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Why Is Whistleblowing So Important?

by Arttu Vesterinen

Whistleblowing

We like to point out to the importance of whistleblowing and open reporting but let's first give a voice to someone else on whistleblowing in their own words:

"The second reform concerns the “whistleblower line,” an arrangement through which employees can send information to me and the board’s audit committee without fear of reprisal. -- Most of the complaints we have received are of “the guy next to me has bad breath” variety, but on occasion I have learned of important problems at our subsidiaries that I otherwise would have missed. The issues raised are usually not of a type discoverable by audit, but relate instead to personnel and business practices. Berkshire would be more valuable today if I had put in a whistleblower line decades ago."

The writer is none other than Warren Buffer in Berkshire Hathaway's 2004 Annual Letter to Shareholders. If you appreciate one of the richest people in the world linking whistleblowing directly with company value, read further to learn more. 

What Is Whistleblowing? 

Tattle-telling, telling on, being informant, snitching - there are so many different names for whistleblowing. Often, these synonyms are tinged with a negative hue to describe the action of selling out.

Betrayal tends to underscore how whistleblowing is viewed when using these words. The word ‘whistleblowing’, however, is not always riddled with bad connotations and can have inherently positive outcomes. 

Whistleblowing involves any action that reveals or reports unethical or illegal activities or information. Although such activities can be minor infractions, others can be severe and quite detrimental to people and institutions. According to PIDA, these can include: 

  • Health and safety risks
  • Injustices or miscarriages of justice 
  • Illegal activities, law-breaking or criminal acts like fraud
  • Cover-ups of unethical activities or wrongdoing

Whistleblower policies, like the WHO’s, can also include “corruption, waste of resources, sabotage…, sexual exploitation and abuse.”

Cases are commonly in a workplace, where an employee may notice something like fraud taking place. Some whistleblowers also reveal wrongdoing in public institutions and matters of national security, like in the cases of Snowden and Murray. The two are not mutually exclusive. The common factor is using whistleblowing for the greater good of the public or the organisation. 

The Law And Whistleblowing

With EU Whistleblowing directive and the related national legislations nearing, it's pays to have a look at other laws related to whistleblowing.  One of them is The Public Interest Disclosure Act of 1998 (PIDA), that amended the 1996 Employment Rights Act and protects whistleblowers in the UK. 

Under PIDA, workers who make “protected disclosures” can claim wrongful termination if their employer fires them as a result of their revelations. They are also cushioned from other negative results like being denied a promotion and being excluded from work opportunities and facilities. 

PIDA also applies to independent contractors or agency workers who can claim mistreatment. 

Theoretically, the Act shields them from harassment. Yet, as Reuters showed that hostile treatment of whistleblowers has been rife in the UK. Unfortunately, this means that many people remain quiet despite having knowledge of wrongdoings. 

Thus, more businesses must support whistleblowing so its benefits can be felt more widely. This way, more people can feel brave enough to stand up against what is wrong. 

Types of Whistleblowing 

While the concept of whistleblowing is the same all around, there are some different types of channels of whistleblowing. These include internal, external, and cyber whistleblowing. 

Internal

Internal whistleblowing is the reporting of wrongdoing to actors that are within a company or organisation (ie: a manager or the directors). Whistleblowing policies and code of conducts often dictate how employees can do this in their respective company. 

Not all organisations have such policies in place. Before disclosing, workers should find out if the company has any policies and mechanisms in place and how these may affect them.

For example, all companies should have confidential or anonymous whistleblowing channels available. This ensures security for the whistleblower and allows the company to take action when any issues arise. 

External 

This type of whistleblower reveals unethical or illegal activities to entities or people outside of the company. These can be the press, industry regulators, law enforcement or even the general public. 

Each of these options would have their own procedures. But, disclosures are only valid if revealed in good faith (with the belief that the reporting was the right thing to do).

Cyber

With the rise of technology and the heightened reliance on cyberspace, cybercrime is a huge deal. As a result, we now have the cyber whistleblower - a person who reports on matters relating to the digital space. 

Cyber whistleblowing protects the worker and the organisation’s data. It does this by giving accounts of:

  • Hacking
  • Poor cybersecurity
  • Lacking encryptions
  • Breaches in data protection and information systems
  • And overall unsafe  practices.

The Importance Of Whistleblowing

There are numerous reasons why whistleblowing is important and should be encouraged. So, let’s have a look at the benefits of whistleblowing.

  • Prevents Wrongdoing

Whistleblowing is very effective in cases of corporate fraud. Yes, whistleblowers may benefit from rewards. But, their information tends to lead to the apprehension of people involved in fraud and misconduct. 40% of occupational fraud is identified through whistleblower tips. Thus, to decrease fraud and corruption, and their effects, it’s essential to encourage whistleblowing.

Whistleblowing can also help to prevent malpractice in three ways. 

First, the people responsible for the issues can be apprehended or adequately punished for their actions. In a company, this can mean removing them from the position that enabled their felony or letting them go. Either way, it allows the company to address the “cause”.

The second way it prevents malpractice is that whistleblowing has a ripple effect. Colleagues and other workers take note of the consequences of wrongdoing and keep away from it themselves. 

Lastly, such activities are curbed when everyone is aware that wrongdoers get punished as whistleblowing is a possibility. 

  • Minimises Risks And Costs

When misconduct and fraud are left unreported, they remain unexposed to those who can address them. 

As a result of not knowing (and in some cases ignoring), the relevant authorities cannot resolve the issue. This poses various risks to the company including things like:

    • Legal prosecution
    • Dents to the company reputation
    • Ruinous public scandals
    • Financial penalties

Fraud deals tremendous blows to individuals, governments, reputations, industries, business and the environment. Just as an example the UK public body loses about 0.5% to 5% of its spending to fraud. 

Whistleblowing minimises the cost of fraud - both financially and to the company image. Thus, it allows for the management of risks to the company.

  • Happy Workers & Happy Brand

Transparency and accountability allow the company to function effectively. Being forthcoming to your workers cultivates commitment and trust. In turn, it allows them to feel happy, comfortable and safe within the company. 

Workers’ mental health and safety are shown to increase productivity. So, whistleblowing can have a direct impact on the company’s bottom line. 

Bad publicity is definitely not better than no publicity when it comes to business. Being linked to misconduct affects how a company is ‘seen’. For example, in 2015, when Volkswagen was discovered to have misrepresented their emission figures, it led to a massive drop in the share price.

Having issues of illegal and unethical activities taint the ‘image’ of a brand. It makes the values and missions of the brand questionable. This can cause distrust from workers as well as clients and customers. Whistleblowing allows the company to tackle the issues head-on to ensure its reputation matches all its principles. 

  • Provides More Detailed Insight Into Issues

Whistleblowers generally have an insider perspective on the issues reported. They can often give details and insight into company matters that may otherwise go unseen. 

This is something that whistleblowers ought to keep in mind - they may be the only ones with access to the information. Even if others are aware, they may not be willing to provide evidence backing the disclosure. 

  • It’s The Right (And Ethical) Thing To Do 

It’s a gigantic philosophical question going centuries into history: What is right versus what is ethical? Whistleblowing satisfies both. It is ethical and right. 

Whistleblowing enables justice and transparency. In your company, it could encourage a culture of openness and accountability. This empowers workers and creates an organisation that rejects wrongdoing. 

Overall, it makes for an environment in which workers can feel safe and protected from issues that could harm them. And, if they do not feel this way, whistleblowing gives them the power to advance change. 

Like Everything In Life, There Are Risks

Of course, there are risks to being the brave representative of what is just. Any worker who points to misconduct and flaws in an organisation can face mistreatment, discrimination, threats and physical harm. 

Whistleblowing can also detriment the company. Some companies have cited losing employees after a whistleblowing case. Encouraging whistleblowing may also encourage a culture of fear if policies and procedures are not implemented effectively. It's up to effective case management and investigation to handle and discourage groundless complaints. 

When weighing pros and cons though, the benefits that whistleblowing adds to public safety far outweigh the risks. 

Fortunately, these risks can also be somewhat alleviated, if not avoided completely! Following these tips can make it clear to employees the depth and importance of whistleblowing. 

Know Whistleblower Rights And Laws 

A company and its workers need to know all the legal implications of reporting. Whistleblowers have rights both in US and soon in European Union, which must be respected and upheld in any whistleblowing procedures. 

There are also responsibilities that whistleblowers have and therefore should be conscious of. 

Have A Set And Accessible Policy

Make sure to establish a whistleblowing policy that your workers have access to and know about. Any whistleblowers should be able to anticipate how they can proceed with reports and what the process might look like. This is why it is so important to set up appropriate whistleblowing channels for your employees to use if they need to. 

Transparency And Accountability

Open communication about fraud and misconduct with workers, and external parties, shows accountability and honesty. Be sure to nurture a candid culture rather than one of fear. 

Different Reporting Options 

The EU Whistleblowing Directive requires companies and public authorities to establish safe reporting platforms. Whistleblowers are often internally abused and mistreated after they report a case. Being able to report anonymously may nudge more people to come forward. Establish anonymous reporting platforms or external reporting options to reduce this risk to the whistleblower.

Educate And Inform

Organise training and educational workshops to inform employees about processes and policies. For example, having a whistleblower attorney can also make the process easier and provide support to the whistleblower. 

Inform staff of the best course of action if they decide to blow the whistle. Creating awareness could also lead to fewer cases of intimidation against whistleblowers by colleagues.

Blow The Whistle!

Everybody ought to think about whistleblowing as a public service. Fraud and misconduct have lasting effects on people’s lives and whistleblowing is one of the best ways to combat this. 

Certainly, it can come with a price if not managed correctly. But, the benefits of proper whistleblowing channels contribute to overall well-being within organisations. It promotes an open and honest company culture whereby all employees can feel safe and comfortable. 

Having confidential and anonymous whistleblowing channels also makes it easier for workers and other stakeholders to come forward. This is not only great for your employees, but it means that your company can deal with issues faster and more effectively. 

If you're looking for a whistleblowing solution that is hyper easy-to-use, ticks all the boxes for anonymity, two-way communication, has built-in workflows for multiple use cases and more, have a look at our incy.io | Whistleblowing module and contact us for more information!


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Whistleblowing

Arttu Vesterinen

Chief Executive Officer