Reputation erodes in many ways. One sure-fire way is when employees spill the beans. A working paper from the National Bureau of Economic Research found that employees lead the list of corporate whistleblowers when it comes to fraud. Companies often wonder how they get themselves into these jams. It is actually pretty simple. Perhaps if they kept the lines of communications wide open or just a little open, employees would not have to resort to tattle-telling. Remember Sharon Watkins and Enron’s Kenneth Lay. If he had only listened and acted sooner. We continually see reputations dashed as negative things come to light. The worse is when it surfaces little by little. I wait every day to hear the Societe Generale story continue to unfold. Now we hear that another person may have been involved with rogue trader Jerome Kerviel. This week we heard that there were early warning signals alerting Societe Generale officers about the fuzzy transactions. Employee fraud is usually suspected by other employees but no one says anything out of fear. The article in BusinessWeek (January 28, 2008) where I learned about the corporate whistleblowers reports that 82% of them are ostracized, fired or demoted. Not much incentive for telling the truth.
|Corporate Fraud Truth Sayers||AKA Whistleblowers|
Source: National Bureau of Economic Research