Engaged and capable employees underpin the success of most entities. It is difficult to quantify the precise impact when innocent employees are the subject of allegations of fraud, corruption, misbehaviour and other wrongdoing, but the potential cost can be significant in terms of both bottom-line impacts and employee turnover costs.
According to the 2014 NAVEX Global Ethics and Compliance Hotline Benchmark, about 60 per cent of allegations of wrongdoing against staff are unsubstantiated.
There is an opportunity for accounting, auditing and other professionals to champion a Charter of Rights for their entity to help preserve employee value.
Duty of care
Management has a duty of care to its staff. In shaping an ethical culture, management typically acts in a way that protects the future and does no harm.
Natural justice principles place communication obligations on management to ensure that employees against whom allegations of wrongdoing have been raised are given the opportunity to:
. be heard
. present their point of view
. respond to any adverse material before decisions are made
. be informed of decisions affecting them.
Principles
A Charter of Rights draws together in a single ‘ready reckoner’ document all of the information that respondents to allegations of wrongdoing may require, including:
. management’s commitment to effective communications throughout the course of an investigation
. how management manages workplace allegations and complaints
. communication channels and support that is available.
The charter should be written in a ‘plain English’ style, so that it is easy to understand and meets the needs of its target audience.
Design
The design of the Charter of Rights will reflect the corporate values and the way in which the entity operates. An example layout is shown below.
Charter content
. Outline why the charter has been introduced how it will operate, how it supports a robust complaints and allegations system, and how it aligns to the entity’s values.
. Restate the values and reinforce the values that relate to areas of integrity (for instance, being ethical, fair, professional, open, accountable and lawful).
. Provide firm commitments and information on areas such as principles of natural justice, commitment to approach all allegations with an open mind and without prejudgement, undertaking to acknowledge and resolve all complaints expeditiously, commitment to informing the respondent where an allegation has been raised against them (unless exempted because of potential criminality).
. Provide a high-level overview diagram of the process, including the channels for submitting allegations, then the distinct phases for logging, assessing and investigating the allegations, and the final decision-making phase.
. Provide commentary on the tiered escalation process for handling allegations that reflects (at one end) how issues of a serious, sensitive or significant nature are addressed, and encourages (at the other end) the handling of low-level localised issues as close to . the source as possible.
. Provide answers to common questions that respondents might have about the process for dealing with allegations, such as ‘what can I expect if an allegation is made about me?’ ‘are outcomes always reviewable?’ ‘What does frivolous and vexatious mean?’. ‘what happens when a process is finalised or resolved?’ ‘what Will be told about the outcome of a process?’
. Outline the options for sourcing an independent review of adverse investigation outcomes, through both internal and external channels.
. Provide contact details of the human resource specialists who can provide assistance, including details of an external specialist confidential employee helpline (if one is available).
Turnover costs
Employee turnover costs can represent a significant waste of time and expense when an employee’s departure is the result of unsubstantiated allegations of Wrongdoing. The quantification of these costs is illustrated below.
Employee productivity
Employee costs represent one of the largest expense lines in an entity’s financial statements and, in many entities, it is the largest single expense item.
Employee productivity is increasingly critical for companies as economic forces become tighter, communication channels continue to evolve, the operating environment becomes more competitive and the Search for talent becomes more pronounced.
Companies are increasingly responding to the current competitive employment climate by establishing strategies for attracting, retaining and managing skilled employees. They are responding through systematic workforce planning, attractive recruitment arrangements and attractive learning and development opportunities. A Charter of Rights is another element.
The availability of a Charter of Rights can minimise the risk of lost productivity through employee disengagement and de-motivation when there is no basis to the allegations. The handling of allegations of fraud or wrongdoing can have long-term detrimental impacts on an entity if the process is not consistently handled in a well-defined, fair, equitable and effective manner.
