Companies too complacent about whistleblowing: Freshfields

Singapore

DESPITE whistleblowing gaining greater acceptance as a corporate risk management policy these days, many companies are still not giving the practice due attention - placing them at risk of criminal sanctions and reputational damage, says a new global study by international law firm Freshfields Bruckhaus Deringer.

Of the over 2,500 senior and middle managers it surveyed around the world, almost one-quarter (24.1 per cent) said that their company did not have a whistleblowing policy in place, while close to one-fifth said their company's policy is not adequately communicated to employees.

Four in ten say that their organisation discourages or actively discourages whistleblowing, while 8.6 per cent said whistleblowing is never mentioned in the workplace because it is not something their company wants to encourage.

As a result, 37 per cent believe their senior management would treat them less favourably or look to terminate their employment if they blew the whistle.

"Despite a recent spate of high-profile whistleblowers and an increase in the number of instances leading to global investigations and fines, companies are ill-prepared to deal with concerns raised by their employees," Freshfields Singapore partner Stephen Revell said.

Those businesses without effective procedures are putting themselves at risk of more than criminal sanctions, even in those countries without a strong whistleblowing culture.

"In recent years, a lot of the largest fines handed down by regulators around the world have come about because of an internal whistleblower. However, many companies are too slow to react to the trend. Corporates need to adopt internal reporting systems to recognise and manage these matters more effectively," he added.

Singapore companies, in particular, have much work ahead of them in this respect. Freshfields employment partner Kathleen Healy said that while a growing number of businesses here are taking an interest in whistleblowing policies, their uptake and application is still very low.

"It's not enough to have a whistleblowing policy in place if that policy gathers dust and employees don't know where to find it. Worse still are those situations where employees sense a company culture that goes against speaking up about wrongdoing.

"We have seen a number of instances around the world where employees have gone directly to regulators because they felt it would put their jobs in jeopardy if they raised an issue internally," she said.

Freshfields' study reported that 7.1 per cent of those polled around the world said that whistleblowing was a priority for their organisation 12 months ago, and even fewer - 6.5 per cent - said that it was a current priority. The top concerns relate to strategic growth and revenue generation, which 42.3 per cent of respondents said was a current priority.

Caroline Stroud, global head of Freshfields' employment, pensions and benefits (EPB) practice, commented, "The lack of priority given to whistleblowing suggests businesses are not aware of the potential damage to their operations and reputation if these issues are not identified and acted on early enough."

Boris Dzida, an EPB partner in Freshfields' Hamburg office, added: "It's really surprising that it's such a low priority. You only need to consider the consequences of a bribery and corruption problem, where fines can run into tens, possibly hundreds, of millions of dollars, to realise how important this is."

Mr Revell believes that robust whistleblowing policies bolster a company's argument that it has implemented adequate procedures to guard against bribery. Those also make it more likely that concerns will be raised internally rather than have them fall under the scrutiny of external regulators or damage a company's reputation.

"As regulators throughout South-east Asia become more sophisticated and closely integrated, it will be vital that companies can demonstrate sound internal processes. A rigorous whistleblower procedure needs to be a big part of the risk agenda for every company in this market," he said.

Ms Healy added, "We are seeing more willingness from businesses in the region to talk about whistleblowing, but it is a slow process and there is still a lot of complacency in the market.

"According to our data, half of all management level employees will take their concerns outside a company if they're unhappy with their company's initial response. That alone should place this item squarely on the boardroom agenda."