How to encourage whistleblowers
Former Enron executive Sherron Watkins helped uncover one of the biggest corporate scandals in US history when she wrote a memo to her boss citing inaccuracies in the energy giant’s corporate financial statements. Watkins went on to become one of three whistleblowers that TIME magazine crowned as Person of the Year in 2002.
A whistleblower is someone who reports a case of wrongdoing in an organisation. Alleged misconduct can include activities such as corporate fraud, discrimination or public health and safety issues. Information provided by the whistleblower can lead to court trials, and in the case of Enron, many of its executives were convicted and sent to prison while the company filed for bankruptcy in 2001.
However, unlike Watkins, not all employees might be so forthcoming with incriminating information. “A sense of social stigma, especially in an Asian society, possible alienation and lack of protection may inhibit would-be employees to come forward to blow the whistle on others – especially their superiors for fear of reprisals,” says Wendell Wong, Director, Litigation and Dispute Resolution, Drew & Napier LLC.
This is where a whistleblowing policy can help, as it is designed to protect the informant. Companies that implement such a policy aim to keep the identities of the informants confidential, although there might be situations where this might not be guaranteed. The employee is also protected from unlawful dismissal or any form of workplace discrimination.
A good whistleblowing policy serves to protect an organisation’s long-term interests. Receiving an early tip-off from an employee can help reduce the financial damage caused by fraudulent activities, while such policies can also boost the credibility of an organisation. The National Kidney Foundation (NKF), a major non-profit organisation in Singapore, established its whistleblowing policy in 2008. The move was part of a corporate governance initiative following a corruption scandal in 2005 involving its former chief.
A strong internal policy sets the ‘top-down’ tone for a culture of whistleblowing within an organisation, Wong adds. “It allows employees to know that their management is serious about its zero tolerance approach against wrongdoings and affords employees with the confidence of protection internally.”
More channels opening
Singapore’s stand on whistleblowers has been in the spotlight in recent months after the Public Accounts Committee called for the Finance ministry to spell out a whistleblowing policy that statutory boards could adopt to flag fraud from within their organisations. The recommendation was raised after a high-profile corporate fraud case in 2010, where two senior employees from the Singapore Land Authority cheated the government of $12 million.
In November 2010, Singapore former Finance minister Tharman Shanmugaratnam said that in addition to a strong audit process and internal supervision, whistleblowing could also play a role against corporate fraud.
However, there is no one clear piece of legislation that currently governs acts of whistleblowing in Singapore, Wong says. “Some direction in the form of legislation would be welcomed.”
In the United Kingdom for example, the Public Interest Disclosure Act introduced in 1998 protects whistleblowers from dismissal or detrimental treatment if they report any malpractice.
More Singapore-based companies are also developing their own policies to safeguard their interests. A survey by the Singapore Institute of Directors found that 70% of companies now have whistleblowing policies in place, compared to 20% five years ago. Another eight per cent of companies do not have a policy in place but planned to introduce one, while three per cent of companies had no interest in having one.
Encouraging employees to speak up
Anonymity is one of the most important factors in an effective whistleblowing programme. Organisations that HRM spoke to said that they have put various measures in place to protect the identity of those who come forward with appropriate information.
At OCBC Bank, the Head of Group HR is assigned as the protection officer-in-charge to safeguard the interests of the whistleblower during the course of an investigation. “Our group audit, which reports directly to the bank’s board audit committee, investigates the whistleblowing cases to provide the independence and assurance of confidentiality,” says Patrick Chew, Head of Operational Risk Management, OCBC Bank.
The bank also provides alternative channels for employees to report suspicions of fraud. “For example, staff can report their suspicions to their immediate supervisor, the Bank’s Chairman, CEO or any member of our senior management,” Chew says.
At the NKF, its whistleblowing policy and procedures are spelled out clearly and made available on its intranet for every employee. The policy states that no employee who in good faith reports a violation of the policy shall suffer harassment, retaliation or adverse employment consequence. “Reports of violations or suspected violations will be kept confidential to the extent possible, consistent with the need to conduct an adequate investigation,” says Gerard Ee, Chairman, NKF. The organisation also uses an external auditing partner for its whistleblowing policies. “An independent party will ensure objectivity and fairness,” Ee says.
Organisations might also want to ensure that their employees know exactly what types of behaviours are acceptable and unacceptable. Employees at Aviva Singapore, for example, attend induction training on anti-money laundering, anti-bribery as well as corruption and fraud within the first three months of joining the company. Employees are also required to pass a test at the end of the training.
Whistleblowing policies are not immune to abuse, so organisations need to clear about motivations behind complaints raised. In some instances, whistleblowers have been known to dob in their colleagues to avoid getting into trouble themselves.
Chew says that while the interests of the whistleblower are safeguarded, employees who are placed under investigation must also be treated with utmost fairness and propriety. “Employees who abuse the whistleblowing programme for personal or malicious purposes may be subjected to disciplinary proceedings.”
Details gathered from just the informant might not be sufficient to incriminate a wrongdoer. “One of the main challenges in the implementation of any whistleblowing policy would be the task of uncovering and gathering concrete evidence to prove misfeasance against the alleged suspect, even if assistance was sought from professional persons, such as private investigators, lawyers or accountants, to conduct investigations,” Ee says.
An independent third party whistleblowing service can encourage employees to be more forthcoming with information. Q2 Consulting Partner and Global Compliance jointly launched a whistleblowing hotline in 2010 that enables employees to report malpractices that they observe in their organisation. They can choose to offer the information anonymously or not, and appropriate investigations will then be carried out. More than 40 firms have signed up for the service. Each firm is assigned a dedicated hotline number.