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Corporate whistleblowers are rarely celebrated. More often, they are considered internal enemies. It is no wonder in the UK that insiders are pushing to create independent institutions to have clearer and safer routes to disclose fraud.
The Private Members bill, which is scheduled for a second reading at the Commons later this month, seeks to establish a whistleblower office to centralize and trinase disclosures, implement standards, maintain anonymity, and encourage relief for those taking personal and professional risks.
The bill has cross-party support, but there are no real champions in the government. Workers who are already facing criticism of anti-business policies are reluctant to support everything they can frame as introducing more deficits. As one FTSE chair said, this mere idea of this body screams “more regulations, costs, time.”
But it is clear in the case of reform. From post office horizon scandals to Barclays whistleblowing probes, there are plenty of famous examples of breakdowns. “We have an endless list,” says Barones Susan Kramer, who is seeking support for the bill. The poor handling of whistleblower disclosures is as problematic as the corporate world. “From contaminated blood scandals to Grenfell, these could have been caught or stopped early.
For businesses, reputational risks currently span the campaigns of perjuring information, including employee activity and executives’ personal behavior. It is a strategic need for large companies to have an appropriate system for disclosure in particular.
However, the path to reporting fraud is not suitable for purpose. In many cases, staff bypass internal hotlines and suspect interference from leaders overseeing fraud. If disclosure is made, restraint or retaliation may continue. Lauren Branston of the Institute of Business Ethics said the lack of a company’s “Speak Up” culture usually indicates a wider problem.
A direct complaint with financial conduct authorities or serious fraud offices means whistleblowers have to navigate complex authorities networks. These organizations offer little in ways of protection, transparency and meaningful engagement. The FCA itself has been criticized for mishandling complaints from employees. Those who look to the media may have tried other methods first.
A fundamental flaw in the UK regime is that whistleblowers have only true protections under the employment law. Georgina Halford-Hall, CEO of Advocacy Group Whistleblowersuk, says the focus will soon change not just to the seriousness of what they are exposed to, but to individuals who are trying to prove the harm they have suffered. “Everyone must effectively become a petitioner in the employment court,” she says. Whistleblowers are responsible for speaking out as they navigate the court system that appears to be stacked against them. Most of the back outs.
In contrast to the US, the Securities and Exchange Commission institutionalized whistleblowing as a pillar of its execution. It offers anonymity, legal protection and significant financial compensation. A whistleblower can receive up to 30% of the financial sanctions arising from tips if the fine exceeds $1 million. The SEC has paid over $2 billion since the program was launched in 2011.
Skeptics argue that financial incentives inflict small frustration on UK regulators. Perhaps the SEC will specifically invite information from senior employees who will otherwise not see the light of day. Even UK tax authorities recognize the value of the model by HMRC, and recently introduced more profitable compensation for whistleblowers.
Executives often say they welcome whistleblowers. However, in reality, the exposure that such disclosures bring is rarely accepted. A scandal that invades public views can wipe out billions of dollars from market value, attract regulatory scrutiny and damage reputation. From Tesco accounting troubles to the explosion of Wylecards – they all came with warnings of ignored or false false whistleblowers.
If managed well, whistleblowing can raise standards and avoid disasters. The flip side is to reveal how vulnerable the company’s internal structure is. It is clear that in the UK the whistleblowing process requires reform. It does not rule out the risks of companies, but it will raise the standard as to how they operate.
anjli.raval@ft.com
