Toby Webb, Founder, Ethical Corporation and Stakeholder Intelligence. Lecturer, Corporate Responsibility, Birkbeck College, University of London

Toby.webb@stakeholderintel.com / tobywebb.blogspot.com

Managing Whistleblowing: Risks and Responsibilities

October 2012

Whistleblowing, a brief history

Origins in the British police: ‘Blowing the whistle’

First seen in law: 1863. US “False Claims Act” (revised in 1986), tried to combat fraud by suppliers of US Govt during the Civil War: Offered incentives to reveal fraud

Early 1970’s Ralph Nader advocated term, over ‘snitching’

US: big cases in 1970s (Nixon, Serpico) gain public interest

(Sources: Financial Times, Wikipedia, NY Times)

Whistleblowing, major legal variations globally

India: The Whistleblowers' Protection Bill, 2011 was passed by the Lok Sabha on 28 December 2011

Bill introduced in Rajya Sabha on 29 March 2012 by V. Narayanasamy, Minister of State for Parliamentary Affairs

The Bill is currently pending in the upper house of Parliament, Rajya Sabha for discussion and further passage

Source: Wikipedia

Whistleblowing, major legal variations globally

USA: The US has no general employment protection legislation. But has a whistleblowers’ ombudsman (appointed Sept 2012)

Outlaws victimisation of those who report infringements of particular statutes, including environmental, health and safety measures.

Federal laws reward whistleblowers who help the government claw back money lost through fraud, and allow for others to share in fines levied by its regulators

USA: Dodd-Frank Act 2010

Dodd-Frank Act offers whistleblowers significant incentives and increases protection for whistleblowers in the SEC whistleblower program:

SEC can reward those who provide information concerning violations of the federal securities laws

Strengthens whistleblower protection provisions of the False Claims Act, contains one of the strongest confidentiality provisions for whistleblowers ever enacted: For the first time, whistleblowers can initially report fraud anonymously by filing a claim through an attorney

Prohibits employers from retaliating against whistleblowers. Employers may not fire, demote, suspend, threaten, harass, or discriminate against a whistleblower

United Kingdom: 1999 and 2010 Acts

UK law specifically protecting whistleblowers in Britain came into force in 1999 and is:

Integrated into the country’s employment laws

Requires the whistleblower to be acting in the public interest, allows for unlimited compensationand, in theory, voids gagging clauses

But unlike US, British law focuses on employment status of the whistleblower, not the message

UK Bribery Act 2010 now makes whistleblowing systems and protection vital for companies subject to UK law

United Kingdom

“In the UK, the proposed enactment of the Bribery Act creates a corporate offence of failing to prevent bribery.

In order to defend a charge of failing to prevent bribery, an organisation must be able to demonstrate that it had adequate procedures in place.

The provision of effective whistleblowing facilities is widely considered to be a key element of adequate procedures for most organisations”

"Striking a balance: Whistleblowing arrangements as part of a speak up strategy“ PwC, 2011

What are the impacts on Whistleblowers?

In many modern cases, whistleblowers have suffered greatly

In a recent Financial Times article (‘The Whistleblowers Club’, 14/12/12) the depth of their personal suffering was detailed. Many lost homes, relationships and thought of suicide

Much of the recent legislation has come as a result

But for business, you cannot rely on the law alone. A culture of openness is needed to get people to speak up

Process is one thing… (PwC report)

But cultural change is another

So how do we change culture, towards openness?

CEO and top level leadership: Bosses must lead from front

Ethics champions: Devolved networks who spread the word

Constant training: Online, offline

Dilemmas databases: Case studies of what to do, and when

Demonstrating action: Taking action, and reporting publicly

Cash incentives: Can they work for your organisation?

Encouraging openness: Case study, Severn Trent

Series of ethical incidents (false information to regulator) led to serious crisis. New top management from 2005

Senior management team visited sites. Involved groups of 50 or so employees in open, honest dialogue about guilt and change

Employees fearful of consequences & senior managers’ motives

Coaching, mentoring techniques & external ethics/dilemmas training

Encouraging openness: Case study, Severn Trent

Changed compensation structure: existing & new executives

Leadership development: Big focus on ethics and honesty: Published revised code of conduct AND whistle blowing policy

20 key performance indicators linked board member’s efforts to performance and values

Won leading industry award by 2009. Programme continues…

Encouraging openness: Case study, Siemens

Huge corruption scandal, resulting in $1.6bn in fines in 2008

Company has re-organised as a result, better reporting and world class anti-corruption processes

Forced by World Bank to spend spend $100 million on anti-corruption awareness initiatives world-wide

Understand ethics is as important as legal compliance

Batches of Siemens managers spend time at the Panchgani campus of the global NGO, the Initiatives of Change, headed by the Mahatma’s grandson Rajmohan Gandhi

Conclusions:

Whistleblowing is one of the hardest challenges to manage

It is very hard to demonstrate that careers will not be ruined as a result of whistleblowing

Leadership is vital: Companies must celebrate and promote them from the top, if they are to be successful

But general culture also matters hugely. Processes can help take away opportunities for misconduct, but engaging ALL employees, constantly, is the secret to a more open culture

There is no magic bullet: But culture and process combined, can hugely reduce risk

Sources and resources: "The Price Whistle-Blowers Pay for Secrets", New York Times,

21/09/12

"Sustainability & INDIA INC: Siemens", The Economic Times, Mumbai, 19/04/12

Wikipedia: "Whistleblowing", accessed 5/10/12

"The Whistleblowers Club", Financial Times, 14/09/12

"Striking a balance: Whistleblowing arrangements as part of a speak up strategy“ PwC Report, 2011

www.ethicalcorp.com: various articles 2005-12