Strengthen your whistleblowing strategy in 2019 with the benefit of key insights that light the path for leaders committed to creating workplace cultures of ethics and integrity.
In this article we summarize crucial outcomes from three sources published as 2018 was drawing to a close: two research studies and one case that gave rise to regulatory action by both the US and UK authorities. Firstly we share credible findings on why you shouldn’t pat yourself on the back if your organisation does not receive many whistleblowing reports, secondly we show that even your professional staff want the option of anonymous reporting, and finally we bring you a stark warning against trying to unmask the identity of an anonymous whistleblower.
Read on…you won’t regret the time spent, and you will want to share this article with your colleagues.
Not many whistleblowing reports? It could be time to worry – here’s why
It’s the most important and credible research on the impact of whistleblowing systems ever published. Kyle Welch, Assistant Professor at George Washington University and Stephen Stubben, Associate Professor from the University of Utah, have undertaken a rigorous academic review of 15 years of hotline reporting information, including over 1.2 million records of internal reports made by employees in 936 publicly-traded companies in the US.
In the study, internal reports are defined as those directed to the organisation’s management, including those made to independently-managed ethics hotlines, while external reports are defined as those made to regulators or other agencies. The anonymized data was obtained from NAVEX Global, a major US-based provider of whistleblower hotline and incident management systems.
If you would like to read the full study, refer to Stubben and Welch’s full paper, ‘Evidence on the Use and Efficacy of Internal Whistleblowing Systems’, published in October 2018. For a highlights version published in Harvard Business Review in November 2018, see ‘Research: Whistleblowers Are a Sign of Healthy Companies’.
Organisations with strong whistleblower systems were found to be more profitable and more productive as measured by return on assets, had fewer material lawsuits which were settled at lower cost, and had fewer reports made by insiders to regulatory agencies and other authorities.
In other words, increased whistleblower activity does not necessarily mean that your organisation has more problems than others. Here are our three favourite quotes from Stubben and Welch’s original paper and the HBR summary:
‘Our analysis revealed that whistleblowers—and large numbers of them—are crucial to keeping firms healthy and that functioning internal hotlines are of paramount importance to business goals including profitability.’
‘…high usage is more often a sign of a healthy culture of open communication between employees and management than a harbinger of real trouble. After all, all large organizations face a large amount of common, unavoidable, and unobserved problems. Internal reporting systems simply make those problems visible to management.’
‘…companies with fully implemented, actively advertised, and widely used internal WB systems benefit from a flow of information from employees, thus being in a position to more quickly identify and rectify problems before they become larger and most costly to the company.’
The study clearly shows that few or no reports may not mean there is nothing to report. Rather it can indicate a lack of trust in management, poor awareness of or lack of confidence in the whistleblowing channel and perhaps worst of all, employee disengagement and lack of care for the employer’s best interest.
Latest AEPF Study: Even your professional staff want an anonymous reporting facility
The Anti-Intimidation and Ethical Practices Forum (AEPF) is a collaboration of six South African professional bodies, the institutes of Chartered Accountants (SAICA), Directors (IOD), Internal Auditors (IIA), Professional Accountants (SAIPA), Risk Management (IRMSA) and the Association of Certified Fraud Examiners (ACFE), as well as The Ethics Institute and Corruption Watch.
The AEPF’s aim is to support professionals working in auditing, accounting, business, governance, and risk management, who increasingly face the prospect of intimidation when responding to and reporting corruption in the workplace. Of the many interesting findings in the AEPF 2018 Ethical Practices Survey, based on responses by 1900 South African professionals, here’s one that stands out:
Fifty-six percent (56%) of the professionals surveyed agreed or strongly agreed that they would only report unethical conduct in their organisation if they could remain anonymous. Only 21% reported that they disagreed or strongly disagreed that they needed an anonymous channel, while the remaining 23% did not take a clear position on the question.
This means we are wrong to assume that if these key specialists are not speaking up that there is nothing on their minds. An ethics hotline offering complete confidentiality is needed if you want to increase the likelihood that those closest to your business finances will raise a flag.
Thinking of trying to identify the source of an anonymous report? A cautionary tale…
When the Barclays PLC board in the UK received an anonymous letter from New York, claiming that Group Chief Executive Jes Staley had exerted inappropriate influence on a recruitment process, Staley tasked Barclays security with unmasking the whistleblower. The transatlantic investigation that followed came to the attention of regulators in the US and the UK who take a poor view of whistleblower intimidation.
The UK Financial Conduct Authority responded by instituting an oversight regime on Barclays’ management of its whistleblowing programme and by issuing Staley himself with a large fine. US regulators in turn fined both Barclays and its New York subsidiary. Barclays issued Staley with a formal warning and docked a substantial amount from his variable pay.
The consequences of Staley’s actions are being noted in boardrooms the world over. We recommend that your whistleblowing policy advises against threatening or attempting to unmask employees who make use of anonymous channels.
If you would like to contact Whistle Blowers, we welcome your comments and queries. You can refer these to our director Dale Horne, at firstname.lastname@example.org.
Visit https://www.whistleblowing.co.za/ for an overview of our service, and to learn why we are a preferred ethics hotline provider in over 30 countries and on six continents.