Elizabeth Ticehurst and Hoda Nahlous investigate what part a ‘speaking up’ and ‘whistleblowing’ culture plays in rebuilding corporate trust.

 

In this current era where trust in corporations is low, there is demand for organisations to develop an ethical corporate culture to control and minimise, to the extent possible, corporate misconduct. As a result, organisations are focusing on better understanding and improving their internal culture and practices. As part of this process, an effective ‘speak up’ and ‘whistleblower’ culture is becoming a prominent benchmark in measuring whether an organisation has a good corporate culture.

The benefits of ‘speaking up’

An effective ‘speak up’ culture is one where employees are encouraged to raise concerns and feel comfortable in doing so without fear of persecution. This requires the board and senior executives of the organisation to clearly articulate to staff what is ‘good’ corporate behaviour, so that ‘bad’ corporate behaviour can be easily identified. In addition, it also requires an organisation’s leaders to encourage a culture of dialogue and openness so that employees feel that management is trustworthy, accessible and well-equipped to handle their concerns.

If ‘speaking up’ is embedded into an organisation’s corporate culture and is effectively managed, then it provides opportunity for the organisation to deal with employee concerns in advance of these concerns escalating into any form of crisis.

What is a ‘whistleblower’?

‘Speaking up’ is sometimes fused with the term ‘whistleblowing’. Although a ‘speak up’ culture must also be a culture that encourages whistleblowing, ‘whistleblowing’ has specific meaning under law. In particular, ‘speaking up’ often involves an employee raising concerns with respect to their own personal circumstances within the organisation. By contrast, a ‘whistleblower’ is an insider within an organisation, who reports misconduct or dishonest or illegal activity that has occurred within that same organisation.

Whistleblowing has often been associated with negative connotations, most prominently that it is used as a tool by aggrieved employees to make a ‘nasty’ complaint against particular individuals, or that it is an act of disloyalty to the organisations (or ‘backstabbing’ of any relevant individuals involved in the whistleblower disclosure).  However, effective whistleblowing is key to eliciting trust among employees as it demonstrates that the organisation actually wants to know and cares about any misconduct or dishonest or illegal activity occurring within the organisation.

In any case, the proposed amendments to the whistleblower laws look to enforce the implementation by certain organisations of internal whistleblower policies, and to further strengthen whistleblower protections.

The law

Currently, a whistleblower is protected under law if they:

• are a current officer, employee, contractor (or employee of a contractor) of the company that they are making the disclosure about;
• disclose the information to any of: the company’s auditor (or a member of the audit team); a director, secretary or senior manager of the company, or a person authorised by the company to receive whistleblower disclosure; or ASIC;
• provide their name to the person or authority that they have made the disclosure to;
• have reasonable grounds to suspect a breach by the subject of their disclosure; and
• make the disclosure in good faith.

Certain protections are afforded to whistleblowers under law, including protection of information provided by the whistleblower and protection for whistleblowers against litigation and from victimisation.

Proposed changes to whistleblower laws

Late last year, the federal government introduced a Bill aimed at improving protection for whistleblowers in the corporate, financial, credit and tax sectors. The Bill proposes various changes to the current whistleblower protection laws, including a requirement that public companies and large private companies implement internal whistleblower policies. Notably, it also proposes extending protection to a whistleblower who makes a report to a journalist or politician in circumstances where they reasonably believe there is an imminent risk of serious harm or danger to public health or safety, or to the ‘financial system’, if the information is not acted upon immediately, and a “reasonable period” has passed since the whistleblower first made a protected disclosure.

The whisleblower’s right to confidentiality is a key feature of the Bill. If enacted, these rules would potentially lead to significant civil penalties, and even criminal charges, for individuals and entities who breach the confidentiality of a whistleblower, or who engage in detrimental conduct towards an individual because that person has been, or is suspected of being, a whistleblower.

The changes were to take effect from 1 July 2018, however, the Bill is still pending in Parliament at the time of writing this article (August 2018). In any case, there is an expectation that most (if not all) of the proposed changes will be passed.

 

Hoda Nahlous is Director and Elizabeth Ticehurst is special counsel – Employment at KPMG Law.