If you are the CEO or the Head of a corporation or LLC in South Salt Lake, Utah consult with an experienced corporate lawyer to set up an audit committee as required by law. • Ensuring that employees can make “confidential” and “anonymous” reports In implementing SOX Section 301, the SEC expressly recognized that it is essential for the audit committee to maintain independence from the board of directors, as a whole, and company management so that the audit committee can fulfill its role in effectively performing oversight functions. The SEC also recognized that audit committee independence is paramount to ensure that there be “frank, open channels of communication so that information can reach the audit committee.” Mechanisms to receive and investigate employee complaints are not an alien concept to either corporate America or the federal government. Several companies in highly regulated industries—such as the nuclear power, defense contracting, and oil, gas, and chemical industries—have attempted to provide for so-called independent employee concerns or complaint programs. Likewise, the federal government has established various procedures, such as Inspector General programs and the Office of Special Counsel, to receive and investigate whistleblower complaints from federal employees. However, all of the currently established programs have met with dubious results and fall far short of the expectations and mandates envisioned by Congress when it enacted SOX. Nonetheless, audit committees and human resources professionals would be well advised to study the problems and inherent flaws in these existing employee-concerns programs before attempting to establish the procedures required by SOX Section 301. In too many cases, the established employee-concerns programs have participated in the retaliation carried out against the employee-whistleblower. This must be avoided at all costs under SOX Section 301, or companies will risk being “de-listed” as a publicly traded company for failing to establish the required procedures. In order to adhere to the reforms mandated by SOX Section 301, it is incumbent upon the audit committee to actively promote and enforce a corporate culture that encourages whistleblowing and that prohibits any retaliation against employees who make complaints protected under SOX Section 301. Once there exists the perception of retaliation against or unfair treatment of employees who report complaints to the audit committee, there will exist a lack of confidence in the program among employees, and the entire purpose of SOX Section 301 will be fatally undermined. When these disputes get out of hand, the whistleblower can be viewed by the organization itself as a threat to its mission or existence. If such situations persist, it can result in creation of a truly hostile work environment for the whistleblower. In the past, whistleblowers have been widely viewed by companies and coworkers as needlessly slowing down production, costing the company excessive amounts of money, threatening the shutdown of the plant and loss of jobs, and as being disloyal, traitors, or disgruntled. In many cases, companies and their management have permitted or even encouraged negative perceptions of whistleblowers to take hold within the organization as a whole. Code of EthicsEstablish a companywide code of ethics as well as policies and procedures that encourage whistleblowing and prohibit retaliation. The audit committee must obtain a commitment from the company itself to establish a companywide code of ethics and company policies to encourage employees to report misconduct. In order for any such code of ethics or company policy to be believable and trustworthy it must include provisions that retaliation against employees who engage in whistleblowing is strictly prohibited. Any failure on the part of companies to adopt such fundamental policies and codes of ethics, and to openly accept that whistleblower retaliation is prohibited, will doom the chance of success of any audit committee procedures under SOX Section 301. Moreover, the company policy must clearly inform employees of their right to file a retaliation case with the U.S. Department of Labor under Section 806 of the SOX. It should explain to the employees precisely how they can file a claim and should commit the employer to fully ensuring that the corporation will adhere to its obligations under the antiretaliation provision. Provide for confidential and anonymous reportingFailure to do this can result in a publicly traded company being “de-listed” from the stock exchanges. Even in cases where an employee does not request confidentiality or anonymity in making a complaint, it is good practice to limit the identification of whistleblowers to the audit committee and its investigators. There is no need under any circumstances for an audit committee or its investigators to inform the company’s board of directors, management, or legal department of the identity of a whistleblower. The most effective way to prevent retaliation against the employee is to restrict the number of people who know the identity of the whistleblower to the absolute minimum and to keep that information within the audit committee. Moreover, if information provided by employees to the audit committee is later revealed to management, or used by the company either to publicly discredit the employee or in litigation against the employee, it will create a chilling effect on other employees, and the audit committee’s sources of information will quickly dry up. Investigate and keep track of each complaintThis is also required by SOX Section 301, and the failure of audit committees to act on and keep track of complaints could result in a company being “de-listed.” Audit committees must ensure that competent and independent investigations are conducted. It will not be sufficient for audit committees to simply refer complaints to company management or corporate counsel to investigate. Additionally, if a company already has an existing employee-concerns program, the audit committee should insist that the existing program report directly to the audit committee and otherwise comply with SOX Section 301 requirements before utilizing any existing program. Most importantly, there must be a procedure designed to establish who is assigned to investigate and monitor complaints, one that avoids any conflicts of interest or compromise of an employee’s confidentiality. In many cases, there may be a need for the audit committee, or its investigators, to hire outside consultants or technical experts to evaluate the merits of the employee’s complaint. Care must be taken to ensure that such experts or consultants are unbiased and independent of management and that conflicts of interest are avoided. An experienced South Salt Lake, Utah corporate can help your business set up an efficient audit committee. Business Attorney Free ConsultationIf you are located in South Salt Lake Utah and you need legal help with your business, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.
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