The whistle is blowing

Posted by on 13/12/2016

After years of talk and any number of parliamentary inquiries into the need for reform of corporate whistleblowing, action is finally replacing words. The Australian Government has made commitments to extend the whistleblower protections in the Fair Work (Registered Organisations) Bill to the private sector, support a parliamentary inquiry into whistleblower laws, set up an ‘expert advisory panel’ to develop draft legislation to act on the inquiry’s report and introduce legislation into parliament by December 2017. An ongoing Senate Committee is folding its inquiry into the one that has just been established, while the preliminary results of the Whistling While They Work 2 project have been released, providing evidence of what needs to change and how to improve it.

The Fair Work (Registered Organisations) Amendment Bill 2014 was passed in the Senate on 22 November, after amendments were introduced by the Xenophon team. It provides for whistleblower protections for those disclosing wrongdoing in registered organisations (unions and employer associations), including making it a criminal offence to take reprisals against a whistleblower, and also provides for compensation for whistleblowers. A broader category of person can make protected disclosures (such as former employees and those contracting with the organisation) and a person is protected in relation to a wider type of conduct (including threatening conduct or omissions). The bill provides for more remedies (including injunctions and apologies) and disclosures are required to be investigated by relevant authorities (usually within 90 days, subject to extension).

While the bill applies only to registered organisations, the Australian Government has made a series of commitments, one of which has already come to pass. Its support for a parliamentary inquiry so that the protections in the bill can be extended across the corporate and public sectors has already seen terms of reference passed to the Parliamentary Joint Committee on Corporations and Financial Services for public consultation. Submissions are due in February 2017. Other commitments include that the government will:

  • ensure that compensation for whistleblowers will be part of the inquiry
  • make sure the inquiry reports by the end of June 2017
  • set up an ‘expert advisory panel’ to develop draft legislation to act on the report
  • introduce legislation into parliament by December 2017 with support of, at a minimum, the standards now set in the bill
  • commit to support enhancements to whistleblower protections and commit to a parliamentary vote on the legislation no later than 30 June 2018.

Meanwhile, the preliminary findings of the Whistling While They Work 2 project, led by Professor AJ Brown, have been released. It is a snapshot of whistleblowing processes and procedures across 702 public sector, business and not-for-profit organisations from Australia and New Zealand confirming ‘the burning need for comprehensive but well-informed reform of the nation's whistleblowing laws'.

The research is the largest cross-section of organisations to participate in a single survey. It is also the first research to systematically compare self-reported evidence on the state of whistleblowing processes across these different sectors. The preliminary findings clearly demonstrate that there is widespread concern that there is not sufficient protection for whistleblowers, with 38 per cent, including 49 per cent of businesses and 51 per cent of not-for-profit organisations indicating that they did not assess the risks of detrimental impacts that staff might experience from raising wrongdoing concerns, either at all or until problems began to arise. And less than half of businesses (39 per cent) and one-third of not-for-profit organisations (32 per cent) provide access to a management-designated support person inside the organisation as part of their response to staff who raise wrongdoing concerns. Overall, 33 per cent of businesses and 34 per cent of not-for-profit organisations did not currently have any strategy, program or process for delivering support and protection to staff who raise concerns.

Whistleblowers can find it very difficult to secure employment after they leave the employer where they blew the whistle, and a secure source of income can prove elusive. Suffering financial and career penalties for whistleblowing is a high price to pay and potentially a strong deterrent to whistleblowers coming forward. The research results show that this is clearly an area that needs work, with only 17 per cent of businesses and 13 per cent of not-for-profit organisations having any mechanisms for ensuring adequate compensation or restitution if staff experience reprisals or other detrimental impacts after raising wrongdoing concerns. With compensation as a key issue in the Senate inquiry terms of reference, the research supports how essential it is that this area of whistleblower protection is addressed.

There has been a lot of talk in the media about providing financial rewards to whistleblowers, with reference frequently made to the USA where such rewards exist. But the US has bounty schemes, where whistleblowers are incentivised to reveal wrongdoing by taking or initiating actions which lead to them recovering a percentage of the fraud revealed, or of the penalties imposed. These are not compensation schemes and can lead to an approach of exploiting whistleblowing for financial gain rather than to address perceived or actual wrongdoing — a whistleblower could let the misconduct continue until such time as the financial rewards for disclosing the wrongdoing are in the millions.

The emphasis should be on improving internal processes and controls to prevent misconduct rather than incentivising whistleblowing. Compensation only comes into play when these fail or aren’t appropriate. While as a matter of good corporate governance, many organisations are already putting in place systems for internal disclosure, nobody knows what is or is not working in any whistleblowing process or system. The research shows that ‘The vast bulk of organisations who responded to the survey reported a wide range of processes for encouraging and responding to wrongdoing concerns from staff… 89.3 per cent of all organisations indicated they had formal, written whistleblowing procedures or policies setting out these processes’. The report also states that ’90 per cent of organisations reported they had processes for ensuring appropriate investigations or management actions were undertaken’. But the major gap is that for company CEOs, company secretaries and directors, there is little real guidance on what best practice whistleblowing programs look like or which internal disclosure procedures — if any — are working.

The second stage of the research is focused on this gap, consisting of a more in-depth survey of staff, managers and systems. The final results should provide the data to set the framework for a robust and independent whistleblowing process that makes employees feel comfortable about fearlessly reporting wrongdoing.

With Professor AJ Brown advising Senator Xenophon on whistleblowing reform, it is likely that the results of the research will inform any recommendations on legislative reform, which augurs well for evidence-based policy.

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