The Sarbanes-Oxley Act‘s legacy may be mixed in some important ways, but one of it more enduring aspects has been its requirement for publicly traded companies to have mechanisms to for employees report concerns anonymously and confidentially. Most companies now have ethics reporting hotlines – in fact, the SOX confidential reporting requirement has spawned an entire industry of third-party firms providing hotline services to public companies, according to a recent Wall Street Journal article. As the Journal article reports, these hotlines have in fact in some instance led to the uncovering of serious concerns, including even instance of accounting misreporting. The September 12, 2025, Journal article, which is entitled “Sex Scandals. Accounting Fraud. It’s All Showing Up on the Corporate Hotline,” can be found here.

According to the article, providing confidential ethics hotlines is big business – it is, the Journal says, an $18 billion a year industry. More than 90% of U.S. firms with at least 1,000 employees provide a hotline for workers. The Sarbanes-Oxley Act requirement was obviously instrumental in the development of this industry, but the business got a big boost around 2018 after the #MeToo movement prompted a deluge of sexual-assault and harassment allegations.

In one recent case, an anonymous hotline tip ultimately led to the bringing down of the CEO at a global company. As the Journal article reports, a tip to the hotline at food giant Nestlé alerted company executives that the company’s CEO was in a relationship with a marketing executive directly under his command, contrary to company policy. The report led to an investigation by an independent law firm, which confirmed the relationship. The company announced the departure of the CEO, Laurent Freixe, on September 1, 2025.

The Journal article reports some interesting information about the Nestlé hotline. Among other things, in 2024, the hotline, which is managed by a third-party service provider, handled 3,218 calls and message with allegations ranging from bullying and harassment to fraud and conflicts of interest at the company and its suppliers. The company says it substantiated 20% of the reports and as a result 119 people left their jobs. Interestingly, the Journal article also notes that “over the years, the company has had to contend with reports of forced labor, corruption and safety deficiencies, and stood up incidents of bribery, environmental abuses and leaks of confidential information.” It could be argued that the recent report of the CEO’s misconduct is not the most serious concern the hotline has unearthed.

The recent incident at Nestlé is not the only example of hotline reports felling an executive. The Journal reports a Credit Suisse executive board member was forced out in 2021 after an anonymous hotline tip of mistreatment of women.

The Journal also reported on another interesting example of a hotline tip report involving the chemical company Chemours. According to the Journal, last year the company launched an accounting probe after an anonymous tip to the ethics hotline reporting that top executives had shifted cash flows at year-end to hit targets that determined their annual stock and bonus awards. Its CEO and chief financial officer later resigned. The Journal notes that last year the company said that an internal review of the matter didn’t result in any material misstatements of financial statements or disclosures.

The Chemours example is particularly interesting to me. Not only did the hotline tip lead to the departures of the company’s CEO and CFO, but the circumstances involved led to an SEC and DOJ investigation, and also to a securities class action lawsuit, which remains pending in the District of Delaware.

The fact is that ethics hotlines not only provide employees an opportunity to report concerns and potential misconduct they observe, but they also provide a way for company executives to identify and address problems at their companies. As the Chemours examples show, ethics hotline reports can also lead to unearthing accounting misrepresentations and even to the filing of securities class action lawsuits.

History has shown that anonymous reporting is powerful, and that tips can be an important fraud detection tool. As the examples above show, hotlines can enhance corporate governance. Among other things, the existence of the hotlines can enable early detection of corporate problems, and perhaps even the unearthing of problems that might otherwise go undetected.

The corporate ethics reporting hotline arguably remains one of the Sarbanes Oxley Act’s most enduring legacies.