Whistle Blowers Protection and the Board of Directors
Phil Kenkel
Bill Fitzwater Cooperative Chair
Every since the Sarbanes Oxley Act mandated that publically traded companies implement
whistle blower protection there has been a trend towards endorsing the concept as a best
management practice. Most non-profit organizations have adopted whistle blower provisions in
their by-laws and codes of conduct. The concept is that the firm should have a provision for
employees to report fraud, illegal activities and other inappropriate activities without fear of
retaliation. OSHA and employment law regulations also contain provisions for whistle blower
protection. For a local cooperative this raises the issue of the role of the manager and board of
directors. Most whistle blower policies encourage an employee to speak to their immediate
supervisor but also provide an outside reporting channel. Since most local cooperatives don’t
have human resource departments or compliance officers, the role of the board of directors in
whistle blowers policies becomes an issue.
The responsibility to take action against any illegal or fraudulent activity should clearly be a part
of the board’s written policy on code of conduct. It is also appropriate for the board to create a
policy defining procedures to report inappropriate activities. Whether the board should be
directly involved in a whistle blower policy is a little less clear. Any safeguard against fraud and
illegal activity is desirable. However it would be difficult for a board member to interview
employees or investigate activities without interfering with their relationship with the general
manager. A poorly thought out whistle blowers policy could lead to the board being the general
grievance committee. The worst thing a board can do is receive a report of inappropriate action
and not take timely action.
In many non-profit agencies the chair of the audit committee is designated to receive whistle
blower reports and is empowered to hire outside investigators. That approach could potentially
work for a local cooperative. If your cooperative is not ready for a whistle blower policy
consider some common sense actions. Adopt a code of ethics policy that makes it clear that
every employee and company officer has a responsibility to immediately report wrongdoing.
Create an environment of trust where employees are not afraid to raise concerns. It also might be
useful for your board to talk through the process of handling a report of inappropriate behavior.
Its always better to review fire fighting procedures when the building is not on fire.
4-7-2010