Read Lubna’s blog insights where she takes a fresh look at governance to create stronger countries and business
Should we punish, protect or promote whistleblowing?
Whistleblowing is rarely out of the news and the recent Barclays case has once again raised key questions about how companies should handle these difficult situations. But one angle that is not much discussed is the issue of how to distinguish between – and then handle – a vexatious employee or individual and a genuine whistle-blower trying to ensure the right thing is done.
In this blog I look at the impact of whistleblowing and the risks and rewards for a company; who should be responsible for handling whistleblowers; should whistleblowers be encouraged; and what can we learn from the spate of high profile cases we’ve seen in recent months?
The Barclays case highlighted the challenge of distinguishing between genuine whistleblowers and malicious or vexatious whistleblowers. It also raised interesting questions as to whether compliance must be the only team to know the identity and work with whistleblowers – or are there times when it is acceptable for the wider company to get involved?
What is a whistleblower?
Whistleblowers are individuals who call attention to wrongdoing or fraudulent behaviour in their organisation and have been the subject of much debate and controversy over the years. Many argue they are heroes of the corporate world, willing to sacrifice their professional reputation to right a wrong. Others say they are nothing more than disgruntled employees determined to damage their company’s reputation.
In reality, the truth lies somewhere in between. Whistleblowers do call attention to genuine issues and many suffer retaliation. However, many are wrong in their accusations and their motives may not always be pure.
I like the simplicity of the definition I found on the UK’s government site under their heading, what is a whistleblower? It says, ‘You’re a whistleblower if you’re a worker and you report certain types of wrongdoing. This will usually be something you’ve seen at work – though not always.’ Because this is about whistleblowing in the government, they also say ‘The wrongdoing you disclose must be in the public interest. This means it must affect others, eg the general public.’
Protecting those who dare to speak out
In most countries around the world, whistleblowers are protected under law. In 2003, 140 countries signed and ratified a United Nations Convention on Corruption that protects and encourages people to come forward. However, many corporations still fail to fully understand or follow the rules and in many instances, their employees are unaware of any policies they may have.
The latest Barclays incident helps to illustrate this. Barclays is no stranger to falling foul of international laws – from rigging benchmarks to mis-selling mortgages – and many would expect all senior management to be extremely well-versed and vigilant. However, chief executive Jes Staley is under investigation by watchdogs and is facing calls to quit after twice trying to unmask a whistleblower.
In this case an anonymous person made a number of claims about a senior executive that Mr Staley hired – allegations that were later found to be unsubstantiated. However, the chief executive twice tried to use the internal security team to unmask the whistleblower, even calling in US law enforcement for assistance, but failed to find their identity.
Since the incident was exposed, Staley has apologised and admitted he should have left the matter to the bank’s compliance department. However, since compliance had said there was nothing behind the accusations, Mr Staley understandably wanted to discuss how this could be stopped from happening again. But the point being made is that even at this stage, he should not have got involved – it must stay with compliance.
Mr Staley is not alone at the lack of understanding about how this works. Despite clear international standards, laws and procedures we often see major corporations – like Wells Fargo, Enron and Olympus – intentionally or unintentionally attempt to silence whistleblowers, punish them or discredit them.
Encouraging people to voice concerns
Many corporations fear damaging their brand but experience shows us that whistleblowers should be encouraged. They are the first line of defence when it comes to exposing wrongdoing in an organisation.
If a business has the proper procedures and culture in place, these people help to ensure misconduct is tackled quickly before it can escalate.
Speaking in the FT, lawyer Jordan Thomas, who helped develop the US Securities and Exchange Commission’s whistleblower programme, says: “Healthy organisations encourage their employees to speak up and they focus on the misconduct reported, not the person who reported it. If your people don’t trust you, they won’t talk to you.”
Most companies will have whistleblower policies and procedures, but how many actually live them? In many instances people who speak out are seen as “sneaky” who “betray” the business.
The Global Business Ethics Survey from the Ethics Research Center found that the majority of people do report misconduct if they see it (59%). However, an average of 36% who spoke out also reported that they then faced retaliation. This figure is much higher in some countries with 74% of whistleblowers facing a backlash in India, 63% in the UK, 53% in the US and 50% in Germany.
The author of the report says: “A problem management does not know about is a problem management cannot address. Reporting of observed misconduct enables committed leaders to tackle issues and fix them. But silence in the face of misconduct allows problems to take root and creates greater risk in the long term.”
Senior management must take lead on misconduct
So, how do companies encourage whistleblowing and ensure they prevent misconduct spreading across the business?
The key element is the knowledge that employees will be listened to and their concerns will be acted upon. The argument that some whistleblowers are vexatious or malicious serves little purpose. No-one will be willing to speak out if they feel they are under suspicion from the outset. A lot of this is down to culture – which I looked at in an earlier blog on the secret ingredients of corporate culture.
In this Harvard Business Review article, they include a series of questions to ask yourself about your own whistleblowing climate. By creating policies and processes to answer these questions, businesses can create a culture that ensures whistleblowers are confident about raising concerns.
In most instances the ethics and compliance function will handle whistleblowing procedures but others also use security teams, internal auditors or even general counsel. Regardless of who manages these reports, the company must have clear guidelines and processes on how to manage concerns. Ultimately, any whistleblowing investigation must be fair and factual and the whistleblowers must be protected.
Sadly, most companies are secretive about their approach to whistleblowers – yet by sharing more we can create whistleblowing policies that work to protect companies and individuals?