Watching out for whistleblowers

Businesses striving to establish an ethical corporate culture are encouraged to set up an effective speak-up system. Working on what is now a clearly established truth that misconduct damages corporate reputations, a good whistleblowing system can act as a company’s eyes and ears, providing an early warning system so that real reputational damage can be averted.

But the whistleblowing stories that have hit the headlines in recent weeks would indicate that all is not as it should be.  A UK government regulator was forced to apologise for making allegations about the mental heath of a whistleblower; a BBC Newsnight report revealed that the Financial Services Agency told a whistleblower never to contact them again; the same Newsnight report also revealed that whistleblowers in banks are routinely dismissed but not a single UK-based bank has been punished for this, despite the fact that such individuals are protected by UK law.

Confirming that retaliation is not uncommon, at least in the States, the US-based Ethics Resource Centre has published its 2012 Business Ethics Survey, which revealed that retaliation against workplace whistleblowers is rising sharply. More than one in five (22 per cent) of employees who reported workplace misconduct experienced some form of retaliation. This compares to 12 percent in 2007 and 15 per cent in 2009. Even more alarmingly, the incidences of reported retaliation were worse when misconduct was reported to a hotline or managers more senior than their immediate supervisor.

From these examples we can see two clear problems: retaliation against a whistleblower by their own organisation and inaction by regulators whose job it is to oversee a particular sector. Although quite distinct problems, their root cause would seem to lie in the feeling that following up on reported misconduct is more trouble than it’s worth, disrupting, as it inevitably does, the status quo and requiring effort for the reported problem to be resolved.

Given that the OECD, the United Nations and the Council of Europe all encourage whistleblowing as an important part of an effective anti-corruption framework, we should examine how and why these problems can occur.

From our experience of assessments of ethical conduct in a wide range of businesses around the world a number of important issues have emerged about whistleblowing:

1)     Advertise it. A whistleblowing line is useless if it isn’t promoted and isn’t known about – this might sound basic and obvious; but because of Sarbanes-Oxley many companies have established speak-up systems in order to comply, without any intention of making them work.

2)     Tailor-made for local markets. Whistleblowing systems work much better when they are championed and managed locally. All too often speak-up systems are seen as remote, head office activities which mean that employees are mistrustful and fearful about using them

3)     Get the name right. Whistleblowing in itself has a very negative connotation – encouraging people to raise concerns, speak-up and challenge are much better fits with a corporate culture than encouraging people to ‘blow the whistle’. Businesses where employees and contractors are encouraged to speak-up in their day-to-day work are healthier, safer and less prone to corruption. In other words, the best businesses will establish a well-managed speak-up system which is ultimately more effective than a so-called whistleblowing hotline

4)     Culture matters. And it’s not just the name, there is no question that whistleblowing works in some cultures and not in others. However as we see from the retaliation that has taken place, even in Anglo-Saxon environments where these types of systems are more acceptable, there can still be problems. In much of Western Europe, there is a strong dislike of whistleblowing and little commitment to making it work. In many Asian cultures it is almost impossible to get employees to call a hotline. Again, to overcome these problems, the best companies develop cultures where speaking up is part of everyday working life. This shifts the emphasis away from any negative connotations associated with whistleblowing, but ensures that a culture is created in which employees are encouraged to speak up about any malpractice or wrongdoing.

5)     Training is essential. Whistleblowing lines only work if employees are trained on how to use them. Encouraging employees to raise issues directly with line managers wherever possible is an essential part of this training. However teaching employees when it is appropriate to blow the whistle and empowering them to do so, is crucial

6)     Extend speak-up to outsiders. The most effective speak-up and whistleblowing systems that we have seen are those that are extended beyond employees to include contractors and first tier suppliers. By including them in the invitation to ‘speak up’, the company gives a strong message about the value it places on knowing what is happening on the ground and not ignoring issues if something is not right

7)     Take it seriously. Demonstrate through proper and fair investigations that the company treats the issue seriously. Many companies do not investigate issues properly. All too often they pass important issues back to the management (that has caused the problem) and ask them to handle and investigate the issue. A good investigation will of course allow local management to present its viewpoint, but it will also be evidenced based and non-judgemental.

8)     Manage well. Establish a clear management system for dealing with any problems, including when to report to regulators/authorities and how to manage any damage limitation should a serious problem be revealed which could have a negative impact on the company’s reputation.

Regulation such as the UK Bribery Act requires a company to be fully responsible and accountable for the activities not just of its own staff but for third parties acting on its behalf.  A speak-up system is an excellent demonstration of such accountability. However, for it to be a really effective, it needs to be properly managed with appropriate time, energy and focus at a senior level.  Done well, it is a simple but vital tool that can help reduce risk and protect reputation.