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Whistleblowers: why companies need them | ECEC 2020 wrap up

Find out how a speak-up culture can benefit your organisation.

by Moritz Homann 3 min

    In 1999 Wendy Addison had a successful accounting career and was working as Group Treasurer at fitness and entertainment company LeisureNet Ltd, the “darling” of the Johannesburg Stock Exchange (JSE). Just one year later she had lost her job, career and livelihood, received death threats and had sent herself and her 12 year old son into self-imposed exile in the UK.

    What happened? Wendy Addison blew the whistle on her employers. On 6th October 2020 at the European Compliance and Ethics Conference (ECEC), Wendy told her fascinating story.

    A whistleblower’s story

    In 2000 Wendy noticed that the joint CEOs at LeisureNet were abusing a simple employee perks system to the tune of millions. She was faced with a huge moral dilemma, and she decided to speak out to her seniors. After Wendy’s concerns were ignored, she was forced to blow the whistle externally. A dawn raid on the company by the South African Exchange Control Board uncovered Wendy’s identity and years of unemployment, death threats and near financial ruin ensued. In 2011, 11 years after she first raised concerns, Wendy finally secured justice when the LeisureNet CEOs went to jail.

    Wendy now runs a consultancy called SpeakOutSpeakUp Ltd which builds on her experiences and helps companies move to more transparent and open dialogue. At the conference Wendy said that, on paper, LeisureNet had a very polished corporate governance structure, with an extremely qualified board, committee structure and Deloitte as the external auditor. However the underlying problem was the culture. “The organisation did not want to hear bad news. Also nobody had the courage to ask questions; we gave them tacit permission to behave badly”.

    Since Wendy’s case, many other high profile whistleblowers such as Edward Snowden and Harvey Weinstein’s accusers in the #metoo movement have come forward, cases which have illustrated the positive role of whistleblowers in society.

    Fostering a speak up culture brings value to your business

    At the ECEC Whistleblowing Panel Session, speakers focussed on several of these benefits:

    • Whistleblowing systems can help to detect wrongdoing at the earliest stage: “40% of fraud identified is uncovered with the help of a whistleblower”, said Dr Wim Vandekerckhove, Reader in Business Ethics at the University of Greenwich. Identifying wrongdoing at the earliest possible stage means that companies are in a position to deal with an issue as soon as it arises, helping to avoid or minimise costly financial penalties and reputational damage.
    • Whistleblowing systems can help to mitigate risk: “We do not live in a perfect world”, argued Gilles Delarue, Group Compliance Officer at Rhenus Logistics, “so companies will never be able to eliminate wrongdoing”. The presence of a whistleblowing system can help to identify the risk and therefore help ensure that the wrongdoing does not endanger the organisation.
    • Whistleblowing systems form part of a speak-up culture: And a speak-up culture not only helps employees to expose wrongdoing, but it also helps the business in other ways, argued Wendy Addison. A speak-up culture can also be supported more broadly for example encouraging employees to come forward with innovative ideas.
    • Whistleblowing systems can help to protect a company’s reputation: All speakers were in agreement that a whistleblowing system and speak-up culture encourage whistleblowers to report internally, which gives a company the chance to resolve the issue first before they potentially turn to the authorities, the media or the public. In his research on the subject, Dr Vandekerckhove found that most whistleblowers actually wanted to raise the matter internally first; it wasn’t until the third or fourth rejection or dismissal that they went public.
    • Whistleblowing systems do not encourage abusive reports: Contrary to the concerns some companies have that the introduction of a whistleblowing channel will lead to more abusive or “staged” whistleblowing reports, Guido De Clercq, Executive Director at Transparency International, clarified that the number of such reports recorded by companies is actually extremely limited and these isolated cases in no way outweigh the benefits a whistleblowing system provides.

    Success factors for an internal whistleblowing system

    Whistleblowing systems take many forms, from simple postboxes and telephone hotlines through to digital software solutions. All channels have their strengths and weakness and some companies even combine different channels. Speakers at the ECEC Whistleblowing Panel Session discussed several factors critical to the success of any whistleblowing system:

    • Ensure accessibility: Companies should be aware that different countries and different situations might require different channels. The most important thing is that your employees know that their opinion matters to the company: whatever they do, wherever they are and whatever their communication preference.
    • Involve specialists: Gilles Delarue highlighted that he benefits from a digital solution because it allows him to easily involve specialists from other areas of the business, for example HR or legal. A digital solution allows him to maintain an overview of requests for assistance to other teams and ensure these requests are acted upon.
    • Offer anonymity: Offering a completely anonymous whistleblower channel is important to lower the threshold for whistleblowers. While many companies would prefer that individuals speak up confidentially while still providing their details, this isn’t always possible. Providing an anonymous option can help build trust in the process and can be reassuring for the reporter. Frank Staelens, CEO of Confidential Reporting, highlighted that anonymous reporting will become very important in the future, even though the current regulations only require confidential reporting. Companies will need to create the best possible environment to persuade whistleblowers to report internally rather than to the authorities. Companies certainly should not disregard anonymous reporting, said Guido De Clercq, even if it is viewed as a last resort for whistleblowers; simply because around one quarter of fraud and corruption cases are revealed through anonymous whistleblowing reports.
    • Handle reports swiftly and effectively: Compliance teams need to provide feedback to reporters within a few days, even if it is just a line saying “we are still working on it”.This means that companies maintain trust in the process while they are investigating.

    More legal protection for whistleblowers

    Lawmakers are now recognising the value of whistleblowing channels. In December 2019, the Directive on the protection of persons who report breaches of Union law (“Whistleblowing Directive”) entered into force. This requires companies with more than 50 employees to implement internal compliance reporting channels and countries to provide protection for certain whistleblowers. EU countries have until 2021 to transpose the Directive into national law.

    The introduction of whistleblowing systems presents an opportunity for all businesses to keep their ears to the ground and identify risk. If implemented in the right way, they can help to build a culture of openness and honesty, minimise risk and help the company to avoid costly financial penalties and reputational damage.

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    Moritz Homann
    Moritz Homann

    Managing Director Corporate Compliance – EQS Group | Moritz Homann is responsible for the department of Corporate Compliance products at EQS Group. In this function, he oversees the strategic development of digital workflow solutions tailored to meet the needs of Compliance Officers around the world.