Whistleblowers: why they’re important and how to protect them

Almost every major scandal in modern corporate history starts with whistleblowers - someone who sees a situation and says, “this is not right; I’m going to say something.” So, how should boards and executives ensure they listen to these people, handle their information correctly, and keep them safe? Whistleblowers are widespread This month, at a gathering of 200 business professionals in Ireland, it emerged that 1 in 4 of their firms had received a protected disclosure notice about serious wrongdoing in the past three years. Furthermore, 85% said white-collar crime was not tackled vigorously in Ireland. Although a small island, Ireland remains an important European financial centre, so these latest statistics are hardly encouraging. They also emphasise the importance of the whistleblowing process and how easy it is to have a corporate environment that doesn’t support it. What does whistleblowing involve? A whistleblower is a person who reveals information about a company's perceived illicit action or fraud to authorities. Usually, these people are (former) employees. Whistleblowing can either be: Internal, where a person would divulge information to more senior staff. External, where a person would divulge information to authorities or the media, often because they have little to no faith that the organisation will adequately address the problem internally. Naturally, a board will deal more with the internal side of whistleblowing. When the revelations are external, the board’s priority is now reputational risk in the face of a PR disaster. Are there laws protecting whistleblowers? Yes. It varies between jurisdictions, but many have adopted laws specifically for this purpose. Generally, they cover processes by which whistleblowers divulge information and establish protocols to protect them from any unfair repercussions. As a board member, you should know the law in your country. The US has extensive whistleblower legislation, as does the UK and EU (primarily through a 2019 directive, although some member states had laws before it was passed). For boards, these laws generally mean an increased legal responsibility, compelling them to play their part when someone comes forward with sensitive information. But like anything of this nature, boards shouldn’t only act because the law requires it; they should be ahead of the game, ensuring a seamless process to protect individuals and the company. Why should boards care about whistleblowers? A board’s primary function is to ensure its company’s continued success and to do what it feels is in the shareholders’ best interests. Whistleblowing is part of that responsibility because, by its very nature, it highlights risks to that success - risks which could anger shareholders. Boards should pay close attention to whistleblowers for the following reasons: Their revelation could stop a persistent problem in its tracks, preventing it from causing even further chaos if, for example, it came out more publicly in 12 months. They provide unique insight into something specific. As a board member, you might not have been aware of the context, the people involved, or the ramifications. So whether the revelation leads anywhere or not, you now have more knowledge about what’s going on at more junior levels. Usually, coming forward means the whistleblowers trust leadership to act, so embrace it. It feeds a positive culture of honesty within the organisation. What is a board’s responsibility to whistleblowers? When it comes to boards and whistleblowing, it’s all about policy. Having a whistleblowing policy in place means the entire organisation has a roadmap to follow. Without one, concerned employees would be unsure who to talk to and what they could say. Meanwhile, as soon as they heard something confidential, senior management would be uncertain about what to do next. The board’s role involves the following: Ensuring a whistleblower protocol is in place, setting a staged process by which people can make reports and feel safe knowing there won’t be repercussions. Ensuring the protocol is common knowledge amongst all employees. It is no good to have one that sits at the back of a “policies and procedures” handbook, never consulted, never used. Fostering an open, honest culture from the top down. Boards should make it clear to shareholders, executives and other management that the company encourages honesty. Listening. When information comes your way, take it all in. Sometimes it can be hard to stomach, but if you don’t deal with it now, there will likely be more significant problems down the line. In summary Whistleblowers should be valued, despite the potential bombshells they could drop on organisational leadership. For boards, it is crucial to have a policy in place, so an internal grievance doesn’t become an external PR disaster. The latest figures from Ireland suggest whistleblowing may be more common than you might think, so if and when it happens, follow the protocol, listen, and engage. Diploma in Corporate Governance Enhance your career as a director. Develop the practical knowledge, insight and global mindset to be a great board director. Learn more Diploma in ESG As a leader in ESG, you need to anticipate investors’ questions before they are asked, manage the associated risks and implement an appropriate ESG framework. https://cdn1.thecorporategovernanceinstitute.com/wp-content/uploads/2022/08/18133835/Certificates-Website-Section-Mobile-3.pngLearn more

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