Is legislation making whistleblowing the norm and not the exception in business?

With the EU Whistleblowing Directive now in force and likely to impact the thousands of UK businesses with operations in Europe, GoodCorporation’s first Business Ethics Debate of 2022 addressed the important topic of whistleblowing. Georgina Halford-Hall, CEO of Whistleblowers UK, opened the discussion and asked the question, Is legislation making whistleblowing the norm and not the exception in business?

Georgina began by highlighting the role of whistleblowing in identifying corruption and malpractice. Nonetheless, it remains a contentious topic. Many organisations talk about the importance of whistleblowers, but no one wants a whistleblower in their organisation and few own up to being one.

According to Georgina there are three pillars to an effective corporate whistleblowing programme, awareness, confidence and responsiveness. Yet recent surveys have revealed a need for improvement in all three areas.

• Awareness
  • According to the UK’s whistleblowing charity Protect, only 31 percent of UK workers know how to raise a concern, with 46 percent unsure whether their employers have a whistleblowing policy.
• Confidence
  • According to the EU’s consultation on whistleblowing, 80 percent of respondents feared the consequences of speaking up.
• Responsiveness
  • According to Project, 35 percent of workers lack confidence that employers will respond when concerns are raised.

Georgina went on to argue that in some sectors, such as finance where it is mandatory, whistleblowing is more normal, but still many issues go unreported. Even in the finance sector, few organisations have robust systems in place to manage investigations well.

Part of the problem is that most of us are only aware of whistleblowing when something goes badly wrong, leading to public disclosure, reputational damage and often retaliation against the whistleblower. But there will be many examples of internal whistleblowing where the raising of concerns is well handled and appropriately dealt with. This is what organisations should be aiming for and in such circumstances, whistleblowing can and should become a normal part of doing business.

Culture is key to getting this right and to ‘normalising’ whistleblowing. When a speak-up culture is successfully embedded there is clear responsibility for the system at the top of the organisation, senior management view those that speak-up as an asset and whistleblowers are protected when raising concerns. Indeed, it should be the norm for whistleblowing to be respectable and respected, with whistleblowers seen as the Board’s best friend.

We are also seeing US lawyers circling the City of London looking for whistleblowers. We may believe that it’s not very British to reward whistleblowers, but 20 percent of the $565m paid out in 2021 by the SEC (Securities and Exchange Commission) went to whistleblowers based in the UK.

Indeed, whistleblowers from the financial services sector have been responsible for exposing some of the biggest financial scandals of recent years, notably Danske Bank, and the Panama, Paradise and Pandora Papers. In our high-tech world, gathering evidence and making a public disclosure is very easy. If stakeholders lack confidence in their internal systems, then a public disclosure may become their only option.

Georgina concluded her opening remarks by summarising the changes to current UK legislation being called for:

• A new definition of whistleblowing and the matters that can be subject to protection to include any harmful violation of integrity and ethics, even when not criminal or legal
• The introduction of mandatory speak-up systems with timely investigation requirements
• Greater public education and support for whistleblowers through an Independent Office for the Whistleblower, and
• Greater sanctions where retaliation or retribution occurs.

Is whistleblowing becoming the norm?

The room was asked to consider whether whistleblowing would become the norm, or at least much more normal in the next three to five years as a result of the changing legislative environment. The room split almost equally, with slightly more believing whistleblowing would become increasingly more the norm in business.

Most agreed that operating a whistleblowing system is already the norm, particularly for larger corporations. But the legislation was having an important impact in bringing many new organisations up-to-date.

While some felt that legislation was key to driving the increased use of whistleblowing systems, a number of other reasons were given.

• Environmental Social Governance: ESG was seen as a driver for change, making speak-up systems a requirement for those organisations looking to evidence their ESG credentials.
• Transparency and ethical values: Linked to the rise in ESG is the growing pressure from society at large, and younger staff members in particular, for companies to operate transparently and demonstrate that they operate to high ethical standards. Operating an effective speak-up system is increasingly seen as a fundamental part of that process. Younger staff members are more likely to speak up and have higher expectations of corporate performance.
• Technological change: A number of participants spoke about the importance of technology in driving the move towards greater transparency in the workplace. This is forcing companies to be more open. Consequently speak-up/whistleblowing systems are increasingly seen as a normal way for organisations to find out what is happening and fix it, before information is leaked into the public domain.
• Competitive advantage: How an organisation conducts its business really matters, particularly in some high-risk sectors, and can be a differentiator. As such there are commercial benefits to operating an effective whistleblowing system that are driving companies to ensure they have effective, functioning systems in place.
• Risk management: Enlightened boards acknowledge that whistleblowing should be seen as an early warning system. A well-planned, well-managed and above all, well-trusted system will ensure that concerns are raised internally where they can be fixed and not disclosed externally where they can become a scandal.

Key steps to building an effective speak-up system

If speak-up is to become the norm, the following key considerations were raised.

• Understand any barriers to speak-up. This is an essential starting point. If an existing system is in operation, review how it is used and perceived. Is it trusted? Does the culture encourage speak-up? Are investigations well-managed and conducted in a timely manner? Is the right language being used? In some parts of the world terminology really matters, so using the right language that works for your organisation is critically important. The fact that the laws use “whistleblowing” is unhelpful because of the negative connotations associated with this phrase, so companies may wish to choose more appropriate language for their cultures.
• Raising awareness. All stakeholders should be aware of the speak-up system, how to use it and most importantly that they will be protected if they do. This is particularly important in global businesses and for organisations operating in high-risk areas or geographic locations where loss of an employee’s livelihood is a real fear as a penalty for speaking out.
• Training, training and more training. Training is important at all levels, including those handling the investigations. This should include the use of real-life scenarios and, where possible, case histories to show how speak-up is handled and stakeholders are protected. Encouraging open discussion as part of training helps embed the idea of a speak-up/listen-up culture. Training can be face to face or online.
• Creating a speak-up culture. Many felt that culture rather than legislation would drive change and that many organisations were already striving to build open and transparent cultures that encourage whistleblowing. Part of this is the need to establish a speak-up/listen-up/follow-up culture. Where this happens effectively, any concern can be raised within the organisation where it is dealt with effectively. Studies show that external whistleblowing only occurs when people feel they are being ignored.

The power of whistleblowing legislation

Most felt that legislation would be welcome to underpin the changes already in train. However, time will be needed to establish global best practice as this requires culture change as well as legal compliance. The biggest impact of legislation is likely to be in the SME and public sector where fewer organisations have sophisticated systems in place. For larger organisations, we are likely to see system reviews and gap analyses to ensure that systems and processes meet any new requirements.

GoodCorporation’s view of the impact of whistleblowing legislation

Any move towards mandatory speak-up will have an impact on whistleblowing culture and the wider acceptance of speak-up. For many UK companies, the EU Whistleblowing Directive will require an overhaul of existing systems or the setting up of new systems from scratch for smaller organisations. Getting this right requires careful planning and senior management commitment. The first step is to develop a policy that works for your organisation, understanding any barriers that might exist and how these could be overcome.

Once the policy has been developed consider whether the culture encourages speak-up, how best to communicate the system to all stakeholders and what training is required. GoodCorporation offers a range of support for companies looking to test, strengthen, build or embed their whistleblowing systems.

Summarising, Georgina Halford-Hall said: “Employers have a vital role to play in changing culture, it’s not about how good the policy looks, it’s about how well people know about it and do they really trust it. You need to ask challenging questions and get independent and confidential outsiders to test it. Whistleblowing is essential to every organisation it is the reassurance that you have the best staff, those who trust you and those who are fully vested in your company.”