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How a Speak-Up Culture Can Prevent Reputational Damage

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A European care home firm was already under investigation over the living conditions of residents and facing criminal charges from its national government. And then, investigative journalists published an article that probed the company’s financial structure, including its use of a holding company in a tax haven.  

The result was a further 10% slide in share price for the business, which had already seen its share price drop 70% since the beginning of the year.  

Following the journalists’ revelations, the market regulator in the company’s jurisdiction recommended the suspension of trading in the company’s stocks and bonds.  

But could the firm have avoided paying the high cost of misconduct? The case of this company shows the importance of creating a speak-up culture where whistleblowing is valued, and employees feel safe to raise concerns internally.  

The background 

The problems for the business began when a journalist alleged there had been severe failings of care at a nursing home run by the company in a wealthy suburb. It accused the company of cutting corners, despite it being in receipt of public funding.  

The allegations led to an investigation and criminal complaint from the national government over the treatment of elderly residents. The company countered that there was no system of mistreatment on a widespread basis but did admit there had been failings of care.   

This led to this issuer being subjected to scrutiny when another set of allegations was made relating to the financial conduct of the business.  

Journalistic report 

A collective of journalists from across Europe published a report on a secret company that some of the care company’s top-level managers allegedly used to carry out “dubious operations.” 

The report referred to it as a “parallel structure” into which key executives were said to have moved millions of euros. Other accusations included disguising commissions being paid to an intermediary in order to avoid VAT in another country and moving the ownership of nursing homes to a tax haven to reduce liabilities. There were also said to be discrepancies in the accounts of 14 of the company’s subsidiaries. 

Could this have been avoided?

The drop in share price and suspension of trading were detrimental outcomes of the various scandals that enveloped the business. In addition, the looming criminal actions, financial sanctions and reputational damage were also concerns for those connected with the business. However, it is possible that some of this damage could have been avoided.  

The business appears to have allowed misconduct to run rife up until the point when journalists exposed its failings in the most public manner possible. This provides the impression that:  

  • Senior managers either turned a blind eye to wrongdoing or did not have sufficient systems to uncover illegal activity 
  • The company failed to create a culture of compliance
  • There was no clear reporting system for whistleblowers 

This means that there is little ground for mitigation in the event of the company facing regulatory action. In addition, to the general public, potential customers and shareholders, there is now a red flag over the integrity of the business and its executives. With no evident attempt to prevent such actions, the company’s reputation will probably be irreparably damaged.  


Create a whistleblowing strategy

The EU Whistleblowing Directive dictates that organisations must provide internal reporting channels for whistleblowers and investigate the reports submitted. Making sure it is as simple as possible for reporting persons to file their reports in a confidential manner encourages all employees to speak up and uncover any wrongdoing within the business. Nurturing a culture that encourages whistleblowing and supporting it with a robust strategy shows that you value reporting and are committed to preventing misconduct.  

 Using an online platform like IntegrityLog makes this process faster and more transparent. It allows confidential and, where applicable, anonymous reporting in a manner that is GDPR compliant. For the investigating team, there is an easy-to-read dashboard of cases, with key information about deadlines for acknowledgement and follow-up clearly displayed.  

 Request a free demo of IntegrityLog or request a 14-day free trial today.  

References and further reading

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