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IAI Actuarial Core Principles · Business Finance · Ethical responsibilities of owners and managers

A company's code of conduct includes a whistle-blowing policy. Which feature would most strengthen its effectiveness in promoting ethical behaviour?

A confidential reporting channel to an independent body such as the audit committee, combined with protection against retaliation, most strengthens a whistle-blowing policy. It lets staff raise concerns without fear or interference from implicated managers, which encourages early reporting of unethical conduct.

  1. ARequiring employees to report concerns only to their direct line manager, whose decision is final
  2. BProviding a confidential channel to an independent body such as the audit committee, with protection against retaliationCorrect
  3. CPublishing the names of all employees who raise concerns
  4. DLimiting reports to matters that have already caused a financial loss
  5. Rewarding only those reports that prove to be correct

Explanation

Effective whistle-blowing needs confidentiality, an independent route (such as the audit committee) when line management may be implicated, and protection from retaliation. Line-manager-only reporting, naming staff, loss-only reports, or rewarding only proven reports each discourage honest disclosure.

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