Whistleblowers: the directors' ally

WHETHER one likes it or not, misconduct by employees (including fraud) can happen in any company. It is difficult for directors to be on top of the problem areas, particularly when there is collusion. Help is at hand, in some circumstances, from those who are close to the action and report the irregularities - namely the whistleblowers.

Whistleblowing is the reporting of misconduct of an employee. The reporting could be made by another employee or other stakeholders of the organisation, such as suppliers and customers. Misconduct can range from minor issues to complex and major frauds.

The corporate financial scandals of Enron and WorldCom were respectively exposed by Sherron Watkins and Cynthia Cooper, two courageous employees who were both subsequently named Time's "Persons of the Year 2002". A more recent headline case is the exposure by chief executive officer Michael Woodford of Olympus' loss-hiding arrangements, one of the biggest and longest-running in Japanese corporate history.