the 2010 figure, Corrup on & Fraud is the most prevalent incident type in the Public Administra on industry, more than doubling the next leading type. In 2011, Corrup on & Fraud accounted for 39% of all incident reports and is down 8 percentage points from its peak level of 47% in both 2009 and This category has also led all categories for the five years of available data. Company/Professional Code Viola on and Personnel Management follow it, respec vely. Incident Category Company/Professional Code Violation 16% 21% 20% 17% 19% Corruption & Fraud 40% 43% 47% 47% 39% Customer/Competitor Interaction 7% 8% 7% 7% 12% Employment Law Violation 6% 4% 5% 5% 5% Environment, Health & Safety 4% 4% 4% 5% 6% Misuse of Assets/Information 4% 3% 3% 4% 3% Personnel Management 23% 17% 14% 13% 14% Other n/a n/a 0% 1% 3% MEANS OF AWARENESS Throughout the en re five-year period for Public Administra on, the Intranet along with a Fellow Employee account for the most frequently reported method of awareness for Public Administra on, with the excep on being the alterna ve or unknown methods. This is a departure from the trends set within the other industries where the Poster is typically the most popular method of awareness. Means of Awareness Brochure 4% 4% 2% 3% 2% Employee 17% 15% 13% 16% 14% HR 3% 1% 3% 2% 2% Handbook 3% 1% 1% 1% 1% Intranet 9% 14% 14% 15% 14% Manager 1% 2% 1% 1% 1% Poster 13% 8% 7% 8% 7% Sign 1% 1% 0% 1% 0% Video 0% 0% 0% 0% 0% Wallet Card 2% 3% 5% 2% 1% Other 36% 42% 39% 38% 45% Unknown 9% 9% 15% 13% 12% Public Administra on 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 46

49 PRIOR MANAGEMENT NOTIFICATION The number of reporters in the Public Administra on industry who did not provide management prior no fica on in 2011 remained rela vely unchanged at a cross-industry high of 82%. This trend has remained very consistent even with the increase in the number of employees in this industry since the 2010 report. Throughout the five-year data period, that number has only fluctuated by 1 percentage point. This sta s c drama cally departs from results from all other industries and may be a ributed to the percep on that governmental corrup on follows atypical guidelines when compared to private industries. PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY In 2011, the most significant increase across incident categories was within Customer/Compe tor Interac on at 14% in This is a 9-percentage point increase from 2007 and a 5-percentage point increase over In the five-year period, the percentage of Corrup on & Fraud reports where reporters no fied management prior to submi ng their report decreased marginally, from 40% in 2007 to 38% in 2011; however, the 5-percentage point drop from the 2010 level is the largest decrease. Contrary to that category is the decrease in prior management no fica on for the Personnel Management category, falling from 27% in 2007 to 15% in The other categories remained rela vely unchanged throughout the fiveyear period. Public Administra on Incident Category Company/Professional Code Violation 12% 19% 16% 11% 14% Corruption & Fraud 40% 38% 41% 43% 38% Customer/Competitor Interaction 5% 10% 7% 9% 14% Employment Law Violation 9% 8% 7% 8% 7% Environment, Health & Safety 6% 4% 7% 9% 8% Misuse of Assets/Information 1% 1% 2% 3% 2% Personnel Management 27% 20% 20% 17% 15% Other 0% 0% 0% 0% 2% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 47

50 ANONYMITY The current repor ng year establishes a three-year trend of reporters choosing to remain anonymous (60%). Although down 1 percentage point from its high of 61% in 2010, this is a drama c shi from the 37% of reporters that chose to remain anonymous in 2007 and Public Administra on 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 48

51 CASE OUTCOME In 2911, 38% of cases were substan al enough to warrant an inves ga on. Of those inves gated, 9% of cases in 2011 resulted in a correc ve ac on (the same as in 2010) while 29% resulted in no correc ve ac on being taken (31% in 2009). The biggest shi throughout the five-year period has been the significant increase in cases being referred or advised, a 13-percentage point increase since This may be a ributed to public administra on en es that have priva zed their repor ng system as they look to refine and strengthen their compliance programs on a more local level. Case Outcome No Investigation Warranted 7% 14% 15% 16% 13% Investigated, Corrective Action Taken 8% 9% 12% 9% 9% Investigated, No Corrective Action Taken 47% 36% 26% 31% 29% Referred/Advised 18% 13% 17% 21% 31% Other 20% 28% 30% 23% 18% CASE DISPOSITION The revised Case Disposi on data, while revealing healthy informa on for all other industries, many ques ons unanswered within the Public Administra on industry. While inconclusive with the informa on disclosed by repor ng organiza ons, the extremely high level of cases falling in the other/unknown category leads to the assump on that Public Administra on organiza ons are not always comple ng the repor ng lifecycle, perhaps due to administra ve privacy guidelines or to the use of alterna ve tracking methods that do not fit within the standard repor ng process. Case Disposition Cleared/No Action 10% 5% 4% Disciplined/Counseled 5% 2% 3% Other/Unresolved 84% 93% 93% Terminated 0% 0% 0% Prosecuted 0% 0% 0% Public Administra on 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 49

52 PUBLIC ADMINISTRATION BY SIZE Throughout the five-year period, the number of reports within organiza ons with less than 5,000 employees increased substan ally from 16% in 2007 to 40% in For organiza ons with 5,001 to 10,000 employees, reports fell from 24% to 15%. An interes ng note regarding Public Administra on is that the majority of reports are from the smallest organiza ons. This is a reversal from the trend set with all other industries in the report, as the highest number of reports typically comes from larger organiza ons. Employee Range Group 1 (0-5,000) 16% 26% 38% 36% 40% Group 2 (5,001-10,000) 24% 16% 18% 15% 15% Group 3 (10,001-20,000) 22% 28% 22% 25% 17% Group 4 (20,001-50,000) 38% 30% 22% 25% 29% Group 5 (50,001 +) 0% 0% 0% 0% 0% PUBLIC ADMINISTRATION BY NUMBER OF ORGANIZATIONS IN EACH GROUP For Public Administra on, the largest number of organiza ons (72%) is found within the smallest group companies with less than 5,000 employees. At 12%, the second smallest group has the next largest group of organiza ons. Public Administra on PUBLIC ADMINISTRATION REPORTS BY GEOGRAPHY For the period , the vast majority of reports in the Public Administra on industry originated in North America (94%) while the remaining 6% are of unknown origin. In 2011, 96% of reports originated from within North America, with less than 1% coming from other geographies and 3% origina ng from an unknown loca on. Geographic Reporting Africa 0.0% 0.0% 0.0% Asia 0.0% 0.0% 0.0% Caribbean 0.4% 0.2% 0.3% Central America 0.0% 0.0% 0.0% Europe 0.0% 0.0% 0.1% Middle East 0.0% 0.0% 0.0% North America 92.6% 93.0% 96.4% Oceania 0.0% 0.0% 0.0% South America 0.0% 0.0% 0.0% Declined to Report/Unknown 7.0% 6.7% 3.3% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 50

53 RETAIL TRADE OVERALL INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES A er experiencing four years of significant decline from 2007 through 2010, the 2011 incident rate mirrored the overall trend and increased almost half a point. At 10.99, the Retail Trade incident rate is s ll significantly lower than its level in 2007 and falls closer in line with other industry rates, but it is s ll the second highest among all industries. INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES In 2011, the incident report rates increased in five categories with Customer/Compe tor Interac on increasing nearly one point from 0.24 in 2010 to 1.23 in Mirroring the incidents rates of other industries, the Personnel Management category out-distanced all other categories at 5.96 in 2011 (almost four mes the next highest incident category). 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 Retail Trade 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 51

54 FREQUENCY OF INCIDENT TYPES Following cross-industry standards, Personnel Management captured 54% of all incident types in Retail Trade. The Employment Law Viola on category is a distant second, accoun ng for 14% of all 2011 reports. Throughout the five-year period, Company/Professional Code Viola on experienced the largest decrease from 18% to 7%. Incident Category Company/Professional Code Violation 18% 8% 8% 8% 7% Corruption & Fraud 11% 12% 12% 10% 12% Customer/Competitor Interaction 3% 3% 2% 2% 2% Employment Law Violation 11% 12% 13% 13% 14% Environment, Health & Safety 5% 5% 5% 5% 5% Misuse of Assets/Information 1% 0% 0% 0% 0% Personnel Management 44% 50% 52% 54% 54% Other 7% 9% 8% 7% 6% MEANS OF AWARENESS Retail Trade follows cross-industry trends, with 39% of reporters no ng that the Poster was how they were made aware of the repor ng program, followed by other/unknown awareness tools and a fellow Employee. For five years, the Intranet has only been acknowledged in 3% of all cases, a low and surprisingly stagnant sta s c. However, this may be a ributed to the fact that the majority of retail employees are in a non-technology based environment. Means of Awareness Brochure 1% 2% 1% 1% 1% Employee 16% 12% 9% 10% 12% HR 3% 3% 3% 3% 3% Handbook 8% 11% 8% 7% 7% Intranet 3% 3% 3% 3% 3% Manager 7% 7% 6% 5% 5% Poster 41% 39% 35% 36% 39% Sign 3% 3% 2% 1% 1% Video 0% 0% 0% 0% 0% Wallet Card 5% 6% 4% 3% 3% Other 11% 13% 10% 12% 14% Unknown 2% 1% 19% 17% 12% Retail Trade 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 52

55 PRIOR MANAGEMENT NOTIFICATION Throughout the five-year period of data outlined in the report, Retail Trade reporters are remarkably consistent in their prior management no fica on. In each year, only about one-third Retail Trade reporters had no fied management prior to submi ng a report. When compared to other industries, this is a low percentage and may be a ributed to the transient nature of retail business employees. In addi on, they may not have opportuni es during their shi s for one-on-one discussions with managers to facilitate such communica ons. PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY A er repor ng a Personnel Management incident to a manager, 52% of such reports were submi ed through the hotline, down 2% from 2010 but up 10% from This is followed by Corrup on & Fraud and Employment Law Viola on respec vely. The percentages are consistent throughout the five-year period from 2007 through Incident Category Company/Professional Code Violation 16% 6% 5% 6% 5% Corruption & Fraud 16% 14% 13% 11% 15% Customer/Competitor Interaction 1% 1% 2% 1% 1% Employment Law Violation 12% 13% 14% 13% 14% Environment, Health & Safety 7% 7% 7% 7% 6% Misuse of Assets/Information 1% 1% 1% 0% 0% Personnel Management 42% 49% 51% 54% 52% Other 5% 9% 7% 7% 5% Retail Trade 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 53

56 ANONYMITY The anonymity shi experienced in 2009 con nued for its third year in 2011 with iden cal levels of 45% of reporters choosing to remain anonymous and 55% revealing their iden ty. Retail Trade 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 54

57 CASE OUTCOME In four of the five years of data outlined in the report, more than 80% of cases led to inves ga ons. In 2011, 54% of those cases led to a correc ve ac on and 29% resulted in no correc ve ac ons taken. In 15% of the cases in 2011, there was no inves ga on warranted, which is most likely a result of improved data collec on. Case Outcome No Investigation Warranted 35% 17% 13% 14% 15% Investigated, Corrective Action Taken 48% 43% 45% 54% 54% Investigated, No Corrective Action Taken 17% 38% 37% 30% 29% Referred/Advised 0% 1% 1% 2% 1% Other 0% 1% 4% 0% 0% CASE DISPOSITION For Retail Trade cases in 2010 and 2011, 48% fell within the Disciplined/Counseled category. In 2011, 22% of cases resulted in the accused being cleared or having no ac on taken against them, only a slight increase from previous years. Trends for case disposi on in the Retail industry are rela vely unchanged. Case Disposition Cleared/No Action 24% 20% 22% Disciplined/Counseled 41% 48% 48% Other/Unresolved 21% 21% 19% Terminated 14% 11% 11% Prosecuted 0% 0% 0% Retail Trade 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 55

58 RETAIL TRADE BY SIZE Throughout the five-year period, the distribu on of reports among organiza onal sizes has remained rela vely stable with the most significant decrease occurring in Group 5, which went from 63% in 2007 to 53% in Employee Range Group 1 (0-5,000) 4% 10% 10% 10% 11% Group 2 (5,001-10,000) 4% 8% 4% 4% 4% Group 3 (10,001-20,000) 10% 17% 11% 12% 11% Group 4 (20,001-50,000) 19% 24% 25% 22% 22% Group 5 (50,001 +) 63% 41% 50% 53% 53% RETAIL BY NUMBER OF ORGANIZATIONS IN EACH GROUP For Retail Trade, the majority of organiza ons (59%) can be found in the smallest organiza onal size group companies with less than 5,000 employees. The second largest group of organiza ons (13%) falls within Group 5, the largest organiza onal size (companies with more than 50,001 employees). RETAIL TRADE REPORTS BY GEOGRAPHY The geographical breakdown of origina ng reports for the Retail Trade industry reveals that most reports come from North America, at 87.5%. An addi onal 11.2% of reports over this period are from an unknown origin, while less than one percent originated in Europe. The larger number of reports with unknown origins may also reflect a greater desire within this industry to remain anonymous. In 2011, 90.1% of reports originated from within North America, with less than 1% coming from other geographies and 8.8% origina ng from an unknown loca on. Retail Trade Geographic Reporting Africa 0.0% 0.0% 0.0% Asia 0.7% 0.4% 0.3% Caribbean 0.1% 0.1% 0.1% Central America 0.0% 0.0% 0.0% Europe 0.6% 0.8% 0.6% Middle East 0.0% 0.0% 0.0% North America 84.4% 88.0% 90.1% Oceania 0.0% 0.1% 0.1% South America 0.0% 0.00% 0.0% Declined to Report/Unknown 14.2% 10.7% 8.8% 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 56

59 SERVICES INDUSTRIES OVERALL INCIDENT REPORT RATES PER 1,000 EMPLOYEES The 2011 rate for the Services Industries increased to 9.81 from 9.23 in 2011, following two years of decline. This is s ll nearly 1.5 percentage points below the highest level reached in 2008 (11.18). The Services Industries rate is one of the highest among all the industries outlined in this report. 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 Viola ons and Corrup on & Fraud, by a wide margin. Incident report rates for the Employment Law Viola on and Environment, Health and Safety categories have more than doubled from 2007 to No categories within the Services industry have experienced a net decline over the five-year 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 Services Industries 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 57

60 FREQUENCY OF INCIDENT TYPES Similar to other industries, Personnel Management accounted for 51% of cases in 2011, while Employment Law Viola on and Corrup on & Fraud represented 15% and 10% respec vely. Throughout the five-year period, there has been rela vely li le fluctua on across all categories. Most notably, while Personnel Management is the leading incident category, it has seen the largest decline over the five-year repor ng period. Incident Category Company/Professional Code Violation 6% 7% 6% 7% 6% Corruption & Fraud 9% 10% 13% 11% 10% Customer/Competitor Interaction 5% 6% 7% 6% 5% Employment Law Violation 11% 9% 10% 14% 15% Environment, Health & Safety 5% 5% 4% 4% 5% Misuse of Assets/Information 4% 5% 6% 5% 4% Personnel Management 60% 58% 54% 52% 51% Other 0% 0% 0% 0% 3% MEANS OF AWARENESS Since 2009, the Unknown category has led the means of awareness categories for the Service Industries. A er Unknown, Poster and Fellow Employee were the most popular categories at 23% and 11% respec vely. The high levels of the Unknown category may be a ributed to a difference in repor ng structure and/or nomenclature within repor ng organiza ons. Means of Awareness Brochure 4% 3% 2% 1% 1% Employee 17% 17% 10% 11% 11% HR 5% 5% 3% 3% 3% Handbook 15% 13% 8% 7% 8% Intranet 5% 7% 5% 6% 5% Manager 3% 4% 3% 3% 2% Poster 31% 29% 21% 24% 23% Sign 2% 2% 1% 1% 1% Video 0% 0% 0% 0% 0% Wallet Card 3% 4% 2% 2% 2% Other 13% 14% 9% 10% 11% Unknown 2% 2% 36% 32% 34% Services Industries 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 58

61 PRIOR MANAGEMENT NOTIFICATION In 2011, only 29% of reporters no fied a member of management prior to submi ng a report, and this is the lowest level among the five-year report. The level of prior management no fica on reached a high of 33% in 2009 and has varied by only a few percentage points. PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY In 2011, the Service Industries reported that in 56% of all no fica ons, the par cipants contacted management before submi ng an official report for Personnel Management incidents. This was followed by Employment Law Viola on and Corrup on & Fraud reports. In the five-year period, Employment Law Viola on has gone from 11% in 2007 to 16% in 2011, while other categories have remained steady. Incident Category Company/Professional Code Violation 6% 7% 4% 5% 4% Corruption & Fraud 10% 10% 11% 9% 8% Customer/Competitor Interaction 5% 6% 7% 5% 5% Employment Law Violation 11% 9% 9% 13% 16% Environment, Health & Safety 5% 5% 5% 5% 5% Misuse of Assets/Information 4% 5% 6% 5% 5% Personnel Management 59% 58% 58% 57% 56% Other 0% 0% 0% 1% 0% Services Industries 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 59

62 ANONYMITY The anonymity levels fell slightly in 2011, with 51% remaining anonymous and 49% choosing to reveal their iden ty. The percentage of reporters remaining anonymous has decreased each year since its highest level in 2007 at 56%. Services Industries 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 60

63 CASE OUTCOME In 2011, 77% of all incidents warranted an inves ga on with 45% resul ng in a correc ve ac on being taken and 32% resul ng in no correc ve ac on necessary. Only 17% of cases in 2011 did not warrant an inves ga on, the lowest in the fiveyear period. This may be a ributed to the improvement in data collec on and a stronger repor ng lifecycle. Case Outcome No Investigation Warranted 26% 22% 23% 21% 17% Investigated, Corrective Action Taken 37% 40% 38% 43% 45% Investigated, No Corrective Action Taken 33% 34% 35% 32% 32% Referred/Advised 2% 2% 2% 2% 3% Other 2% 2% 2% 2% 3% CASE DISPOSITION In the Service Industries, 22% of cases resulted in a termina on in This has increased from 8% in The number of cases that fell into the Other/Resolved category saw a decrease. This is most likely due to improvements in the internal repor ng process. The most common case disposi on category across all five years for the Services industry was the Disciplined/Counseled category with 37% in 2011, followed by 27% of cases that resulted in the involved par es being cleared with no ac on. Case Disposition Cleared/No Action 34% 26% 27% Disciplined/Counseled 35% 35% 37% Terminated 8% 9% 22% Prosecuted 0% 1% 0% Other/Unresolved 23% 30% 14% Services Industries 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 61

64 SERVICES INDUSTRIES BY SIZE In 2011, there was a slight decrease within Group 2 from 10% in 2007 to 7% in While remaining rela vely unchanged from the previous year, Group 1 organiza ons grew by 7 percentage points since Throughout the remaining categories, the distribu on of reports among the five groups remained consistent with the previous years, with more than half of all reports coming from organiza ons with more than 50,000 employees. Employee Range Group 1 (0-5,000) 10% 21% 20% 18% 17% Group 2 (5,001-10,000) 10% 9% 10% 9% 7% Group 3 (10,001-20,000) 6% 4% 7% 8% 5% Group 4 (20,001-50,000) 18% 19% 17% 15% 16% Group 5 (50,001 +) 56% 47% 46% 50% 55% SERVICE INDUSTRIES BY NUMBER OF ORGANIZATIONS IN EACH GROUP For the Service Industries, 74% of organiza ons fall within the smallest group companies with less than 5,000 employees. This is followed with 12% in the second smallest group. SERVICE REPORTS BY GEOGRAPHY For the period , geographical breakdown of reports in the Service industry reveals that reports primarily originated in North America (92.9%). Approximately 3.7% are spread out across South America, Asia, the Caribbean, Europe and the Middle East. An addi onal 3.4% of reports are from an unknown origin. In 2011, 93.8% of all reports originated in North America, followed by Asia (1.1%) and South America (0.9%). Geographic Reporting Africa 0.2% 0.3% 0.1% Asia 0.7% 0.8% 1.1% Caribbean 0.4% 0.7% 0.5% Central America 0.1% 0.1% 0.3% Europe 0.4% 0.7% 0.7% Middle East 0.5% 0.5% 0.5% North America 92.4% 92.4% 93.8% Oceania 0.1% 0.2% 0.3% South America 0.1% 1.0% 0.9% Declined to Report/Unknown 5.3% 3.2% 1.8% Services Industries 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 62

65 TRANSPORTATION, COMMUNICATIONS & UTILITIES OVERALL INCIDENT REPORT RATES PER 1,000 EMPLOYEES In 2011, the Transporta on, Communica ons & U li es incident rate climbed up to 13.48, almost reaching its peak rate of in This follows two years of small declines in 2009 and Throughout the five-year period, the overall incident rates for this industry are among the highest of all industries outlined in this report. INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES The overall incident rate increase (9.2%) from 2010 to 2011 is reflected across all but two incident categories for this industry: Corrup on & Fraud and Customer/Compe tor Interac on. The largest increases were found in the Employment Law Viola on category with an increase to 3.06 in 2011 from 2.19 in The Company/Professional Code Viola on and Environment, Health & Safety categories also saw significant increases. 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 Transporta on,. Communica ons & U li es 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 63

66 FREQUENCY OF INCIDENT TYPES In the five-year period outlined in this report, Personnel Management has decreased 8 percentage points while Employment Law Viola on has increased 5 percentage points. The remaining categories for the industry have remained rela vely stable. Incident Category Company/Professional Code Violation 9% 9% 8% 8% 9% Corruption & Fraud 10% 11% 9% 9% 8% Customer/Competitor Interaction 2% 4% 3% 5% 3% Employment Law Violation 18% 17% 17% 18% 23% Environment, Health & Safety 7% 7% 8% 7% 8% Misuse of Assets/Information 1% 1% 1% 1% 1% Personnel Management 52% 50% 48% 48% 44% Other 1% 1% 6% 4% 4% MEANS OF AWARENESS In 2009, the Unknown category as a means of awareness jumped drama cally and has con nued to increase. In fact, since 2007 it has increased 22 percentage points, from 2% to 24%. This category is followed by the Poster at 18%, a Fellow Employee at 17% and the Intranet at 12% in The least popular means of awareness are Signs, Videos, Brochures and Wallet Cards. Means of Awareness Brochure 3% 3% 2% 1% 1% Employee 18% 19% 15% 14% 17% HR 7% 5% 4% 4% 4% Handbook 7% 7% 5% 4% 4% Intranet 20% 20% 17% 17% 12% Manager 6% 5% 4% 4% 4% Poster 17% 18% 18% 17% 18% Sign 1% 1% 1% 1% 0% Video 0% 0% 0% 0% 0% Wallet Card 2% 2% 1% 1% 1% Other 17% 18% 16% 17% 6% Unknown 2% 2% 17% 20% 24% Transporta on,. Communica ons & U li es 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 64

67 PRIOR MANAGEMENT NOTIFICATION The rate of prior management no fica on for reporters remained rela vely steady throughout the five-year repor ng period. In 2007, only 18% of reporters no fied a manager prior to submi ng their incident report. That level rose to 22% in 2008 but has since fallen to 20% in This level of prior management no fica on is low when compared to overall industry levels. PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY In line with other industries, Transporta on, Communica on & U li es industry reporters were most likely to no fy management before submi ng hotline reports about Personnel Management concerns. However, since 2007 it has decreased 8 percentage points to 47% in The next two leading incident categories were Employment Law Viola on and Environment, Health & Safety. The Misuse of Assets/Informa on and Customer/Compe tor Interac on are the least likely incident categories in which reporters have no fied management prior to submi ng their report. Incident Category Company/Professional Code Violation 6% 7% 6% 6% 6% Corruption & Fraud 7% 8% 7% 8% 7% Customer/Competitor Interaction 2% 2% 3% 4% 2% Employment Law Violation 19% 18% 20% 19% 26% Environment, Health & Safety 10% 9% 10% 10% 12% Misuse of Assets/Information 0% 0% 1% 0% 0% Personnel Management 55% 55% 52% 52% 47% Other 1% 1% 1% 1% 0% Transporta on,. Communica ons & U li es 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 65

68 ANONYMITY The past three years have realized a significant decrease in reporters desire to remain anonymous when submi ng a report. In 2007, only 39% of reporters chose to reveal their iden ty. In 2011, non-anonymous repor ng has hit a five-year high, with 63% choosing to provide informa on about their iden ty. Note: The graph in the 2011 Benchmarking Report inadvertently mislabeled the anonymous and non-anonymous results for 2009 and Transporta on,. Communica ons & U li es 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 66

69 CASE OUTCOME For the past two years, the majority of cases have resulted in an Other outcome. This may be a ributed to organiza ons using unique classifica ons or different repor ng tools. In 2011, 16% of cases did not warrant an inves ga on, while 31% of cases did warrant an inves ga on. This 31% ac onability sta s c for this industry is a low figure across all industries. Of these reports, 21% resulted in a correc ve ac on. Case Outcome No Investigation Warranted 21% 20% 21% 18% 16% Investigated, Corrective Action Taken 27% 27% 24% 21% 21% Investigated, No Corrective Action Taken 22% 29% 26% 18% 10% Referred/Advised 0% 0% 0% 0% 0% Other 30% 24% 29% 43% 53% CASE DISPOSITION For the three years of this available data, the majority of cases resulted in an Other ac on. A er that, 31% of all cases were Cleared/No Ac on while 6% were Disciplined/Counseled. For 2% of these cases, there was a termina on or the case led to a legal prosecu on. Case Disposition Cleared/No Action 27% 37% 31% Disciplined/Counseled 15% 9% 6% Terminated 2% 2% 1% Prosecuted 1% 1% 1% Other 56% 52% 60% Transporta on,. Communica ons & U li es 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 67

70 TRANSPORTATION, COMMUNICATION & UTILITIES BY SIZE The dispersion of reports within employee sizes remained stable throughout the five-year report. The largest number fell within Group 5 but that has decreased from 61% in 2007 to 54% in Employee Range Group 1 (0-5,000) 8% 7% 8% 11% 10% Group 2 (5,001-10,000) 2% 2% 5% 7% 6% Group 3 (10,001-20,000) 3% 3% 3% 4% 4% Group 4 (20,001-50,000) 26% 31% 37% 33% 27% Group 5 (50,001 +) 61% 57% 47% 46% 54% TRANSPORTATION, COMMUNICATION & UTILITIES BY NUMBER OF ORGANIZATIONS IN EACH GROUP For Transporta on, Communica ons & U li es, the largest number of organiza ons (69%) falls within the smallest group companies with less than 5,000 employees. This is followed with 15% in the second smallest group. TRANSPORTATION, COMMUNICATION & UTILITIES REPORTS BY GEOGRAPHY The combined geographical breakdown of origina ng reports in the Transporta on, Communica on & U li es industry reports reveals that these reports originate primarily in North America (87%). An unusually high percentage of reports (11.8%) are from an unknown origin and about 1% originated from Europe. In 2011, 88.1% of reports originated in North America. No other single geography has a significant number of reports. Geographic Reporting Africa 0.0% 0.0% 0.0% Asia 0.1% 0.2% 0.4% Caribbean 0.2% 0.2% 0.2% Central America 0.0% 0.1% 0.1% Europe 0.3% 0.4% 0.2% Middle East 0.0% 0.0% 0.1% North America 86.5% 86.5% 88.1% Oceania 0.0% 0.1% 0.1% South America 0.2% 0.2% 0.3% Declined to Report/Unknown 12.6% 12.3% 10.6% Transporta on,. Communica ons & U li es 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 68

71 WHOLESALE TRADE OVERALL INCIDENT REPORT RATES PER 1,000 EMPLOYEES At 8.96, the Wholesale Trade incident report rate reached a five-year high in This tops the previous high of 8.8 in 2008 that was followed by a drop in 2009 and marks two consecu ve years of increases. INCIDENT REPORT RATES BY TYPE PER 1,000 EMPLOYEES The primary reason for the high overall incident rate is the increase in Personnel Management from 4.67 in 2010 to 5.00 in This is the leading incident category and is followed by the Employment Law Viola on and Corrup on & Fraud categories. There were slight decreases in Company/Professional Code Viola on and Customer/Compe tor Interac on categories. 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 Wholesale Trade 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 69

72 FREQUENCY OF INCIDENT TYPES In 2011, the distribu on of incident types has experienced the smallest varia on throughout the five-year period of all industries with a maximum of a 2-percentage point shi among all categories from 2007 to Personnel Management leads for Wholesale Trade reporters, represen ng 56% of all reports. This is a decrease from the 58% level established in The next highest incident category is Employment Law Viola on, which at 18% is sta s cally high. Incident Category Company/Professional Code Violation 8% 7% 7% 7% 6% Corruption & Fraud 10% 9% 10% 9% 9% Customer/Competitor Interaction 3% 3% 3% 5% 4% Employment Law Violation 17% 17% 19% 19% 18% Environment, Health & Safety 5% 6% 6% 7% 7% Misuse of Assets/Information 0% 0% 0% 0% 0% Personnel Management 57% 58% 55% 54% 56% Other 0% 0% 0% 0% 1% MEANS OF AWARENESS The Poster was the leading method of awareness for Wholesale Trade reporters at 51% in This is the highest level among all industries and is significantly higher than the overall level of 34% for the Poster. A far second is held by the Employee category. The remaining categories are in the single digits. Means of Awareness Brochure 2% 2% 2% 1% 1% Employee 15% 13% 13% 15% 15% HR 3% 3% 3% 3% 3% Handbook 8% 9% 7% 6% 6% Intranet 4% 5% 5% 5% 4% Manager 4% 3% 2% 2% 2% Poster 49% 49% 52% 52% 51% Sign 2% 3% 2% 1% 2% Video 1% 0% 0% 0% 0% Wallet Card 1% 2% 2% 2% 1% Other 10% 10% 10% 13% 13% Unknown 1% 1% 2% 1% 2% Wholesale Trade 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 70

73 PRIOR MANAGEMENT NOTIFICATION A er reaching a five-year peak of 33% in 2010, the rate of reporters no fying management prior to submi ng a hotline report decreased 1 percentage point in 2011 to 32%. For Wholesale Trade reporters in 2011, 68% chose not to discuss their incident with management prior to submi ng their report. PRIOR MANAGEMENT NOTIFICATION BY INCIDENT CATEGORY Personnel Management incidents are the most likely to involve a prior management no fica on throughout the five-year period with 57% of cases in 2011, down only 1 percentage point from the 2007 level of 58%. The next most likely category is Employment Law Viola on incidents with 22% in Corrup on & Fraud experienced the largest decrease, from 12% in 2007 to 6% in Incident Category Company/Professional Code Violation 5% 5% 5% 4% 4% Corruption & Fraud 12% 9% 8% 7% 6% Customer/Competitor Interaction 1% 2% 1% 2% 2% Employment Law Violation 18% 18% 20% 21% 22% Environment, Health & Safety 6% 7% 8% 9% 9% Misuse of Assets/Information 0% 0% 0% 0% 0% Personnel Management 58% 59% 58% 57% 57% Other 0% 0% 0% 0% 0% Wholesale Trade 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 71

74 ANONYMITY In 2011, Wholesale Trade reporters were balanced when choosing whether to reveal their iden ty. This mirrors the 2009 results and is only a 3-percentage point differen al from the 2007 levels, which are the most extreme levels during the fiveyear period. Wholesale Trade 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 72

75 CASE OUTCOME Throughout the five-year period, there was a significant increase in the number of cases not warran ng an inves ga on, rising from 5% in 2007 to 24% in Also in 2011, 76% of cases warranted an inves ga on with 44% of those cases resul ng in a correc ve ac on and 32% resul ng in no correc ve ac ons. The 10-percentage point decrease year-over-year in inves gated cases resul ng in no correc ve ac on may be a ributed to an increase in the quality of data collected but also an increase in the repor ng of minor or false incidents. Case Outcome No Investigation Warranted 5% 6% 13% 18% 24% Investigated, Corrective Action Taken 49% 39% 44% 40% 44% Investigated, No Corrective Action Taken 46% 54% 42% 42% 32% Referred/Advised 0% 1% 0% 0% 0% Other 0% 0% 1% 0% 0% CASE DISPOSITION Following the cross-industry trend, the most common case disposi on category for the Wholesale Trade industry was the Disciplined/Counseled category with a range of 61% - 70% throughout the three-year period. In all three years, the second most common category was Terminated, with a high of 23% in In 2011, only 8% of cases reaching this level were cleared or resulted in no ac on and 2% were unresolved. Case Disposition Cleared/No Action 12% 13% 8% Disciplined/Counseled 66% 61% 70% Terminated 14% 23% 21% Prosecuted 0% 0% 0% Other/Unresolved 8% 3% 2% Wholesale Trade 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 73

76 WHOLESALE TRADE BY SIZE Throughout the five-year period, report distribu on for the Wholesale Trade industry experienced minor fluctua ons. The smallest group, Group 1, experienced a 7% increase from 2007 to 2011 while Group 2 experienced an 8% decrease during the same period. Employee Range Group 1 (0-5,000) 9% 15% 12% 14% 16% Group 2 (5,001-10,000) 19% 14% 13% 11% 11% Group 3 (10,001-20,000) 7% 14% 8% 7% 6% Group 4 (20,001-50,000) 24% 15% 21% 21% 21% Group 5 (50,001 +) 41% 42% 46% 46% 46% WHOLESALE TRADE BY NUMBER OF ORGANIZATIONS IN EACH GROUP For Wholesale Trade, the largest number of organiza ons (65%) falls within the smallest group companies with less than 5,000 employees. Only 5% of all organiza ons fall within the largest group with more than 50,000 employees. The second largest group falls within the second smallest group (Group 2) with 14% of the organiza ons. WHOLESALE TRADE REPORTS BY GEOGRAPHY Over the three-year period of , the geographical breakdown of origina ng reports in the Wholesale Trade industry reveals an equal split between reports origina ng in North America and Unknown origins. No other geography had more than one percent of repor ng. However, the percentage of reports origina ng in North America in 2011 is almost 10 percentage points higher than it was two years ago, and conversely, the percentage of unknown loca on reports has fallen by the same number over the same period. In 2011, 54.8% of reports in the Wholesale Trade industry originated in North America. Geographic Reporting Africa 0.0% 0.0% 0.1% Asia 0.1% 0.1% 0.0% Caribbean 0.1% 0.1% 0.1% Central America 0.0% 0.0% 0.0% Europe 0.0% 0.1% 0.0% Middle East 0.0% 0.0% 0.0% North America 45.3% 49.2% 54.8% Oceania 0.1% 0.1% 0.2% South America 0.0% 0.1% 0.2% Declined to Report/Unknown 54.3% 50.4% 44.8% Wholesale Trade 2012 CORPORATE GOVERNANCE AND COMPLIANCE HOTLINE BENCHMARKING REPORT THE NETWORK page 74