The evolution of whistleblowing culture in Australia
whis•tle-blow•er n. One who reveals wrongdoing within an organisation to the public or to those in positions of authority.
Australia’s attitude towards whistleblowing has changed. The old ethos of ‘don’t dob in a mate’ has been overtaken in the workplace by the increasing desire of employees’ to work in a fair and honest environment.
Employees are no longer willing to turn a blind eye to issues that affect either a company’s or employees’ wellbeing. They want to report it and they want something done about it. As a result, corporate whistleblowing is taking off.
The recent foreign exchange loss is a case in point; the losses were uncovered by a tip-off from a whistleblower who suspected that something was wrong and was concerned about the impact.
The woes of Enron and WorldCom were also uncovered by now infamous whistleblowers, Sherron Watkins and Cynthia Cooper, who, along with FBI whistleblower, Coleen Rowley, were named Time Magazine “Persons of the Year” - another firm step forward in the cultural acceptance of whistleblowing.
But unlike the cases of Enron and WorldCom, the majority of incidents reported by whistleblowers in Australia uncover workplace issues well before they balloon to such magnitude.
It is this early warning mechanism of detecting problems before they become a catastrophe that is motivating organisations to think seriously about how they harness the power of their employees and encourage them to report suspected misconduct.
Encouraging honest employees to raise the flag when something is awry is one of the most effective ways to uncover fraud, theft, workplace safety or sexual harassment incidents, before they get out of hand.
Which is why corporate governance regulations such as Sarbanes Oxley requires all SEC listed companies to implement a whistleblowing system. The philosophy behind it being prevention - or early detection - is better than the cure. While Australia’s Corporate Law Economic Reform Program (CLERP) regulations have so far fallen short of legislating such a requirement, ASX Corporate Governance Guidelines do recommend the use of a whistleblowing system.
Globally, the use of a whistleblowing system is considered best practice.
But if an organisation’s idea of establishing a whistleblowing system is to simply setup an internal telephone number for employees to call, then they are bound to fail.
Reasons why whistleblowing systems fail
There are several reasons why whistleblowing systems fail in their attempts to help detect misconduct:
1. Lack of anonymity – one of the biggest impediments for whistleblowers to report misconduct is the fear of retribution. If employees have to report misconduct through an internal channel that doesn’t guarantee anonymity then they are less likely to blow the whistle. They want to alert their organisation to misconduct but not at a personal expense.
2. Culture – an organisation’s culture is set by the tone at the top. If management sets a poor example in relation to misconduct, then employees are less likely to speak out for two reasons: firstly, fear of being chastised by management; and secondly if management has a culture of misconduct then they are unlikely to act on a whistleblower’s report, especially if it relates to the management team.
3. Policies – if policies in relation to acceptable behaviour and ethics are not abundantly clear within an organisation then employees will be uncertain about what constitutes misconduct and whether to make a report.
4. Lack of awareness – if the existence of the whistleblowing system is not communicated effectively or continually reinforced then employees are less likely to use it or know how to access it.
Keys to a successful whistleblowing system
For a whistleblowing system to work effectively to help identify misconduct in the workplace, it must have the following elements:
1. Anonymous – employees must be assured that they can report suspected incidents of misconduct without fear of retribution. An effective system must conceal the identity of a whistleblower. While this may lead to a proportion of mischievous reports, these can be easily verified through a follow up investigation of the incident.
2. Independent – employees feel more comfortable about reporting misconduct to an independent party who is not in any way related to the organisation or the party or parties involved in the misconduct.
3. Accessible – employees need to have several different channels through which they can report misconduct, i.e. via the telephone, email, online or via mail. This ensures all employees – blue collar, white collar, office bound or remote – can anonymously make a report using the channel that suits them.
4. Follow up – incidents reported through to the whistleblowing system must be followed up and corrective action taken where necessary. This will demonstrate the benefit of the system and encourage further reporting of misconduct.
Cost vs. Benefit
The cost of implementing an independent whistleblowing system, such as Tip-offs Anonymous, that can detect misconduct before it’s too late is peanuts compared to the cost of reputation damage or the potential fate of corporate collapse.
Many believe that if HIH had an independent whistleblower system in place then the insurer may not have collapsed.
However it must be recognised that on its own, a whistleblowing system will not entirely eliminate fraud or misconduct. An organisation must have a holistic approach to fraud prevention that starts off with a clear understanding of an organisation’s culture and ethics and attitude to misconduct; the development of policies and guidelines that clearly outline what constitutes misconduct; the policies must be lived and breathed by management; and once identified, corrective action must be taken - misconduct cannot be swept under the carpet.