Here is a timely question to directors of Australian companies: do you want your organisation to conduct its affairs with integrity or would you prefer to read about how you do business in the media or when a regulator arrives on the doorstep?

This question is central in the ongoing debate about corporate culture in Australia. A recent article highlighted how management paints serious misconduct as “isolated” events and not culture, that is, it’s the fault of a few bad apples. Many compliance professionals will say there is never one or two bad apples, there is often something wrong with the barrel.

There is a lot of talk today about culture in organisations. A couple of years ago, a UK survey found that a large majority of financial sector executives thought ethics were important, but a majority thought that if they adhered to their company’s code of conduct, it would limit their career progression. What an indictment on their companies. But ask yourself: would it be the same in your company? If it could be, how would you find out where the code of conduct is not being applied?

An ethical company wants to know about serious misconduct early and it will respond – its board and management will be thankful to those who have brought it to their attention. A company needs an effective whistleblowing program. Australian organisations lag their overseas counterparts when it comes to whistleblowing and it is time this changed.

To achieve a culture of integrity, a company needs to have a culture of speaking up. Without that, one day, your company will have a major incident that is in the full public glare. Companies should examine how open they are – how likely are staff to raise bad news; what is likely to happen if they do. Boards should be asking management these questions.

Even if your organisation has a culture of speaking up (and not many do), it should still have a whistleblowing program. It is a safety net. It is a protection for the company, its directors and management and often its employees. There will be some matters which employees will naturally be concerned about raising, even in the most open environment. Also, in organisations where generally there is openness, there will be pockets where this is not the case.

Many companies have a whistleblowing program and feel they can tick a box; they are clearly not putting in any effort. This is a serious lack in judgement by their leaders, particularly independent directors. Employees will quickly pick up on the company’s attitude and not use the program.

There are still managers who think that they can keep unpleasant facts secret. The chance of that happening these days is rapidly diminishing with the rise of social media and investigative journalism. A whistleblowing program is subtle pressure on managers to encourage openness and address issues before a whistleblower report is made.

ASIC has announced it is backing the Griffith University survey of whistleblowing in the private, public and not-for-profit sectors. A Senate committee recently published an issues paper entitled Corporate whistleblowing in Australia: ending corporate Australia’s cultures of silence and whistleblowing was part of the remit of the Senate committee examining foreign bribery. Prudent directors will recognise that the company should have an environment of open communication well ahead of being forced to take action by legislation.

Establishing a program

Whistleblowing programs are not difficult. There are some basic elements. First, don’t call it a whistleblowing program. “Whistleblower” still connotes bad things to many people – it is like the Australian concept of “dobber”. You don’t want any language that sounds like a whinger or complainer. Find another name for the program like “Speak Up” or “Open Talk”. This will help with messaging, namely that the board and senior management want to hear about serious misconduct because they want to do something about it. Of course, the earlier a company hears about concerns, the better – it is far better to nip something in the bud before there is a major scandal.

Second, the whistleblowing mechanism should be handled by an experienced external provider which provides easy access to the program 24/7 through various avenues, for example via a toll-free telephone number or through a website. It is standard practice to have unique numbers for each report so that follow up with the reporter can occur. The external provider should give a monthly summary of all reports received – this should go to the CEO and one other person, perhaps the chief compliance officer or an external director. This adds to confidence of those contemplating using the program, and the confidence of the boards and senior management that they are hearing about issues.

Third, allow anonymous reporting. Some people fear the system will be used vexatiously by anonymous reporters to attack individuals and those individuals will not have a fair right of reply. Experienced personnel are able to provide reassurance of fair process. I have never heard an experienced compliance professional list anonymous reporting as a major issue for their whistleblowing program. Anonymity could be the factor that convinces an employee to provide crucial information. Even where the reporter is not anonymous, their identity should be treated confidentially.

Fourth, make it clear how reports will be handled. Who hears about it? When will reports be dealt with by the central office and when will they be handled by the local unit? It is possible to set parameters so that matters receive the appropriate response – these parameters include the seniority of those alleged to be involved, the amount of financial impact and the type of allegation, for example antitrust, insider trading and corruption.

Fifth, and most importantly, it must be clear that a whistleblower with an honestly held belief will not suffer any retribution for using the program. In fact, they should be recognised and in some instances rewarded. It should be a badge of honour, just like raising a safety concern in a mining company. Not all whistleblowers will have clean hands and if they have committed some wrongdoing as well, there may be implications for them – this is a matter for balanced judgement at senior levels. On the other hand, reporters using the system other than in good faith, and who can be identified, should face discipline.

Sixth, examine all matters reported to determine an appropriate response. Investigate thoroughly those reports that should be investigated. There should be processes to give appropriate feedback to the whistleblower.

Seventh, communication is vital. There needs to be ongoing internal publicity about the whistleblowing program and how it works. I recall conducting a staff discussion at a site. The attendees knew about the whistleblowing program but none of them knew how it operated and, worse, none of them knew if anything ever happened if someone used it – consequently they would not use it. A company must communicate to its employees about the program – how many matters were received and how many resulted in some action.

Clear support of senior management is vital. I remember after a staff meeting at an overseas site the CEO asked to be taken to look at the whistleblowing posters in the office. That act became known around the group – it was worth 100 messages from me. Directors and senior management visiting sites should look for the posters and if they cannot see them, ask – try the telephone number to make sure it works. What a simple act to reinforce the message.

Finally, look at the reports more broadly: why did the reporters feel they had to use the program and not raise the issue directly with management? Could the reports be just the tip of the iceberg? Are there worrying trends? Directors should be asking these questions when being presented with reports about the program. They should be ensuring that the analysis is used to improve the company’s integrity and compliance efforts.

If you want your company to act with integrity, it should have an effective whistleblowing program. Not having one comes at a cost.

The AICD is a supporter of the Whistling While They Work 2 research project on public interest whistleblowing led by Griffith University. To participate in the project or for information visit: www.whistlingwhiletheywork.edu.au