7 ways to establish an effective whistleblowing policy
New research reveals the role directors can play in improving whistleblowing policies and practices to ensure fair treatment for employees who expose wrongdoing in an organisation.
Despite all the talk about how important whistleblowing is, large numbers of employees still suffer after exposing wrongdoings and many organisations continue to have their reputations tarnished by their poor responses. A new report reveals how these outcomes can be minimised or averted — and what role directors can play in this.
Whistling While They Work 2 is the result of one of the world’s largest studies into whistleblowing. Funded by the Australian Research Council and 23 partners, and led by Griffith University's Centre for Governance and Public Policy, the three-year project surveyed 700 organisations and more than 17,000 employees, managers and governance professionals. The report comes at a time when new laws and protections are being introduced. It confirms there is still much to be done to improve how whistleblowing is managed.
“Despite the importance of whistleblowing in uncovering wrongdoing, we found continuing levels of poor outcomes for whistleblowers and the prevalence of informal, collateral impacts such as stress and isolation,” says associate professor Eva Tsahuridu, an industry fellow at the School of Accounting RMIT University, and a researcher involved on the director side of the study. “More than 80 per cent of the reporters of wrongdoing experienced some form of informal repercussion, while almost half of them suffered some form of direct retaliation.”
Yet the study also shows that whistleblowers need not necessarily suffer — and don’t always. On average, more than half the whistleblowers surveyed indicated they were treated well, or no differently, by management and colleagues. However, even if they didn’t believe they had been treated badly, most reporters experienced a range of negative consequences, including stress, isolation, ostracism, harassment or intimidation.
Tsahuridu notes that by being proactive and intervening early, organisations can create better perceptions of treatment and fewer cases of negative repercussions for whistleblowers. “Those using proactive risk assessments are also more effective in preventing whistleblower detriment,” she says.
The study found risk assessment should be the first step an organisation takes to reduce repercussions. It noted better outcomes when the risk assessment occurred as soon as a report was made. If done only when conflicts or problems began to arise, the assessment made little difference. “These results confirm that simply considering what could go wrong for reporters, before anything does, can make a crucial difference in helping place the organisation on the right path,” the report says.
On the governance side, the report advises that to be effective, there should be a functional separation between many key roles for whistleblowing, with independence granted to those entrusted with investigating and resolving disclosures as well as those tasked with ensuring support. However, there was little support in the study for ensuring those with whistleblowing management responsibilities had the required expertise or training to fulfil their role.
The director’s role
“Directors have legal and ethical responsibilities to ensure their organisations comply with the law, identify and address conduct risk, as well as protect the people who raise concerns from direct harm and collateral damage,” says Tsahuridu. “Their attention is needed on two fronts — how their company is dealing with the disclosure as well as the person who made the disclosure. Both need to be managed effectively.”
The information directors receive is also important. In partnership with the AICD, the researchers asked 118 Australian directors whether their board should receive information on whistleblowing cases. The majority (60 per cent) agreed they should receive such information through regular reporting on all cases, not simply “specific cases that seem likely to have serious consequences”. Only 36 per cent said management currently provided such information while 29 per cent said a board committee oversaw the program.
Tsahuridu says directors understand that information about whistleblowing is important and valuable, but don’t seem to receive as much information as they ought to. “Directors have to play a more active role and seek timely and comprehensive information on the number, nature and status of concerns, risk assessments and responses, and outcomes and actions, including the changes in policies and practices that ensue,” she says. “Remember, the absence of reports of wrongdoing is not necessarily indicative of an absence of wrongdoing. Our research shows the number of people who experienced serious wrongdoing but did not report it remains high.”
Sylvia Falzon FAICD, chair of Cabrini Health, says the new laws can be viewed in two ways. “The improved protections can be seen as a regulatory stick to enhance whistleblower protections and looking to bolster corporate responsibility — or, for those boards with a strong culture and a supportive, open and honest environment at its core, the new law is an extension to what already exists... enabling and encouraging a culture of continuous improvement.”
Tsahuridu also warns directors that organisations can suffer from overconfidence. “This overconfidence may lead boards to mistakenly think they do not have anything to be concerned about or need to improve. Governance and oversight of whistleblowing is necessary in all organisations.”
How to establish an effective whistleblowing policy
Commentary in Principle 3 of the ASX Corporate Governance Principles and Recommendations (Fourth Edition) offers guidance for organisations on whistleblowing policies and practices. It states: “In most cases, the best source of information about whether a listed entity is living up to its values are its employees. They should be encouraged to speak up about any unlawful, unethical or irresponsible behaviour within the organisation through an appropriate whistleblower policy.”
It suggests an organisation should:
- Link the policy to the organisation’s statement of values.
- Clearly identify the types of concerns that may be reported under the policy and how and to whom reports may be made.
- Explain how the confidentiality of the whistleblower’s identity is safeguarded, and how the whistleblower is protected from retaliation or victimisation.
- Outline the processes to follow up and investigate reports made under the policy.
- Provide for the training of employees about the whistleblower policy and their rights and obligations under it.
- Provide for the training of managers and others who may receive whistleblower reports about how to respond to them.
- State that the policy will be periodically reviewed to check that it is operating effectively and whether any changes are required to the policy.
Source: Whistling While They Work 2: Improving managerial responses to whistleblowing in public and private sector organisations. The researchers asked 118 Australian board directors whether their board should receive information on whistleblowing cases. The majority (60 per cent) agreed such information should be received by the board through regular reporting on all cases – not simply ‘specific cases that seem likely to have serious consequences’. However, only 36 per cent indicated that management currently provided such information and only 29 per cent indicated a board committee was active in overseeing the program.