Whistleblowing has come a long way in the last decade. And there's a long way still to go.
Attitudes to whistleblowing have slowly but surely transformed over recent years. When CEO and whistleblower Michael Woodford exposed the accounting scandal at medical equipment and camera business Olympus, one of Japanese largest corporates, he was considered by some to be a traitor – and not just by those inside the company.1
At the time, his concerns were not just for his career, but his safety. As he says, people have been killed for a lot less than the US$1.7 billion at the heart of the scandal. "I was scared," he has recalled. "Wouldn't you be?"2
Today much has changed. Woodford now has a TV deal,3 and the role of whistleblowers is recognized and protected by governments, regulators and businesses alike. We've come a long way. Global rules on whistleblowing are gradually beginning to show signs of convergence, with greater legal protection and a recognition of their value in promoting compliance and identifying abuses being either implemented or proposed in recent years in several major economies, including the U.S., UK, China and Australia to name but a few.
But it would be rash to think that changes to rules and protections are done. In the UK for example, the number of whistleblowing cases in asset managers in 2017 was 21, its lowest in years and just half the number there were in 2014. And the total number of reports received by the FCA is down, too – 1,047 last year, from a high of 1,360 in 2014.4 Whilst there may be positive reasons for some of this decline, possibly including firms' own internal processes improving and underlying issues being fixed, the direction of travel feels slightly at odds with whistleblowing becoming culturally accepted and encouraged.
A big sacrifice
There's speculation that some recent decisions by regulators have undermined the message of support for whistleblowing, which was originally conveyed in the UK's 2015 shakeup of the area, led by both the PRA and FCA that required firms to put in place adequate policies on dealing with whistleblowers and a senior manager to take responsibility for overseeing them. The rules aimed "to encourage a culture in which individuals working in the industry feel comfortable raising concerns and challenge poor practice and behaviour".5
Critics, and a number of high profile whistleblowers themselves, point out that there is still some way to go before those who raise the most serious of concerns can do so without fear of losing their careers.6
The problem is more fundamental, however. Partly, it is that there are still cultural barriers that discourage "disloyalty" and view whistleblowing with suspicion. Mostly, it is that the cost for many whistleblowers is still too high, and the benefits unclear. Many who whistleblow may want to do the right thing, but they are measuring that against massive uncertainty around the impact on their career, their personal life and financial future. How many are willing to put their neck on the line for the greater good?
Since 2012, U.S. regulators have addressed this with financial incentives for whistleblowers. Other regulators have not, so far, followed suit. The FCA considered the question of financial rewards in 2014, only to reject the idea over doubts about evidence for its effectiveness and concerns over the costs associated with incentive schemes.7 Instead, its most recent development has been to insist on each firm appointing a senior manager as a "whistleblowers' champion" – part of the SMCR that entered into force in the UK banking sector in September 2016.8
Time will tell whether this proves enough to reverse the trend of declining whistleblowing numbers. The early indications, however, are not encouraging. Where firms can focus their efforts in the meantime is to review their internal whistleblowing arrangements to ensure they are compliant, fit for purpose and fully supported by senior management and the Board.
Equally, management can set a positive tone from the top, fostering an organizational culture where whistleblowers feel empowered and confident to come forward without fear of repercussions, and where whistleblowers are viewed as acting in the best interest of the company and the industry.
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