ENCINO — Three years ago, tough new federal sentencing guidelines took effect that drastically increased fines for companies found guilty of crimes such as fraud. But the guidelines also created a powerful incentive for corporations to adopt ethics programs by reducing fines for companies shown to have procedures in place to detect criminal behavior and reporting offenses.
Such was a business opportunity for Pinkerton Security & Investigation Service, the Encino-based security services giant. In the past two years, business has tripled for Pinkerton's AlertLine, which provides a toll-free phone service for employees to report anonymously on any unacceptable behavior or conditions in their workplace, including sexual harassment, theft or safety hazards, according to T. Richard Elslager, Pinkerton divisional vice president of AlertLine Services.
Hundreds of companies ranging from manufacturing to entertainment to finance--and from 25 to more than 200,000 employees--pay Pinkerton for its AlertLine services. Fees are based on the size of the company and how the program is customized for that business.
For their money, corporations get literature and other educational materials to teach employees about company ethics programs and ways to help keep the workplace safe and free of wrongdoing.
The second major service is the 800 number that promises workers strict confidentiality in reporting their complaints or observations. At the division's offices in Charlotte, N.C., Pinkerton operators man phones 24 hours a day, seven days a week, taking information from callers and filing detailed reports to the client companies.
Pinkerton, with $772 million in annual revenue, is best known for its guards-for-hire and other securities services. It doesn't break out financial results for AlertLine. But with incentives continually increasing for companies to identify and deal with internal problems, Elslager said, "I don't see interest in this type of service declining."
The growth of Pinkerton's AlertLine coincides with a recent boom in corporate ethics programs. A decade ago, Gary Edwards, president of the nonprofit Ethics Resource Center in Washington, was unaware of any corporation that had an ethics office or ombudsman. But the center found in a study it conducted this year that one-third of the more than 4,000 companies surveyed now have such an office.
The vast majority of those ethics offices have some sort of "safe reporting system," including phone hot lines or help lines, Edwards said.
Corporate ethics programs were born in the mid-1980s when large defense contractors found themselves in hot water with the government for a variety of abuses. Defense giant General Dynamics Corp., for instance, was among the first to set up an in-house department to encourage ethical behavior. The trend spread to other industries and received a big boost with the 1991 implementation of the new sentencing guidelines.
While Edwards also sees continued growth for help lines--sometimes derisively referred to as snitch lines or rat lines--he also believes that they can have limited value when provided by a third party like Pinkerton.
"What they're doing is good," Edwards said of Pinkerton. But AlertLine "is not sufficient by itself because it is not going to provide help on the question of misconduct. You need the internal resources that understand the company, its products and its policies."
Nynex Corp., a big telephone company with an award-winning ethics program, finds that 85% of the calls to its GuideLine 800 number involve employees asking for advice on issues ranging from potential conflicts of interest to personality conflicts, said Ann Whelehan, who heads Nynex's New York ethics office. In an era when the telecommunications industry is changing rapidly and lines are being blurred among competitors, customers and vendors, Nynex employees need constant guidance on proper conduct, Whelehan said.
Pinkerton's AlertLine phone reporting service, by contrast, dispenses no advice to callers. It only reports the employee's concerns to the employer, who is then responsible for any response.
Michael Hoffman, executive director of the Center for Business Ethics at Bentley College in Waltham, Mass., said that many corporate ethics officers are strongly opposed to third-party hot lines because they believe it defeats their goal of establishing trust between the company and its employees. Nonetheless, Hoffman thinks outside reporting services can be valuable to companies that lack resources to maintain a complete in-house ethics program.