James Thomson, the Editor of SmartCompany made some interesting observations following the appearances of Rupert and James Murdoch before a British Parliamentary inquiry into phone hacking by News Corporation’s publications.

The Murdochs and the CEO Rebekah Books all claimed “to have been kept in the dark over key elements on of this hacking scandal over the last three-to-five years.” If this is accepted Mr Thomson asserts that questions must be asked “about News Corp’s governance procedures and particularly the way it detects, investigates and deals with unethical behaviour.”

“He contends that “it’s not just News Corp that should answer these questions – SME company owners and managers would do well to sit down and figure out how problems are dealt with in their company.

These governance questions would include:

•What processes are in place for detecting unethical behaviour? Is there an anonymous phone line or an established process for staff to make reports?

•How are complaints acted on? Is there an established complaints-handling process?

•Which managers are given the responsibility for deciding the seriousness of complaints and therefore the level of manager that needs to be informed?

•How is the CEO and board kept informed of serious complaints?

•How are the outcomes of serious complaints made known to the organisation?

Being able to answer these questions is as important in a small company as it is in a large business like News Corp.

Most SME entrepreneurs I know understand that the buck always stops at the top – problems are always the CEOs responsibility, regardless of who actually created the problem.

And when the buck stops at the top, leaders better have a way of ensuring that problems can be quickly and appropriately dealt with.

Because when things go wrong and directors and investors start asking questions, you’d better have some clearer answers than Rupert did.”

A national survey of over 5,100 employees found close to one third (28%) of Australian workers say they have been bullied in the workforce, while 42 per cent of employees report having witnessed their colleagues being bullied or discriminated against at work.

The 2011 Workplace Pulse Quarterly survey, conducted by employment screening solution provider, WorkPro, revealed bullying and discrimination remain prominent features of the Australian workplace. One quarter of employees (23%) say that they have been a victim of bullying or discrimination in the workplace in the last two years, while 12 per cent report that it has happened multiple times.

The findings come as the Victorian state government sent a clear signal to workplace bullies last week with bullying now considered a criminal offence in Victoria. Changes to the Crimes Amendment (Bullying) Bill 2011 mean Victorian workplace bullies could now face up to 10 years jail.

Tania Evans, Manager of WorkPro, said that employers need to realise that bullying and unfair treatment in the workplace are more common than they think, and they must put strategies in place to help tackle the problem.

“These are issues that over 40 per cent of employees say they have witnessed which seriously affects workplace culture and could put employers at risk of liability from OHS claims,” Ms Evans said.

“Last week’s amendment to the Crimes Act in Victoria makes it clear that threats and abusive words or acts which amount to bullying will incur serious consequences for anyone who engages in this type of behaviour,” Ms Evans said.

However, when compared to WorkPro’s previous survey, the 2011 results are very similar to those seen in 2008, indicating that many employers are still not addressing these issues.

“Employers need to be proactive about making sure employees get the information they need to understand their rights and responsibilities at work. They also need to ensure employees feel they can report inappropriate behaviour,” Ms Evans said.

Ms Evans emphasised that education needs to involve a clear reporting line for bullying and discrimination. She says that individuals working in temp placements are most confused about these reporting lines, with 47 per cent unsure of whether they report to the recruitment agency or the host employer.

Refer Workplace Pulse Quarterly Survey: Bullying and Equal Employment Opportunity @ http://www.workpro.com.au/

“This amendment to the Crimes Act, makes it clear that threats and abusive words or acts which amount to bullying constitute the offence of stalking.

This legislative change acknowledges the serious consequences for anyone who engages in this type of behaviour.

The OHS Act imposes duties on employers and employees with respect to treatment of anyone in the workplace. Victorian Attorney-General Robert Clark acknowledged that despite the OHS Act having an important role in addressing significant workplace issues, the Café Vamp case demonstrated the need for the worst cases of bullying to be regarded as criminal offences carrying significant punishments.

These cases will generally be investigated by WorkSafe Victoria and in more serious instances be referred to Victoria Police.

The purpose of this legislative change is to address the issue of serious bullying and deter people from engaging in such conduct. Employers must take responsibility to ensure that employees can work in a safe environment that is free from risk, including incidents of bullying. Employers are encouraged to update their bullying policies and educate employees in relation to this legislative change.

“Computer giant IBM says it takes sexual harassment and bullying claims “very seriously”, as the IT giant battles legal action from an employee who says her complaints of systematic harassment, bullying and unlawful discrimination by a senior manager were ignored by the company.

The claimant, an unidentified senior sales consultant who worked in IBM’s Melbourne office, is suing IBM for $1.1 million in the Australian Human Rights Commission.

She alleges it took almost 18 months for IBM to respond to her complaints, and she spoke to four managers about the issue.

Industrial relations lawyer Peter Vitale says if Maurice Blackburn can establish what they say about the conduct of the manager and they can link that to the damage the claimant says she has suffered, it should have a “pretty good case.”

Vitale says companies should have in writing effective mechanisms for dealing with complaints, and ensure that if somebody is uncomfortable with making a complaint to their own manager, that there’s an alternative source.”

The Securities and Exchange Commission approved rules yesterday that could make it highly lucrative for Wall Street whistleblowers and other corporate insiders to alert the agency to securities violations.

Under the rules, whistleblowers will be entitled to 10-30 per cent of the money they help the SEC collect through enforcement.

The agency was acting at the behest of Congress and President Barack Obama, who mandated the rewards last year in legislation responding to the mortgage meltdown. Companies had lobbied intensely for rules that would impose constraints on whistleblowers.

But most SEC commissioners rejected pleas by business groups that, before going to the SEC, whistleblowers should have to notify the companies they were accusing of wrongdoing and give them a chance to deal with the allegations.

”Today’s rules are intended to break the silence of those who see a wrong,” said SEC chairman Mary Schapiro. ”For an agency with limited resources like the SEC, I believe it is critical to be able to leverage the resources of people who may have first-hand information about potential violations of the law.”

The issue is one of the most contentious the SEC has faced in its response to the 2008 financial crisis. The issue is also a bellwether of the agency’s direction under Ms Schapiro, an Obama appointee who previously headed a self-regulatory organisation for Wall Street companies.

The total cost of fraud is increasing: $345.4 million was lost to fraud compared to $301.1 million two years ago. Respondents believed that only a third of total losses are being detected.

The value per fraud is increasing: The number of separate frauds reported fell when compared with the 2008 survey, yet the average fraud rose from $1.5 million in 2008 to $3 million in 2010.

65 percent of major frauds are committed by people already working in the organisation who usually act alone. The main motivator for fraud was greed and lifestyle.

Internal Controls and Whistleblowers remain the two major means of detection.

The ACFE’s 2010 Report to the Nations on Occupational Fraud and Abuse is based on data compiled from a study of 1,843 cases of occupational fraud that occurred worldwide between January 2008 and December 2009. All information was provided by the Certified Fraud Examiners (CFEs) who investigated those cases. The fraud cases in our study came from 106 nations — with more than 40% of cases occurring in countries outside the United States — providing a truly global view into the plague of occupational fraud.

This allowed the ACFE to more fully explore the truly global nature of occupational fraud and provides an enhanced view into the severity and impact of these crimes. Additionally, ACFE were able to compare the anti-fraud measures taken by organizations worldwide in order to give fraud fighters everywhere the most applicable and useful information to help them in their fraud prevention and detection efforts.

Survey participants estimated that the typical organization loses 5% of its annual revenue to fraud. Applied to the estimated 2009 Gross World Product, this figure translates to a potential total fraud loss of more than $2.9 trillion. The median loss caused by the occupational fraud cases in the ACFE study was $160,000. Nearly one-quarter of the frauds involved losses of at least $1 million. The frauds lasted a median of 18 months before being detected.

Tips were by far the most common detection method (40.2%), catching nearly three times as many frauds as any other form of detection. This is consistent with the findings of ACFE reports since 2002 . Tips remain by far and away the most common means of detection. Management review and internal audit were the second and third most common forms of detection, uncovering 15% and 14% of frauds, respectively. It is also noting that 11% of frauds were detected through channels that lie completely outside of the traditional anti-fraud control structure: accident, police notification and confession. In other words, 11% of the time, the victim organization either had to stumble onto the fraud or be notified of it by a third party in order to detect it.

The report highlighted that only 25% of Australian (Oceania) organisations had hotlines compared with more than one-half of USA entities even though disclosures (tips) were the major source for highlighting fraud.

The Association of Certified Fraud Examiners recommended “Organisations should implement hotlines to receive tips from both internal and external sources. Such reporting mechanisms should allow anonymity and confidentiality, and employees be encouraged to report suspicious activity without fear of reprisal.”

The ACFE also found the organisations tend to over-rely on audits. Employee education is the foundation of preventing and detecting occupational fraud combined with tip off hotlines. Internal controls alone are insufficient to fully prevent occupational fraud.

The not-for-profit (NFP) sector is quite significant to the economy and recent reported cases have raised questions about the extent of fraud in this sector. There are over 700,000 NFPs across Australia and New Zealand, with a combined income of $76 billion, holding approximately $138 billion in assets and contributing approximately 4.1% to GDP. The sector covers a diverse range of organisations in areas such as: culture and recreation, education and research, health, social services, environment, development and housing, law and politics, philanthropy, religion and business and professional associations.

There is concern about the damaging effects fraud can have on NFPs. The community already has questions about what portion of public and donated funds actually benefit the intended recipients. Reports of fraud can affect the community’s willingness to donate funds, but also reduce NFPs’ ability to obtain funding and grants from various agencies.

The main lessons for the NFP sector are for the Board to practice strong governance and risk management, establish a fraud control policy, implement and promote a strong ethical culture through a code of conduct, establish a whistle-blower policy and establish and monitor internal controls.

This is an interesting article written by James Thomson, the editor of SmartCompany.com.au, who draws upon some interesting observations and commentary from Melbourne work place lawyer Andrew Douglas.

Mr Douglas comments “We are inclined to deal with problems when they percolate to the surface. What we miss is that performance management is a daily task.” Your-Call has been particularly successful in this area with its behaviour monitoring tool which operates 24/7 in the background as the regulator of acceptable conduct in accordance with the company or organisations code of conduct/ethics polices.

The independence, security and anonymity provided by Your-Call’s processes helps meet the objective Mr Douglas sees as imperative, namely “companies need to work hard to have a culture where particularly junior staff feel safe enough to actually make a complaint, regardless of the perpetrator’s seniority.”

Increasing the pace of small initiatives to integrate governance, risk and compliance is critical in helping Boards with their capacity to gather and manage real-time data on strategic risks – including compliance risks that can impact upon their legal and/or community license to operate, according to Alf Estaban, general manager of SAI Global.

Visibility of these strategic risks is essential for Boards to undertake their core functions, said Estaban, who noted that regular discussions about the adequacy and effectiveness of programs, coupled with an active review of compliance reporting, are key tools in ensuring Boards are confident in managing compliance risks.

He added that Boards also need to actively promote a culture of ethics and compliance through clear policies and other activities which inform staff about desired behaviours.

“Importantly, Boards should promote a culture of openness and provide access to independent whistleblowing services to reinforce that [they are] serious about wanting to know and address serious breaches or incidents,” said Estaban.