Covid-19’s Latest Side Effect: A Stampede of Whistleblowers at the SEC

It seems every day we find new ways the pandemic has upended the way we live and work. Just ask anyone in HR, data security and compliance. It’s no secret that housebound and hybrid workers have been keeping them awake at night – and for good reason. 

The latest proof point is an annual report from the SEC, which documents a stunning amount of whistleblower complaints and monetary payouts in fiscal 2021. Consider:

  • The 12,200 whistleblower complaints filed in fiscal 2021 were more than all previous years combined since the bounty program began in 2012.
  • The 12,200 complaints logged in 2021 represent 76 percent increase over 2020, which itself was a record year.
  • 108 whistleblowers received payouts totaling $564 million in 2021, again more than all previous years combined.
  • Of special concern for businesses: employees and internal whistleblowers are increasingly doing an end run around internal reporting and going straight to the SEC with complaints. That should raise alarms because internal complaints provide businesses a chance to respond, take action and self-report, and potentially mitigate any penalty.

Clearly, filings were on the rise before Covid-19 upended corporate culture. Court rulings and a push by the SEC to encourage whistleblowers have caused a steady increase in such claims. But there’s also no doubt that remote and hybrid working have created a disconnect with compliance frameworks, and that is likely one reason for the 76 percent jump in whistleblower complaints, particularly those that bypassed a company’s internal procedures. Workers at home simply don’t have the same access and opportunity to walk down the hall and poke their head inside a manager’s office to discretely raise a concern.

Many businesses have still not adapted compliance programs to ensure that workers have access to hotlines and other avenues. Reporting has become even more challenging and confusing, and as a result, there’s more reason than ever for employees to bypass the internal process and go straight to the authorities.

Writes Bloomberg Law:

The isolation that comes with being separated from a communal workplace has made many employees question how dedicated they are to their employers, according to lawyers for whistle-blowers and academics. What’s more, people feel emboldened to speak out when managers and co-workers aren’t peering over their shoulders.

With 12,200 whistleblower complaints in the pipeline in fiscal 2021 alone, we can expect even more payouts and higher dollar amounts in the years go come.

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