In April of this year, Coastal Mental Health, a Sanford, Florida based family of private mental health and counseling clinics was forced to declare bankruptcy. Shortly thereafter, state and local authorities seized Coastal’s bank accounts and sequestered their physical assets. Employees were no doubt shocked when they arrived to work the following Monday only to find the doors chained and locked.

But Coastal was posting better than expected profits and generating more revenue than had been predicted. Why? Why did Coastal die? How did a company so dedicated to helping others find a path through their own issues become so lost? In many ways, Coastal committed corporate suicide–they failed to police their own practices, and apparently fabricated documents about their patients to gin up more funding from government programs. That fabrication was fraudulent and now hundreds of patients will go untreated and dozens of workers will have to look for new jobs.

Had someone caught Coastal’s fraud early on, the company might still be in business today.

What are Corporate Ethics and Why are They Important??

In many industries, companies are required to develop a system of “corporate ethics.” Corporate ethics, often recorded in codes of conduct produced by the company and distributed to employees, serve as the “law of the land” for a community of employees. This set of rules and regulations is meant to ensure employees do not even approach illegal or unethical conduct.

Why is this important? Beyond the obvious “it’s the right thing to do,” failure to enforce ethical standards often leads to serious financial consequences for the company involved. Like Coastal Mental Health, referenced above, a company that does not watch the actions of it’s employees closely–and does not set clear expectations of what is right and wrong–could be forced to payout large sums of money to any number of possible victims. In Coastal’s case, they were forced to hand over their entire business to government regulators–but individual employees, or “classes” of employees could also bring suit for unfair or unethical practices when they are the victims of an unethical policy.

In all, the U.S. Chamber of Commerce estimates that, on average, one-third of all profits generated in America are eventually eaten by legal costs related to these kinds of suits.

How Can an Anonymous Hotline Help?

Organizations that study corporate self-governance have found time and time again that the most effective way of encouraging an organization to police itself is to establish a dedicated hotline that employees can use to anonymously report bad and unethical behavior.

An anonymous hotline can help your organization avoid costly legal expenses by tipping you off ahead of time to potential issues of corporate liability. If the directors of Coastal Mental Health had understood what their lower-level managers were doing much earlier on, they could have intervened in a way that saved their organization.

Likewise, anonymous hotlines help organizations avoid other kinds of potential legal liability, such as that associated with sexual harassment accusations and unfair hiring practices. In short, an anonymous hotline serves as an extra, more efficient set of eyes and ears among your employees. An anonymous hotline is a simple, easy, cost effective way of protecting your most important interests.