Being tipped off that fraud, bribery, and other corporate malpractices are taking place within parts of the organisation can save companies substantial costs in terms of legal actions and regulatory sanctions. Yet those who deliver that information are often sidelined, dismissed, or hung out to dry over suspicions that they are somehow untrustworthy informants intent on causing trouble.
Whether they raise their concerns internally to the board, internal audit, or compliance, or externally to a hotline, regulator, enforcement agency, or the press, it is fair to say that the job prospects of most whistleblowers become markedly shortened once their identity becomes known, and especially if the issues they are drawing attention to are particularly serious.
A simple internet search will uncover plenty of cases of people who have had their lives ruined for trying to do the right thing. It is partly why the Securities and Exchange Commission offers whistleblowers a substantial chunk of any fine they levy in exchange for the information—the regulator knows that these people are largely unemployable after they have raised their concerns.
As such, a group of U.K. academics has developed guidance to help organisations establish effective speak-up arrangements that encourage people to come forward without fear of reprisal. Indeed, a key factor of the guidance is that it stresses the many positive aspects for organisations that instill an open culture where speaking out is welcomed and acted upon and the organisation is seen to be receptive and responsive to allegations of wrongdoing.
Called Effective Speak-Up Arrangements For Whistleblowers and devised to ensure firms learn from whistleblowers rather than scapegoat them, the guidance was put together by academics from Warwick Business School, Queen’s University Belfast, and the University of Greenwich. It was commissioned by the Association of Chartered Certified Accountants, and includes information gathered from (among other organisations) the U.K.’s National Health Service (NHS), a multinational bank, a central government in Southeast Asia, and a global engineering firm.
Marianna Fotaki, professor of business ethics at Warwick Business School and one of the report authors, says that whistleblowers provide companies with a great opportunity to learn and improve their practices, especially when it comes to robust speak-up procedures.
“This is important for companies as it prevents reputational damage, improves corporate governance, builds public sector accountability and could save money,” says Fotaki. “Recent research found that 40 percent of companies had suffered serious economic crimes resulting in an average of more than U.S.$3m in losses. Nearly half (43 percent) of these were exposed by whistleblowers. This means that whistleblowing was more effective than all the other corporate security measures for preventing wrongdoing—so long as it is acted upon.”
Fotaki says that safe and effective whistleblowing is only possible if there are effective speak-up arrangements. “Merely encouraging employees to speak up, without putting robust response systems in place, is a recipe for disaster, for both employees and the organisation,” she says.
Using evidence-based research, the authors have devised a 12-step approach to building an internal process to support whistleblowers and make sure the information is acted upon.
“It is important that organisations recognise that there could be instances of wrongdoing in their operations and that it is employees who will be the best placed to inform them of such incidences.”
Marianna Fotaki, Professor of Business Ethics, Warwick Business School
The guide highlights the many benefits of having effective speak-up arrangements in place. For example, research shows that organisations suffer fewer financial losses if whistleblowing hotlines are in place, which also helps to maintain good corporate governance, as well as their corporate reputations, and instills trust. Furthermore, as whistleblowing provides organisations with the opportunity to address wrongdoing at an earlier stage, legal costs associated with court battles and regulatory investigations can be significantly reduced.
For employees, having speak-up arrangements in place gives them vital protection from retaliation for coming forward and signifies that their concerns will be taken seriously and investigated appropriately. More widely, having speak-up arrangements in place promotes public trust in the organisation.
The key to a good whistleblowing policy is to have a range of different channels available for employees to use, says the guidance. These can include internal and external hotlines, as well as channels to independent, external ombudsmen. Some organisations have had success with “question” channels, whereby employees use either phone lines or e-mail and Web applications to raise concerns about whether certain areas of business conduct would be considered illegal or unethical or constitute bribery, corruption, or fraud. This would then give them a better idea as to whether they should escalate their concerns further.
Another tip for success is to ensure that speak-up arrangements are not just left to one function in the organisation to deal with. Both HR and compliance should be involved, possibly with one “owning” the speak-up arrangement (usually HR), and the other facilitating it (compliance). Ensuring that speak-up arrangements are independent of the company to establish trust is also key—as is having a dedicated team to deal with enquiries. The researchers found that in those organisations where receiving and following up speak-up concerns was central—rather than marginal—to their core job task, speak-up operators were able to keep their focus on appropriate listening, objectively evaluate the quality of investigations, carry out and document end-to-end follow-up concerns, and spot potential wrongdoing, underlying concerns that seemed unsubstantial or unfounded at first sight.
In fact, responsiveness is a key tenet of any effective speak-up arrangement, says the guidance. It reassures employees and those who raise complaints that their concerns are taken seriously. Organisations need to react quickly, and they should explore whether the person who has raised the complaint can be included in developing a solution to the problem.
EFFECTIVE SPEAK-UP ARRANGFEMENTS
When developing speak-up policies, organisations should consider the following 12 best practices:
Offer a variety of speak-up channels; this promotes trust, increases accessibility, and navigates potential cultural issues within the organisation
Involve more than one function in your speak-up arrangement; this tends to increase overall responsiveness
Build trust through speak-up arrangements; pay special attention to training your speak-up operators
Be responsive when issues are reported; make sure that response is well-organised, clearly mandated, and adequately resourced
Be aware of the barriers to responsiveness, and how they can contribute to a perception of disinterest or distrust
Develop strategies to circumvent barriers to responsiveness, such as legal limitations and ‘invisible’ sanctions
Shape and co-ordinate attitudes to responding; reinforce to all managers that they have a duty to respond to concerns raised
Involve third parties, such as unions wherever possible
Record all speak-up events to recognise patterns in underlying problems, collect data for training, and monitor the most frequently used speak-up channels
Publish aggregate data on speak-up incidents in annual report to generate positive interest from investors as well as to promote transparency
Consider the potentially difficult interactions between organisational and national cultures when developing an appropriate strategy
Provide access in different languages, especially in multinational organisations
Sources: ACCA; ESRC
Conversely, organisations need to be aware of what the barriers could be to their own responsiveness to genuine complaints, as “being responsive does not guarantee being perceived as such,” says the guidance. For example, being unable to share the results of a whistleblower investigation due to legal proceedings, data and privacy protection regulations, and issues relating to anonymity may look as if the organisation is sitting on its hands. As a result, organisations should look at ways of addressing such problems. This can be done by telling employees how speak-up complaints are investigated; what the usual timeframe is to conduct a follow-up; and why certain details will need to be kept confidential due to legal limitations.
An essential part of fostering an environment where speak-up concerns are welcomed is to “continuously reinforce the message to managers at all levels that responding to concerns is part of their role,” says the guidance. “You should also restrict their discretion about how to respond to speak-up attempts. Giving a coherent and consistent response is crucial for building trust.” Another bonus is to involve third-parties, such as trade unions, in the speak-up process (though since there is less and less union recognition in many employers, such an avenue may not always be available).
It is also important to record all speak-up events—even if concerns do not lead to an investigation or sanction. Recording speak-up events may help recognise patterns of concerns resulting from underlying problems, which could lead to earlier intervention to prevent corporate wrongdoing, as well as enable managers to monitor risk cultures more effectively and help improve internal controls. The data can also be used for training purposes and for improving the processes and channels around encouraging people to speak-up: For example, compliance can use the information to find out how many speak-up events there are in a year; which channels they come from; how many are investigated and lead to sanctions; and the types of concerns raised.
The guidance encourages organisations to publicly report data relating to speak-up concerns in their annual reports. It suggests that by doing so, organisations gain positive interest from investors and also help to promote internal transparency and raise awareness of their speak-up arrangements.
Other points that organisations should consider, says the guidance, is how culture—both organisational and national—may impact the effectiveness of speak-up policies. The researchers found that in some parts of the world, employees preferred to raise their concerns with compliance functions directly, whereas in Germany, the Middle East, and Asia, employees preferred to take their complaints to an external ombudsman (an option much less enjoyed by employees in the United Kingdom, United States, and Latin America).
Finally, speak-up policies should be multilingual, and the channels that are available to employees to voice their concerns also need to be able to deal with complaints raised in different languages—particularly if the organisation is multinational or has overseas subsidiaries. The researchers found, for example, that employees in Brazil chose to raise their concerns through a dedicated Website or a hotline as they thought that an external ombudsman would not be able to speak Portuguese.
“It is important that organisations recognise that there could be instances of wrongdoing in their operations and that it is employees who will be the best placed to inform them of such incidences,” says Professor Fotaki.
“This guide lists the benefits of operating effective speak-up arrangements, introduces different types of speak-up channels and provides detailed recommendations concerning how to design and operate speak-up arrangements. It also identifies the challenges an organisation may face in implementing the guidelines and suggests strategies that can be adopted to address them,” she says.