Protecting whistleblowers: Creating the optimal environment

Legal protections for whistleblowers

Since 1 July 2019, new whistleblowing provisions under Part 9.4AAA of the Corporations Act 2001 (Corporations Act) mean that for every type of company and body corporate in Australia:

• eligible whistleblowers now include former employees, contractors and unpaid workers
• anonymous disclosures are protected
• requirements for ‘good faith’ have been replaced with a test of reasonable suspicion
• categories of wrongdoing and detriment have been greatly widened
• a whistleblower is protected from any criminal, civil or administrative liability
• uncapped compensation rights attach to any person who is made to suffer for the reason of the whistleblower disclosure
• a whistleblower need only ‘point to evidence that suggests a reasonable possibility’ of this, before the company has to prove otherwise (s 1317AD(2B).

These provisions allow the Corporations Act to be more effective, and organisations face serious consequences for failing to listen to employees and other eligible whistleblowers who speak up.

Corporations Act policy requirements

On top of this, from 1 January 2020 the Corporations Act will require all public and large companies to implement their own whistleblowing policy, with mandatory inclusions covering

1. the protections available to whistleblowers in the company, and under the Act
2. whom protected disclosures may be made to, and how
3. how the company will support whistleblowers and protect them from detriment
4. how the company will investigate disclosures
5. how the company will ensure fair treatment of employees to whom disclosures relate
6. how the policy will be made available to officers and employees (s 1317AI(5)).

Creating the environment for effective outcome

Given these historic new policy requirements, this article provides some practical tips for creating a corporate environment that offers effective outcomes for the whistleblower and the organisation. These tips come off the back of the recently released Clean as a whistle: a five step guide to better whistleblowing policy and practice in business and government¹.

The product of the world’s largest research project into the management of whistleblowing in public and private sector organisations, this new guide helps identify the factors that best support whistleblowers. In addition to the importance of having good policies on paper, it shows good investigation processes and positive and responsive management attitudes to reporting play a huge difference in outcomes.

On average, 42 per cent of over 5,000 whistleblowers in our study reported having received poor treatment by management or their colleagues or both; and managers and governance professionals described a similar proportion (34 per cent). But even more suffer detrimental outcomes, even when not badly treated — for example, simply through stress, isolation or reputational damage.

Yet despite these negative experiences, the vast bulk of whistleblowing leads to positive or necessary outcomes for organisations, in terms of wrongdoing identified and dealt with, or other organisational reforms and improvements. And often, organisations do manage to support at least some of their whistleblowers well.

So what are the factors consistent with achieving these better outcomes?

Whistleblowing policy factors

Our study looked at three groups of factors: the organisation’s whistleblowing policies, the actual processes used in practice to respond to reports of wrongdoing, and the general ethical cultural factors at play in the organisation. These factors all play a role in creating effective outcomes, however, one factor alone is not enough, rather there must be a culmination of the factors.

Not all whistleblowing policies are created equally. Our research found that written whistleblowing policies can be a cornerstone of creating effective outcomes for both whistleblowers and their organisations, but very often they currently make no difference — most likely because they are not actually implemented.

The quality of the written policy only tended to become an identifiable factor in better outcomes for organisations which report a culture of unethical behaviour — apparently, in these contexts, people do fall back on the written policy to help secure better outcomes in terms of support and protection than would otherwise be obtained.

Whistleblowing processes

The key is what actually happens in practice, irrespective of what procedure the company thinks it has.

We found three key whistleblowing processes were central to positive whistleblowing outcomes for organisations: procedural justice in their investigations, the level of support provided to reporters by managers and the organisation, and level of interpersonal justice shown by the organisation towards the reporter.

These processes were strongly linked to positive organisational reforms flowing from reports of wrongdoing. But even more importantly, where support was offered to the whistleblower — even though this is not currently being done vigorously or widely — it plays a huge and effective role in containing poor treatment, repercussions and poor outcomes.

Support varied across both practical and emotional support, from intervention in workplace problems to adjustments to the workplace, or access to legal services. But most support was offered by immediate and line managers — creating a whole opportunity for more organisations to do better, by also offering more independent, reliable means of support even in more difficult cases.

Organisational justice is also critically important. Procedural justice, the consistent application of procedures and interpersonal justice, centred around the respect and treatment of the whistleblower, were both strongly related to achieving better outcomes.

State of the ethical culture

If written policies are currently not showing up as key, then how are some organisations and managers achieving these better outcomes? Our research indicates it is because these real-life processes for delivering justice and support are embedded in the management and working culture of those organisations, much more than in the many cases where outcomes are poor.

Awareness of the whistleblowing processes of the organisation is key. Knowing what support for whistleblowers is provided, and knowing how to access this support are some of the strongest predictors that a whistleblower will feel well-treated. Similarly, half of all employees were concerned that they did not know if their report was investigated or did not believe that it was — but where staff knew what happened, the outcomes were better.

Most importantly of all, senior management ethical leadership and ethical behaviour reinforcement in the workplace are both playing a central role in the quality of investigations and the level of whistleblower support — and in achieving better outcomes.

This provides good reason to believe that both are needed. Even if the ethical role modelling of senior managers is strong (talking and even walking the talk), good outcomes are not guaranteed unless ethical behaviour is also reinforced in the immediate workplace experienced by staff, and in the conduct and atmosphere created by more junior managers.

In order to create an environment that creates positive outcomes, ethical behaviours must be perceived to be reinforced in one’s immediate work area, ethical conduct must become a cultural norm, and unethical behaviour should not be tolerated.

Confidence in the organisation’s responsiveness to whistleblowing is strongly associated with better outcomes, but on the other hand, low ethical culture leads to increases in unethical behaviour, clearly discourages reporting, and most of all means that organisations are not getting the benefit of whistleblowing when it occurs. For them, whistleblowing is just trouble and conflict. Whereas for many others, where all these factors come into play, whistleblowing is clearly being grasped as an opportunity — to show justice towards employees, learn from mistakes or failures, achieve better practice, and move on.

Key actions for business and government

Clean as a whistle: a five step guide to better whistleblowing policy and practice in business and government sets out the wide range of practice actions organisations can take to improve organisational and whistleblower outcomes — from the way they assess and manage staff disclosures at the start, and assess and manage risks to reporters, through to their support strategies and the level of independence and strength of board oversight they give their whistleblowing program.

More law reform is likely, especially for the public sector which now needs to catch up with the new Corporations Act standards. And more seamless, consistent rules across all sectors will help see whistleblower protection dovetail more effectively with other areas of good governance and human resource management, and be accepted into the core business of organisations.

For now, the research confirms that making the most of whistleblowing means some hard choices to ensure effective implementation of policies, processes and ethical behaviour within the organisation, together with stakeholder understanding of roles and responsibilities in the whistleblowing process. But where this is achieved, we know that encouraging staff to speak up about wrongdoing, and supporting them when they do, is not only essential for good governance but actually leads to better organisational outcomes.