Should Aussies become bounty hunters?

Posted by on 09/05/2017

Providing whistleblowers with a bounty or reward could lead to a vigilante culture and to people exploiting whistleblowing for financial gain rather than a response to perceived or actual wrongdoings.

That is the view of Governance Institute which appeared before the Parliamentary Joint Committee on Corporations and Financial Services Inquiry into Whistleblower Protections in Canberra in April.

The Inquiry discussed incentivising whistleblowers to reveal wrongdoings by giving them a percentage of the unveiled fraud or of the penalties imposed.

Those promoting these kinds of incentives suggest that Australia could follow US schemes such as the False Claims Act and the Dodd-Frank reforms to the Securities and Exchange Commission’s (SEC) powers.

A whistleblower in the US can receive ten to 30 per cent of the penalty flowing from poor reported conduct and this can amount to millions of dollars.

Last month, for example, the SEC awarded nearly US$4 million to a US whistleblower who tipped it off with detailed and specific information about a serious misconduct and provided additional help during the ensuing investigation.

‘Whistleblowers with specialised experience or expertise can help us expend fewer resources in our investigations and bring enforcement actions more efficiently,’ explained Jane Norberg, chief of the SEC’s office of the Whistleblower.

Around US$153 million has now been awarded to the 43 eligible whistleblowers who voluntarily provided the SEC with original material that led to successful enforcement actions. These tipoffs have resulted in more than US$953 million in financial remedies against wrongdoers.

Governance Institute says it understands that whistleblowers can find it very difficult to secure employment after they leave the employer where they blew the whistle. As a result, a secure source of income can prove elusive.

‘Suffering financial and career penalties for whistleblowing clearly is a high price to pay and potentially a strong deterrent to whistleblowers coming forward. As such, we are also strong supporters of compensation,’ Governance Institute told the Parliamentary Joint Committee in its submission.

But its submission noted that A J Brown, Professor of Public Policy and Law at Griffith University’s Centre for Governance and Public Policy and the project leader of the world’s largest research project into whistleblowing, did not view the US schemes as compensation schemes.

Instead, Brown saw them as incentivisation schemes, which provided compensation as a by-product in the specific types of cases where they work. 

Governance Institute said it feared that these schemes could lead to situations where people exploited whistleblowing for personal gain rather than to address perceived or actual wrongdoing.

‘We are also concerned that the rewards witnessed in the US — some as high as US$20 million and US$30 million — can lead people to view these schemes as ‘get rich quick’ schemes,’ it said.

‘Governance Institute would be very concerned if a system was introduced that maximised the use of whistleblowing rather than the use of internal controls and processes to detect and prevent misconduct and illegal activity.’

Professor Brown has also noted that unlike the US, Australia already has a much stronger system of workplace law to help support a more comprehensive approach.

He believes the credible starting point is our systems of workplace health and safety. It recognises that all employers must protect and support those who disclose wrongdoing as an extension of their responsibilities to provide a safe working environment for all employees.

Return to News & updates


Calendar

View our calendar of events and short courses

Need to know more as soon as possible?

Acquire knowledge and skills


Resource

Access our publications and guides on governance and risk management issues

Interested in more detailed information?

Guidance from the leaders in governance


Become a subscriber

How will reform proposals affect your organisation?

Read the latest commentary on governance and risk management in Governance Institute’s journal