With corporate behaviour under renewed scrutiny as explanations are sought for the financial crisis, revelations have come to the surface about internal critics who warned about their employers’ activities but were ignored or, worse, sacked.

The UK’s Serious Fraud Office has now established a whistleblowers’ helpline for City workers worried about their employers. Should whistleblowing be encouraged? And if so, how can a company take note of grievances without encouraging malicious or groundless complaint that could threaten the company’s reputation?

Paul Moore
© Financial Times

THE WHISTLEBLOWER
Paul Moore
You can have the best governance processes in the world but if they are carried out in a culture of greed and unethical behaviour or by leaders who are resistant to challenges, they will fail.

If businesses really care about wrongdoing, the current internal whistleblowing procedures can work. If not, they don’t and they won’t. Although genuine whistleblowing starts with an issue of conscience, if the internal procedures fail, the personal risk involved in going public almost always results in lawyers followed by compromise and capitulation.

Virtually all high-profile whistleblowing claims are settled. The wrongdoers spend shareholders’ money, the whistleblower signs the “gagging order” and a lot of serious wrongdoing is swept under the carpet.

Good firms should put even more effort into developing a culture of openness, ethics and excellence in which fear, blame and excessive pride have no part. This will include genuine whistleblowing procedures and living by the motto “Feedback is the Breakfast of Champions”.

For those firms who still think making money by any means is OK we must strengthen policies on governance, ethics, risk management and compliance. This means stronger internal and external regulatory support.

The writer is the former head of group regulatory risk at HBOS

Cathy James
© Financial Times

THE WHISTLEBLOWER ADVISER
Cathy James
Enlightened organisations embrace whistleblowing arrangements rather than see them as a threat. They enable the proper communication of information so that wrongdoing is not only detected but deterred.

Unless staff think it is safe to raise concern about misconduct internally, the likely result will be that they stay silent and so the risk to the organisation or public will not be addressed.

Alternatively, they will anonymously leak the information, encouraging a culture of sleaze where the perception of possible misconduct attracts as much if not more attention as proven malpractice. Organisations that face embarrassing disclosures should examine whether an internal disclosure could have been made, and if not, why not.

The unfortunate outcome of media coverage is the spotlight falls on the whistleblower. This has a chilling effect on potential whistleblowers. Robust whistleblowing arrangements offer staff safe internal and external options – helping to prevent this outcome.

The writer is acting director of Public Concern at Work, a charity supporting whistleblowers

Anthony Evans
© Financial Times

THE ACADEMIC
Anthony Evans
Whistleblowing reveals uncomfortable information that otherwise wouldn’t be known. A company’s health depends on such information coming to light.

Markets are a critical mechanism to allow information-holders to express their judgment. Indeed, during the financial crisis it was the short sellers, trading on their concerns, that were proven correct, and the regulators who failed.

Companies should adopt their own internal prediction markets – betting markets where the outcomes are specific to that company. For example, an employee can bet on whether their bosses’ latest idea will actually deliver the increase in sales they have promised, and this will establish a market “price” which can be used by management.

Research suggests that corporate information can be more accurate when channelled through markets than alternatives like focus groups or chief executives’ whims. If an employee has misgivings about whether their boss’s latest idea will deliver, the internal market will provide a warning sign.

The writer is assistant professor of economics at ESCP-EAP European School of Management

Jeremy Summers
© Financial Times

THE LAWYER
Jeremy Summers

The Serious Fraud Office and Financial Services Authority are both taking a more robust approach to alleged criminality in the business world. Promoting a new culture of corporate and individual responsibility is an important part of this strategy. When investigating companies, enforcement agencies are increasingly looking at the systems in place to prevent irregular activity and the presence of an effective whistleblowing procedure is a very important component to any such system. Companies that work with the authorities to address such concerns may be treated more leniently.

Businesses may not readily embrace the possibility of whistleblowing, particularly on the part of disgruntled former employees. But the risks of not having a system in place could greatly outweigh the perceived disadvantages of ensuring valid concerns are properly investigated.

Indeed the lack of adequate compliance systems is likely to weigh heavily on an investigator deciding whether to prosecute a company.

The writer is a partner in the regulatory investigations team at Russell Jones & Walker

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