Toby Webb, Founder, Ethical Corporation and Stakeholder Intelligence. Lecturer, Corporate Responsibility, Birkbeck College, University of London [email protected]/ tobywebb.blogspot.com Managing Whistleblowing: Risks and Responsibilities October 2012
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Managing Whistleblowing, risks and responsibilities
Presentation given to anti-corruption conference in Delhi, October 2012, organised by the Indian Centre for CSR
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Toby Webb, Founder, Ethical Corporation and Stakeholder Intelligence. Lecturer, Corporate Responsibility, Birkbeck College, University of London
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