Whistleblowing won't work in Malaysia |
This statement represents a commonly held belief among some business people here in Malaysia about the success of implementing an anonymous whistleblowing service. One of the reasons cited for this belief is ‘culture’, that is the Malaysian culture of preferring to ‘keep things to ourselves’ or it ‘not being in our nature to do that.’ Another reason often cited is that such a service would only receive ‘poison pen letter’ complaints.
Our experience and success in providing whistleblowing services globally, including Malaysia, suggests that these statements and the reasons for making them are untrue. Whistleblowing is a significant means of detecting fraud and corruption and should be part of an overall control framework. According to the Association of Certified Fraud Examiner’s Report to the Nation in 2008 (US), 46.2% of fraud incidents examined, were detected by tips, an increase from 34.2% in 2006. In 2006, the next highest means of detection was by ‘accident’ at 25.4%, decreasing to 20% in 2008. In 2008, detection by ‘internal controls’ at 23.3% took over from ‘accident’ as the second highest means of detection. So, in 2008, fraud detected by tips was almost double that of the next detection method.
The Malaysian Government’s commitment in the recent budget to formulate a ‘Whistle Blower Act’ to encourage informers to disclose corruption and other misconduct supports the contention that whistleblowing is an important measure in the fight against fraud and corruption.
Whilst it is important for an organisation to have whistleblowing policies in place that outline reporting processes and articulate a commitment to the protection of whistleblowers, it is equally important to provide an anonymous whistleblowing mechanism such as a hotline. In the US, it is mandated by the Sarbanes-Oxley Act 2002, that all public companies have such a mechanism.
Anonymous whistleblowing mechanisms have equal application in the public and private sector because fraud and corruption occurs wherever people exist. They can be established specifically for the use of employees or extended to include other stakeholders such as suppliers or customers. The mechanism can also be extended to cover issues other than fraud and corruption, e.g. workplace safety, environmental hazards, bullying and discrimination. It really depends on what an organisation wants to achieve from its reporting mechanism. An added bonus is that statistical information derived from reports can assist management decision making through the identification of areas of concern that may not have otherwise been apparent.
The most successful whistleblowing services are those that are accompanied by a well planned and executed, ongoing communication strategy and awareness campaign. There appears to be a direct correlation between the level of training and awareness and the success of the service, with success measured in terms of whether the service is used for its intended purpose, i.e. detecting serious employee misconduct.
Whistleblowing services can be operated internally or externally. Internally operated services, however, are time consuming and costly to manage. Many only operate during normal business hours with a recorded message to record after hours calls.
Best practice suggests that the most cost effective and successful whistleblowing services are operated independently, offer multiple reporting avenues, including a dedicated phone number, email, internet, freepost and free facsimile, operate 24/7 and have trained, multilingual response centre analysts to receive calls.
As forensic investigators, it often becomes apparent that employees are aware of the activities being investigated well before management. However, many of these employees are still uncomfortable reporting their concerns to line management, particularly when the report relates to an immediate supervisor or senior management. It is in these circumstances that an alternative method or reporting misconduct should be available. Some of the largest fraud cases, in particular the well known financial misstatement frauds like WorldCom and Enron, were perpetrated by or with the knowledge and authority of senior management, but came to light through courageous individuals who blew the whistle. Generally though, it appears that when senior management is involved in the wrongdoing, employees become much more interested in maintaining their anonymity, and sometimes avoid reporting details that, although helpful, would more easily identify them as the whistleblowing source.
An independent and anonymous reporting mechanism reduces the perception that when significant matters are reported they will not be swept under the carpet, particularly when the complaint relates to senior management. Anonymity reduces the fear of the possible repercussions of making a disclosure and provides the additional impetus for employees to report serious misconduct.
Likewise, 24/7 capability allows employees the flexibility to make a disclosure in a place that they feel totally comfortable in and at a time that suits them. Business-hours-only services do not provide this flexibility and quite often, employees feel anonymity cannot be guaranteed, leading to the disclosure not being made. Making disclosures to a recorded message is very limiting due to the very nature of the communication; it is one way. Often a caller will not even proceed to make their disclosure when confronted with a recorded message. On the other hand, interactive communication with an analyst trained in cognitive interview techniques generates significantly more information than one-way communication.
It is somewhat surprising how many organisations that are otherwise interested in adopting and maintaining good corporate governance standards, choose to operate their whistleblower reporting mechanisms internally. This is particularly true when the cost of operating whistleblower systems using an independent provider is insignificant. When one recognises the value of whistleblower systems in detecting serious misconduct such as fraud and corruption, combined with the major reason that whistleblowers do not come forward, the decision to keep this function in-house is puzzling. These considerations coupled with the increased corporate governance standards, responsibility and liability of directors and senior management, makes it all the more important to provide employees with an additional avenue to voice concerns.
Good corporate governance and a plethora of objective case study evidence make an overwhelming case for the implementation of an anonymous whistleblowing mechanism and there are many multinationals and locally owned companies that have implemented the very successfully in Malaysia.
The belief that anonymous whistleblowing mechanisms won’t work in Malaysia or anywhere else for that matter, is simply not true and is really not a good enough reason for choosing not to have one.
David Lehmann is the Head of Deloitte Malaysia’s forensic practice.