Responding to Allegations of Wrong-doing

May 31, 2002

In the May/June issue of Corporate Board Member, William Brandt, president and chief executive officer of Chicago-based turnaround firm Development Specialists Inc., recommends the following course of action in response to allegations regarding misbehavior of one’s company or its officers.

  1. Resist the temptation to conduct a personal investigation of the whistle-blower
    or his or her allegations.

  2. Inform the other directors of the allegations. Insist that a small group
    or subcommittee of board members be formed to investigate and respond. This
    subcommittee should be dominated by outside directors, ideally ones who are
    not members of committees affected by the allegations.

  3. The subcommittee must act quickly to ensure that all relevant materials
    such as memos, correspondence, financial working papers, etc. are kept away
    from the shredder.

  4. The subcommittee should immediately retain outside professionals specializing
    in the area of question to conduct a thorough, no-holds-barred investigation.
    The subcommittee should also retain an independent law firm to represent it
    exclusively. If the company’s in-house lawyers are involved in either
    the allegations or document storage, make the outside counsel responsible
    for all relevant materials.

  5. The bulk of the investigation should be conducted offsite. This will minimize
    interference by management and disruption of day-to-day operations.

  6. Avoid any wisp of retaliatory action against a department or an individual — including the whistle-blower and anyone accused of wrongdoing — until the subcommittee completes its report.

Moderator Comment: How should management react to

Look for solutions, not scapegoats.

Here are two things for managers to keep in mind when
a whistle-blower comes to you.

  • Don’t shoot the messenger simply because you do not
    like the message. Often, whistle-blowers are trying to do what is right for
    the organization and its customers.

  • Just because you’re paranoid doesn’t mean that someone
    isn’t after you. Some whistle-blowers do have ulterior motives.

Anderson – Moderator

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

Be the First to Comment!