Blowing in the wind?
The Middle East is relatively new to the concept of anonymous reporting and there is a fear that unfounded allegations could jeopardize someone’s job. The other point is that the Middle East culture historically has not included the concept of informing on someone.
The Sarbanes-Oxley Act in the U.S. and other legislation in Europe and the Far East have seen an increased use of hotlines in the business community. Under Section 301 of the Sarbanes-Oxley Act, companies trading on the U.S. stock exchange must provide a mechanism for employees to remain anonymous when reporting concerns about accounting or audit irregularities. This is at odds with legislation in certain European countries, where anonymous allegations are not sanctioned.
The Australian Standard 8004-2003 ‘Whistleblowing Protection Programs for Entities’ is only a guideline but is increasingly being used as a basis of ‘best practice’ in other countries, in the absence of any other appropriate guide. That, coupled with an increased awareness of corporate governance, has also helped the increase in hotlines. Indeed, some organizations have been created solely to provide outsourced hotline services. Regular statistics from the Association of Certified Fraud Examiners surveys identify that ‘tip-offs’ still provide a significant percentage of fraudulent behavior detections. However, there is a need to balance the whistleblower’s requirement to maintain anonymity against the organization’s need to establish whether the information provided genuinely raises allegations of inappropriate behavior.
The whistleblower also has to rely on the organization’s policy of protecting a genuine whistleblower, without any backup from legislation. So can the whistleblower rely on the organization to protect him? What must the organization do to provide a whistleblower with that sort of comfort? The answers to these questions are normally found at the top of the organization. The directors and senior management are responsible for setting the culture of the organization. Therefore, the message has to go out from the top. The term ‘tone from the top’ is often used in corporate governance and culture rhetoric, but it holds true. If the senior players don’t provide the leadership, who further down the chain is going to bother?
By providing outsourced whistleblower hotline management, organizations can send the message to their employees that the initial communication will be handled independently to ensure that the allegation is recorded and passed to the appropriate person. What occurs subsequently depends on the nature of the allegation and the organization. Although internallyoperated hotlines can also work well, they are disadvantaged by the fact that all allegations are initially received by employees of the organization where the subject of the whistleblower’s allegation is also employed. This has always been a point of concern.
The processes required to establish the bona fides of allegations involving junior or middle ranking staff tend to be fairly straightforward. Either internal or external investigators are normally appointed to review the matter and report on the allegations raised. Usually an appropriate senior manager will then deal with the matter after legal and HR advice.
If the allegation is against a senior manager, the situation becomes a little murkier and the issues may become confused. Unless the organization has a robust policy for dealing with such a scenario, investigations run the risk of becoming compromised by senior management involvement, or of allegations being ignored.
It is really at this level that the true ethical nature of the organization becomes clear. In reality, the use of a whistleblower hotline is another alternative to reporting issues to management and is normally only used where the whistleblower is uncomfortable in approaching their line manager or HR department. One of the major issues in dealing with whistleblowers is that the person taking the initial call is unaware of the history leading up to the contact. For example, it is possible that the whistleblower has resorted to the hotline as a final act following the unsatisfactory resolution of other avenues. As such, the whistleblower may be under extreme psychological pressure, having invested a significant amount of emotional capital in the matter.
With this in mind, from an investigative perspective it is advantageous that the initial contact should be with an experienced investigator or operator who has the ability and training to deal with stressed and anxious callers. Sometimes, if the whistleblower refuses to give their details or contact number, the call receiver may only get one chance to get all the information, although the call receiver may actually be able to convince the whistleblower that better assistance can be provided if the person identifies themselves. It is becoming more common for hotlines to be Internet- and e-mail-based. Although this makes it easier to report concerns, it removes the ability of the hotline operator to gather potentially critical additional information at the outset.
Few studies have been undertaken into the motivation of whistleblowers. Only in the U.S. is there a provision to provide whistleblowers with financial rewards following successful prosecutions. Anecdotally, the vast majority are motivated by ethical issues concerning inappropriate conduct by the subject of the whistleblowing. However, it is also possible that some whistleblowers may be motivated to make allegations with the intent to embarrass someone or for the sake of revenge.
It is only by talking at some length to whistleblowers that an understanding of their motivation may be gained. This can prove critical in understanding how the matter should proceed.
Ongoing support for the whistleblower is also important to ensure that they are comfortable with what is occurring and are not suffering any adverse treatment as a result of their actions. This fear seems to be the major reason whistleblowers initially wish to remain anonymous.
Essentially, the key to an effective whistleblower program is two-fold. The first part is dealing with the allegation, but just as important is the ongoing management of the whistleblower. Policies should ensure that any ‘detrimental’ action taken against the whistleblower as a result of their allegation should be treated as a serious matter and appropriate action taken.
Whilst the major focus of most whistleblower policies is on whistleblowers, processes should also be put in place to deal with the person(s) against whom the whistleblowing allegation is made.
As part of any investigation, the subject should be interviewed and provided with any evidence supporting the allegation and offered an opportunity to respond to the allegation. This is known as the duty of fairness, which underpins most legal processes. Once a determination has been made, the subject of the allegation should be advised of the finding. If the allegation is found to be unsubstantiated, any harm caused to the subject of the allegation should be remedied, including a statement of outcome from senior management if the matter had been made ‘public’.
The final issue, especially where no legislation exists to protect the whistleblower, still reverts to the question of trust. Can the management be trusted to respond to whistleblower allegations in an appropriate manner? The answer comes back to the issue of culture, mentioned earlier. The increasing global acceptance of the need for a whistleblower process means that the Middle East needs to adopt the process in order to comply with overseas expectations and requirements. Obviously, no one is going to use the system if they don’t trust it. As with most other cultural issues the buck stops with senior management. If senior management can demonstrate that the whistleblower system is fair, transparent and has sufficient safeguards to both the complainant and the accused, the program has a lot more chance of succeeding than where it can’t demonstrate them.
by David Clements, director, Forensic and Dispute Services, Deloitte Corporate Finance Limited (Regulated by the DFSA), Middle East