Whistling while you work: Building a new regime for protected disclosures

Happy employees whistle while they work.

So do the most deeply aggrieved, emotionally bruised and ethically exasperated, as it turns out. In the age of digital information and bulk data dumps, can your organisation afford not to have a comprehensive framework in place for managing protected disclosures?

The inaugural Whistleblowing Conference in Sydney today is exploring the latest research and legal developments in this critically important area.

We even got the lowdown on those elusive Australian law reforms ...

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IN AUSTRALIA'S sclerotic political climate, it's a brave person who sets deadlines for the passage of legislation. But the inimitable Professor AJ Brown, head of the Centre for Governance and Public Policy at Griffith University, is nailing his colours to the mast.

"I expect that Australia's whistleblower protection laws will be reintroduced to the Senate any day now," Professor Brown told a conference in Sydney this morning. "Australia needs to have these laws passed and implemented by this time next year."

It was a bold call from someone who is deeply passionate about the benefits of whistleblowing for public and private-sector organisations.

John Price, commissioner at the Australian Securities and Investments Commission (ASIC), is a little more measured. It comes with the job. But he too expects the laws will be reintroduced, with a number of major improvements, before the end of the year.

Australia is set to roll out a new regime to protect a broader range of whistleblowers, their immediate circle, anonymous informants and even former employees. And not before time.

"Robust whistleblowing processes are vital to the integrity and good governance of all organisations, as well as to society as a whole," Brown told more than 100 delegates at the inaugural Informa Whistleblowing Conference this morning.

"What we have right now is a historic opportunity."

Exploring the empirical data

Today the good Professor unveiled the results of a three-year study into whistleblowing in Australia and New Zealand. The research, entitled "Whistling While They Work 2", was funded by the Australian Research Council and 23 partners and supporters. It builds upon the original work undertaken in this area a decade earlier.

The research into whistleblowing programs found that most organisations are failing to protect people who report internal complaints. Surprisingly, the problem is evident across the public and private sectors in almost equal measure.

Four-fifths of whistleblowers said they have experienced some form of "negative repercussions" after making an internal complaint. Two fifths said they were treated badly by management or colleagues as a result of "blowing the whistle".

In one third of cases, the managers and compliance professionals who dealt with the matter agreed that the whistleblower had been mistreated.

The researchers from Griffith University assessed the whistleblowing processes in 46 major public and private-sector organisations across Australia and New Zealand. The study polled a total of 17,778 employees about their processes for reporting wrongdoing, their actual reporting experiences and the management of those complaints.

The study, which is the largest and most comprehensive of its kind, found that organisations with robust whistleblower frameworks enjoyed better outcomes at a group and individual employee level. Despite this, there is a lack of maturity at most organisations when it comes to handling internal complaints.

"The research reinforces the importance of new legal and regulatory arrangements to underpin, incentivise and enforce good organisational practice," said Professor Brown, who is also a director of Transparency International Australia.

 Regulatory overhaul

The comprehensive research comes as Australia embarks on a regulatory overhaul of its regime for internal complaints handling. Australia's financial conduct regulator has been working with the government on the revised Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill. The legislation is expected to include a number of key changes, including proposals for a statutory whistleblower protection authority.

The Bill will also make it easier for whistleblowers to seek redress for harm they suffer as a as a result of making a protected disclosure. It also covers those who make anonymous disclosures — something that is not protected under the existing law. The Bill will require all large companies to have whistleblower policies.

The Morrison government is understood to have finalised changes to bring the Bill into line with the recommendations from a Senate Committee report. The government had originally aimed to have the laws in effect by the middle of this year.

"We expect the bill to return to the Senate for debate this year, and are looking forward to the reforms being enacted," Price told the conference.

To set an example, ASIC has overhauled its own whistleblower handling processes over the past four years. This followed widespread criticism over the mishandling of a number of cases. The most high-profile case involved Jeff Morris, a former Commonwealth Bank financial adviser, who reported extensive wrongdoing to ASIC. The regulator did not act on his concerns until they blew up in the media. As a result, Morris suffered serious detriment including a marriage breakup, mental health challenges and the loss of his career.

The conference heard that this type of experience was not uncommon for whistleblowers in Australia.

 Breaching the public-private divide

Brown said the research had found that internal reporting rates in the public sector (74 per cent) were only slightly higher than in the private sector (69 percent).

"Neither sector used external reporting paths to a great degree and both sectors only used a mixture of reporting paths when there was a mixture of wrongdoing types," he told delegates.

The researchers said examples of best practice were also evident across both the public and private sectors. The success of a whistleblowing program depends on organisational and management factors that cut across all types of entities.

The researchers found an overwhelmingly positive view of whistleblowing across the survey respondents. The majority of people viewed internal complaints as being important for organisational wellbeing. They also found a large number of cases where complaints had been managed well, to the benefit of the organisations involved.

Brown said the research had challenged the stereotype that whistleblowers were commonly ignored or discouraged.

"Contrary to many stereotypes, reporting led to positive investigation outcomes and organisational changes and reforms in a large proportion of cases," he said.

Individual consequences

Despite these sanguine results for organisations, the outcomes for individual whistleblowers are far less positive.

In 42 percent of cases, whistleblowers said they were treated badly by their management or colleagues. There was little difference between whistleblowers in the public and private sectors. The complainants experienced some form of "negative repercussions" in up to 81 per cent of cases.

Brown said these issues would need to be addressed to improve the quality, frequency and value of internal reporting.

In a surprise finding, the researchers discovered little correlation between internal policies — on paper or as claimed — and whistleblower outcomes.

"There seems to be no clear, direct relationship between the official policies that organisations claim to have and the organisational support that individuals who report wrongdoing actually experience," said co-researcher Professor Rodney Smith, of the University of Sydney.

"Whistleblowers in organisations with what might be considered ‘weaker’ official policies were no less likely to receive most kinds of support than those in organisations who reported that they had ‘stronger’ policies."

Price said the data indicated that too many organisations were treating whistleblower programs as a perfunctory, tick-box exercise.

"This can't just be driven by regulators and legislation. It has to be embraced by organisations from the board level down," the ASIC official said.

Outcomes for whistleblowers

The decision on whether to report internally or externally has a major impact on the outcomes for whistleblowers. When complaints are managed "in house" the consequences for reporters are far more benign, the research showed.

The results suggest that whistleblowers expose themselves to a significant personal toll when they report externally, for instance though the media or an ombudsman service.

Brown said direct supervisors or line managers were, in most cases, the first and most important point of contact for people with internal complaints. This created problems when the manager was the subject of a report — for instance, in cases of bullying.

Management backing and emotional support are crucial, the researchers found.

Case study: ASIC sets an example

To set an example for the financial service industry, ASIC has taken deliberate steps to improve its internal framework. The agency wants to become an example of best practice for its regulated population to follow.

One of the first steps in overhauling ASIC's internal culture was to centralise the whistleblowing function so that reporters would have a consistent experience, regardless of how they approached the organisation.

ASIC set up its Office of the Whistleblower, headed by Warren Day, in 2014. The office acts as a central point within ASIC for ensuring that it records and acts upon whistleblower reports. The regulator's approach for dealing with these disclosures is outlined in Information Sheet 52, entitled "Guidance for Whistleblowers."

 The results of this work have been dramatic. In the most recent financial year, ASIC received 228 disclosures from whistleblowers. One third of the whistleblower reports that ASIC is acting upon involve large financial services institutions.

Price said this reflected ASIC's priorities to "improve the functioning of the financial system."

Robust processes

The Whistleblowing Conference heard that financial services firms in particular need to have robust processes to make it clear that whistleblowers will be protected. Policies need to be documented clearly and communicated to all staff and stakeholders. This then needs to be backed up with training.

"Procedures need to be in place to enable staff to disclose information if they feel there is wrongdoing. These processes require integrity and they require the confidence of staff," Price told delegates.

"It's also very much about the culture of the organisation. The leadership team of the organisation helps set this through the tone from the top. Then you need reinforcement in the middle. And occasionally a kick up the bottom." — John Price, ASIC

From a business perspective, the research showed that managing protected disclosures makes good commercial sense.

Price said repeated case studies had shown that when employees are encouraged to speak out about problems, organisations are able to take action "before those problems turn into crises."

The research unearthed a number of other factors that can influence the outcomes for whistleblowers. Chief among these is the approach that organisations take to investigating internal complaints. When whistleblowers feel there has been procedural fairness — and personal justice — they are far likelier to be satisfied with the outcome.

Ethical leadership, ethical role modelling by senior management and strong behavioural reinforcement also play a key role in shaping the whistleblower's experience.

Raising awareness of internal whistleblowing processes, such as anonymous hotlines, also has a positive outcome on those who report wrongdoing.

ASIC has recognised that all of these controls are crucial — both as an organisation and as a regulator.

"ASIC can only operate effectively if people are willing to share information or their experiences with us. People from inside companies and licensees who report misconduct to us are potentially risking their own jobs and sometimes their careers and family life. They do us a great service," Price said.

"What we get from whistleblowers, is the value of their perspective. They give us another way to look at the concerns and misconduct that may be happening in companies and licensees. And they provide another perspective to test the information that companies and licensees are telling us."

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