5 Reasons Your Company Needs an Ethics Hotline

Business ethics aren’t what they used to be a generation ago. With advancing technologies, trade secrets and intellectual information are up for grabs more than ever before. Most fraud and ethical issues are initially discovered through tips from outsiders or employees. Initializing an ethics hotline for your business can help you to stay on top of unethical activity.

Drawn-out investigations can be expensive and damaging to a company’s reputation. Companies that use an ethics hotline and encourage their staff to use this confidential outlet to report suspected fraud can protect themselves from expensive and embarrassing losses.

Building trust and instilling firm behavioral expectations is part of safeguarding your company from fraudulent activities. A company ethics hotline can help to ensure that problems are identified and investigated quickly. Let’s look at a few of the reasons your company needs an ethics hotline.

Sarbanes-Oxley Act Compliance

Investing in a company ethics line can help businesses stay within the compliance regulations of the Sarbanes-Oxley Act. This act states that all companies should facilitate a confidential and anonymous reporting process that allows employees to report fraudulent or unethical conduct in the workplace. The Sarbanes-Oxley mandates were created so that companies would comply with creating a viable avenue where suspected fraudulent behavior could be reported and investigated with no risk to the whistleblowers.

Expedited Investigations

Extended investigations into suspected unethical or illegal internal activity can be damaging to any company. Company culture can be permanently damaged as suspicions arise between employees and management, and external reputation can be scarred. Ethics hotlines can account for over half of the reported unethical behavior tips that lead to a faster investigation. Investing in an ethics hotline can help companies to spend less time and money settling their fraud investigations. 

Internal Management

Following a disastrous decade of insider trading and unethical business dealings, the Dodd-Frank Wall Street Reform and Consumer Protection Act was created to protect and reward whistleblowers. Unethical and fraudulent behavior can be reported directly to the SEC at a profit to claimants. Although this is part of the legal process of any ethics investigation, most companies prefer that these issues be reported initially to their in-house counsel. An ethics hotline encourages employees to report first to their management before seeking recompensation through the SEC.

Confidentiality and Privacy

It can be tough for an employee to share their suspicions of unethical behavior with management in a face-to-face environment. The fear of recrimination or displaced suspicion are the top reasons why many decide to stay quiet. An ethics hotline provides completely private and confidential reporting where anonymity is a priority. This safeguard encourages more tips than any other accountability system. 


Having an ethics hotline as part of your infrastructure is a good way to subtly encourage honest business practices. Employees that are aware of the reporting and investigative process of the ethics hotline are less likely to engage in suspicious behavior.

Ethics hotlines can be an essential tool in detecting fraud quickly and confidently in any business. Along with ethics training courses and a strict code of conduct policy, an ethics hotline can help protect employees and companies from fraud.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.