Outside Director Lessons #5: Being a Whistleblower Hotline

Outside Director Lessons Nicholas Benes

At one company where I served as an outside director, I was on good relations with several people who served in administrative functions that involved them in working closely with the board secretariat. Of course they all knew my email address.

One day I was asked somewhat secretively to have lunch with one of them.  Two persons showed up.  They told me that a certain senior manager had repeatedly made inappropriate comments to a particular woman, – a form of sexual harassment. The problem was, this senior manager was the head of Planning, was otherwise well-qualified, and was working on an extremely important transaction at the time. It would not be possible to quickly hire a replacement for his position who would have the right experience base and knowledge of the company that was needed. Moreover, the woman herself knew this, and therefore did not want a scandal for the company or even punishment of the manager that would become known by other employees.  She just wanted the offensive comments to stop, as quietly as possible.

I went to the CEO and told him that this is what I was hearing, asking “could you please talk to Mr. X? I don’t know what is the truth of the matter, but if you hint to him that there have been allegations, he will surely stop if anything is actually happening.”  Several weeks went by.  However, I was informed by the two persons who had met with me, that nothing in Mr. X’s behavior had changed.  I then went to the CEO again, and told him what I had heard.  I told him, “if you do not make him stop, I will bring this up at the next board meeting in some way.”

A week or two later, I was told by my contacts that Mr. X’s behavior had almost immediately improved.

For many readers, it may be hard to imagine this happening at one’s own company. And admittedly, this occurred some years ago. (Then again, maybe it still happens more often than you think….) You may also wonder whether it is optimal governance and compliance for there not to be transparency in such a case. I totally agree, it is not optimal, because the company loses the opportunity to publicly show that its Code of Conduct actually has “teeth” and thereby set a higher standard for behavior which might deter others from inappropriate conduct in the future.

But to the victim of harassment, the issue is not one of transparency or future deterrence. The person does not necessarily want any transparency.  She or he just wants the conduct to stop. And if we cannot find ways to respect the desires of victims to a large extent, there will be less reporting in the future.  Directors, boards and executives sometimes have to find a way to balance these two opposing realities in a sensitive way for the time being. In the end, constantly reinforcing a healthy corporate culture where transparency is not something to fear, and where only minor offenses ever need to be corrected, is the best solution.

I also learned from this experience that the secretariat and anyone who works with them, are sort of “flies on the wall” who know everything that goes on in the board room. Over time, based on seeing the actions of all directors, they can get a good idea of which directors are earnestly trying to “do the right thing” and are willing to take action to that end…and which directors less likely to take action. Some of them may share their views of the members of the board with others in the company, to some extent. This can sometimes result in one getting information and even “whistleblowing” just because employees do not trust alternative routes (e.g. “hotlines”) for reporting about sensitive matters.

When I have time and it is appropriate, I try to send supportive emails to employees with ideas and input, or meet with them to learn more about their activities, simply to show them that I am “approachable” and sincere in wanting to help them and the company. (I should rather say with more humility, that I should do this more than I actually do.)  In this case, it seems the reason I was contacted was simply that I was viewed as such a director.

Being trusted is golden. But as an outsider, constant effort is required to get and maintain trust.  In this, remember that actions speak louder than words.  One tends to be trusted more when he or she takes action that is clearly necessary even though it is difficult.

Nicholas Benes
(writing in his personal capacity and not representing any organization).


If you thought this post was helpful, here are many other posts in this series, which will continue! Please come back for more. 

Outside Director Lessons #11: Committees Need Rules(click)

Outside Director Lessons #10: Directors Set Direction(click)

Outside Director Lessons #9: Appointing the CEO(click)

Outside Director Lessons #8: The Role of the Board(click)

Outside Director Lessons #7: If No D&O…Get It Yourself(click)

Outside Director Lessons #6: Insist on Total Independence!(click)

Outside Director Lessons #5: Being a Whistleblower Hotline(click)

Outside Director Lessons #4: What is Worse Than the Company Going Under?(click)

Outside Director Lessons #3: How Suddenly Companies Can Collapse! (click)

Outside Director Lessons #2: My First Experience as an Outside Director (click)

Also, kindly please read the post below, consider making a donation(click) to BDTI so we can keep contributing to good governance, Japan’s future, and sustainability… and share these posts widely!

Outside Director Lessons #1: Genesis of Director Training Nonprofit BDTI(below)

On 4/16/2023 I became 67 years old. On this “occasion” I would like to ask you to consider donating to The Board Director Training Institute of Japan (BDTI), which I have led in offering director training in Japan for almost 14 years now, training about 3,000 persons in our programs, and many more via e-Learning.  At the same time, going forward, I also will attempt to make a series of posts (on this discussion forum) giving a perspective or story related to corporate governance, based on recent events and/or my own 15 years of experience sitting on boards here (or the experiences of people I know), that will be light, easy reading but hopefully also be thought-provoking.

BDTI’s work is “missionary work” that requires passion and commitment. Perhaps these stories will be of interest in terms of revealing why I do what I do, the challenges that face Japan and its companies and investors, and how they can be overcome.

Because Japan does not have a customary or mandatory requirement for serious director training, BDTI’s courses need to be “subsidized” in some way so that we can offer high-quality programs at a price point that is low enough to attract our (overly frugal) customers, –that is to say, at prices that on a per-person-per-hour basis are one-third of less than in other developed markets.  (Even paying low salaries and donating a lot myself, this is the market reality). Moreover, “G” is the foundation on which the “house of ESG” is built, but that fact is not as widely recognized as it should be.

We “subsidize” and lower our prices in three ways: 1) first, by skimping on all expenses at a small office in the suburbs of Tokyo; 2) second, by receiving donations from individuals and  institutional investors who think it is important to improve the effectiveness and trustworthiness of corporate governance in Japan; and 3) third, by collecting and normalizing a long-term “big data” structured  database of information (including text), and selling access to it to large fund managers, including large quantitative funds.

At long last, Japanese institutional investors are now considering to support us, but this will take a bit more time…so we need your help, even if it is just a few thousand Yen.

BDTI’s Update and Plans for FY2023:  https://blog.bdti.or.jp/en/2023/03/27/fy2023/  – This contains the most recent information, concisely.
BDTI’s Training Programs:  Best to look at:  https://bdti.or.jp/director-training/ using Google Translate.

To Donate: 

Please share this post widely !!!

Thank you,
Nicholas Benes
Representative Director, The Board Director Training Institute of Japan

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