Harnessing the Power of New Whistleblower Laws
Governance practitioners are ideally placed to help leaders unlock the ‘ethical climate’ potential of new whistleblower laws.
The Case for Leadership
Informant mechanisms—institution-led systems designed to form confidential pathways for the provision of information about organisational integrity threats and wrong-doing, by encouraging and protecting potential whistleblowers to come forward—have developed rapidly over the last few years. While the focus of legislation is increasingly directed towards avoiding and compensating harm to whistleblowers, the governance potential now lies with helping organisations to be exemplars of ethical practice, rather than merely complying with regulations or dealing with single cases of mischief—and the corporate climate is turning in favour of those wanting to be integrity leaders.
This momentum for change is driven in part by public, boardroom and shareholder dissatisfaction with the scandalous revelations of systemic impropriety across sectors—think, for a recent example, the Royal Commission into the Misconduct in the Banking, Superannuation and Financial Services Industry. Those with longer memories will recall the alleged Australian dimensions of the UN Oil for Food scandal, or the offshore bribery allegations linked to the Reserve Bank’s subsidiary, Note Printing Australia. The risk of being exposed to contagion from mass leaks of documents (such as the Panama Papers) add to the many other powerful motivations for organisations to want to make genuine efforts to be “clean”.
US legislation that (amongst other things) incentivises whistleblowers with financial rewards has also spurred pan-Pacific conversations at political and industry levels about the merits of strengthening existing measures to uncover corruption in Australia. UK legislation that penalises offshore bribery—including exposing to civil liability a company’s “failure to prevent corruption”—has set new standards and corporate responsibility. New governance obligations in Free Trade Agreements have provided additional energy and urgency to those deliberations. With good reason, the bar is now set very high.
Even major sporting organisations (like the International Olympic Committee and professional sporting bodies)—faced with complex, multi-billion dollar challenges of illicit wagering, doping, influence peddling, game manipulation, bid-rigging and major procurement and construction fraud—are turning to whistleblowing pathways as a key method of shaping their ethical climates (and improving their business intelligence).
Most Australian jurisdictions now have a decade or more of experience in implementing public interest disclosure legislation (in various forms), and updated practices are now making their way into the corporate, union and NFP sectors, through new and updated legislation (see the text box for an update). More iterations of the integrity framework are likely as expertise grows (and misconceptions break down)—see, for example, the proposal for the establishment of a Whistleblower Protection Commissioner in a bill introduced into the Australian Parliament last year by Independent Member for Indi, Cathy McGowan MP (National Integrity Commission Bill 2018).
Are you ready?
Despite this momentum, actual boardroom and senior management experience (and, sadly, much consultant experience) in building and maintaining integrity systems that people will use is lacking (at best) and failing (at worst). However, a range of good examples are developing in Australia and overseas (for organisations and for whistleblowers) that are built with people in mind.
These examples tell us that the key issue for governance professionals to bear in mind is that—despite the technical complexities of navigating legislative frameworks for whistleblowing—the challenge is just as much to build systems that people will trust, and that offer multiple channels to participate. A decade of tick-the-box policies haven’t met those challenges terribly well. Several insights follow:
- Whistleblowing is always discretionary (that is to say, voluntary and based on the person’s calculation of risk and reward)
- Integrity systems depend on information flows.
- Staff watch leaders carefully, and can feel authenticity and commitment to integrity, and base their actions accordingly.
- Recent #MeToo and racism awareness movements have raised employee expectations of integrity and expanded the scope of what they will speak up about.
- Trust is earned, so accessible information, multi-channel access and quality first responses matter.
- Sometimes there is only one chance to get it right—it is the organisation that loses when concerns about integrity are not freely brought forward or dealt with professionally.
Building ethical literacy at senior and middle management (first responder) levels remains a key governance strategy. The momentum to introduce whistleblowing schemes offers the opportunity for leaders to make the conversation with managers, staff and customers about where they stand on integrity.
Recent changes in Whistleblower Laws
Recent amendments to the Corporations Act 2001 (and related Acts) will commence on 1 July 2019 that significantly expand the core elements and reach of mandatory whistleblowing schemes for corporate entities (including introducing victimisation compensation provisions). Amendments to the Taxation Administration Act 1953 also establish a new tax affairs whistleblowing scheme in Australia from the same date.
Public companies and large proprietary companies (among others subject to the new regime) will have until 1 January 2020 to implement a compliant whistleblowing policy. However, since respondents will still be liable for compensable actions that arise from commencement of the new provisions, better outcomes can be expected from introducing policies and training as soon as possible.
The amendments are contained in the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019.
Nick Sellars is a Senior Associate in OCM’s Canberra office, and an international anti-corruption practitioner and governance specialist. He recently returned from assignment to Vienna where he is a member of the UN/International Olympic Committee Expert Panel that is preparing a Handbook on Reporting Mechanisms for Corruption in Sport.