“Regulators are putting more emphasis on companies having effective speak-up mechanisms, with more focus on the necessity for anonymity and protection of whistleblowers from detriment
Caroline Stroud
Head of the people and reward practice, Freshfields Bruckhaus Deringer
In the financial sector, the fine given to James ‘Jes’ Staley, Chief Executive of Barclays Group, by UK regulators the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) in May 2018 provided a cautionary tale on handling whistleblower disputes. In 2016, an anonymous letter containing a number of allegations was sent to the bank’s board and Staley attempted to identify the letter’s author. According to the regulators, in responding to the letter, Staley ‘failed to act with due skill, care and diligence’. The FCA and PRA also imposed a number of special requirements on Barclays, the first of their kind applied to a regulated firm in relation to whistleblowing. Despite the penalties, an apologetic Staley kept his job, leading to questions over whether the regulators went far enough, given the possible deterrent effect of Staley’s actions on future whistleblowing.
When assessing the current ‘state’ of whistleblowing, there is some cause for optimism: ‘What these examples suggest is that the idea of whistleblowers as being on the right side of good governance and democracy is getting some traction in institutions and organisations,’ says Dr Wim Vandekerckhove, Reader in Business Ethics at the University of Greenwich. ‘We are certainly seeing a culture shift,’ adds Bob Matheson, Head of Advice & Advocacy at UK whistleblowing charity Protect. ‘No longer is a specific incidence of wrongdoing accepted, just because it has previously been commonplace.’ Matheson refers to the ongoing #MeToo movement – which has spread globally since autumn 2017 and emphasises speaking up about harassment and sexual assault – as a further example of this trend.
Revolution in the making
Reinforcing this sense of change is the progress being made at a legislative level. In April 2018, the European Commission put forward plans for a new European Union directive for ‘the protection of persons reporting breaches of Union law’, aimed at strengthening protections for whistleblowers. The Commission highlighted major global scandals from over the past few years – including the LuxLeaks financial scandal and the Panama Papers leak – that showcase the important work of whistleblowers.
EU Member States will need to transpose the directive into their national law by 2021. Ten have some degree of protection for whistleblowers in place already, but for others it will be the first time protections become part of their national legislation. According to Leah Ambler, Co-Chair of the IBA Anti-Corruption Committee, the directive ‘could be a huge revolution if enacted’. Matheson believes ‘one of the most important contributions of the directive is that it moves the discussion on whistleblowing beyond employment rights protections, and onto what is needed from organisations, and regulators, to “make whistleblowing work”’.
The past few years have also seen national governments bring forward whistleblowing legislation, typically in response to scandals. France’s Sapin II anti-corruption law, for instance, isn’t specifically about whistleblowers but it does place an obligation on any French company with more than 50 employees to implement a whistleblowing procedure and protections.
Australia is also updating its whistleblowing legislation. As of early January 2019, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill is before the Australian Parliament. It’s expected to pass in February. The Bill looks to strengthen the Australian whistleblowing regime, including by broadening existing protections for corporate and financial sector whistleblowers and modifying the definition of who can fall within the classification of a ‘whistleblower’.
Whistleblowing is certainly on the current agenda of regulators, as well as legislators. Caroline Stroud, a partner and head of the people and reward practice at Freshfields Bruckhaus Deringer in London, is seeing ‘regulators putting more emphasis on companies having effective speak-up mechanisms, with more focus on the necessity for anonymity and protection of whistleblowers from detriment, for example.’
“People are now seeing information disclosed by whistleblowers as being relevant to themselves and to the lifestyles they lead, for example the Cambridge Analytica case
Leah Ambler
Co-Chair, IBA Anti-Corruption Committee
In the UK banking sector, the FCA ‘has placed a lot of emphasis on culture and doesn’t see banks as getting it right,’ says Holly Insley, a senior associate at Freshfields. ‘It expects to be notified early of issues that arise and that may be reflective of a wider cultural problem.’ Insley expects this to continue in 2019, with ‘a lot of focus on banks’ treatment of whistleblowers’.
At the regulatory level, ‘we’ve come a long way if you compare with, say, ten years ago, in terms of confidentiality, communication and case management,’ Vandekerckhove says. ‘However, even the best-in-class are still experimenting. In a way, this is an innovative field.’ Vandekerckhove explains that internationally, the concept of having a central agency for whistleblowing is gaining ground: in South Korea this has existed for a while, but there are new agencies in France and the Netherlands, and the idea is being played with in Australia and the UK.
Increasingly, more and more companies are seeing that it’s in their own interests to have whistleblowing procedures in place, says Sonja Maeder Morvant, Senior Vice-Chair of the IBA Business Crime Committee and a partner at OHER Attorneys. ‘If they have these in place the company will usually be the first informed; if they don’t have these procedures in place then the authorities are likely to be the first informed. Large corporations protect themselves by putting in place procedures.’
In the legal field, two major firms, Linklaters and Herbert Smith Freehills, established external whistleblowing hotlines in May 2018. Linklaters’ hotline, for example, is called SpeakUp and allows staff to anonymously report problematic behaviour, such as bullying and discrimination.
Can changing attitudes be found beyond the corporate and legal world, however? Ambler thinks the public now have more of an appetite for stories about whistleblowing, which she hopes indicates a shift in attitude. ‘People are now seeing information disclosed by whistleblowers as being relevant to themselves and to the lifestyles they lead, for example the Cambridge Analytica case,’ she says. ‘There are examples of information by whistleblowers that notifies the public of corporate or government activity that they wouldn’t otherwise be aware of. There’s increasing public support.’
Vandekerckhove agrees that there might be a shift in public perception, and highlights whistleblowing in the areas of healthcare, sexual harassment and information privacy as triggering this. ‘These are issues and contexts that people, regardless of what their profession is, can understand and recognise,’ he says, before warning that ‘there is a risk of a backlash caused by the “fake news” panic. I do see a shift but it might slide into cynicism.’
While the headlines and developments in 2018 drew attention to progress and positive change, lingering problems and concerns remain. Creating real cultural change around whistleblowers is a long-term process. Matheson highlights that whistleblowing takes place every day – a GovUK survey carried out by Protect suggests that in the last two years 400,000 people in the UK alone raised a ‘whistleblowing’ concern. Matheson notes that ‘in a large section of these instances, individuals are badly treated because they have raised concerns. Both calls to Protect’s Advice Line and claims of whistleblowing victimisation in the courts are dramatically on the rise.’ According to the interim results of a recent survey conducted by the UK’s All-Party Parliamentary Group on Whistleblowing, initiated by non-profit WhistleblowersUK, 88 per cent of respondents claimed to have faced retaliation from their organisation after whistleblowing.
In November 2017, Freshfields Bruckhaus Deringer reported on its survey on whistleblowing and attitudes to whistleblowing. The survey found some progress, with 47 per cent of 2,500 business managers spoken to across France, Germany, Hong Kong, the UK and the United States asserting that they had been involved in whistleblowing. However, 55 per cent felt that concerns about the impact of whistleblowing on career prospects and reputation would prevent an individual from whistleblowing within their organisation.
The survey found two major factors that hold people back, explains Stroud. ‘Firstly, a fear of retaliation,’ she says. ‘This is what the legislation is there to protect against, but there’s still a fear of a negative consequence. Secondly, there’s a sense of futility, people who have blown the whistle themselves or who see colleagues do it, and have seen nothing coming from whistleblowing.’
While organisations may increasingly have whistleblowing policies in place, whether these are used effectively – and whether employees have an awareness of them – may be another matter entirely. ‘The board might be supportive of the whistleblowing policy but if it hasn’t been communicated to line managers, for example, then the whole thing can fall down. The training element is very important,’ says Stroud, who sees employers focusing on training down the organisation to counter this problem.
“People recognise, in the abstract, that treating whistleblowers negatively is wrong, but when placed in a practical situation, are failing to challenge peers on their discriminatory behaviour
Bob Matheson
Head of Advice & Advocacy, Protect
Not heroes or villains
Speaking from a US perspective, Mauro Wolfe, Co-Chair of the IBA Criminal Law Committee and a partner at Duane Morris, suggests that negative perceptions of whistleblowers still linger. He notes the ‘inherent tension between loyalty owed to a company and going to the authorities. That balance remains a lingering issue, wherein whistleblowers are perceived as disloyal or “rats”. The financial rewards or bounties [in the US] do make up, in small measure, for the negative perception that may exist.’
Matheson thinks we are probably in the same position with whistleblowing, at least in the UK, as we were with discrimination two decades ago. ‘On the whole people recognise, in the abstract, that treating whistleblowers negatively is wrong, but when placed in a practical situation, are failing to challenge peers on their discriminatory behaviour, or indeed introspectively considering their own actions,’ he says.
With corporate-level attention increasingly being paid to whistleblowing processes, a marketplace has developed for external hotlines and digital whistleblowing systems that businesses can purchase ‘off-the-shelf’ and implement. This is the rise of what might be termed the ‘corporatisation’ of whistleblowing. Vandekerckhove notes a ‘growing’ market for these solutions, but warns that in these early days of adoption by organisations, there is a risk that the need for quality solutions could be underestimated. Meanwhile, the new stream of information generated by these solutions needs to be managed, which ‘requires all internal stakeholders to come to grips with how this information stream impacts them,’ he says. ‘You can outsource different parts of a whistleblowing system – for example, channel, triage, investigation – but you cannot outsource the change in attitude and communication on which the effectiveness of whistleblowing systems depend.’
“We need to shift the paradigm from whistleblowers being portrayed as heroes and villains to the reality that things go wrong, this is how we learn and accept that mistakes happen
Georgina Halford-Hall
Chief Executive, WhistleblowersUK
Anonymous, protected and represented
Given the events of the past few years and the progress across some areas, many will now be keenly observing how things pan out in 2019 and beyond, and whether the substantial remaining concerns can be addressed. In the EU, on 20 November 2018, the European Parliament Committee on Legal Affairs (the ‘JURI Committee’) approved a revised text of the whistleblowing directive. The JURI Committee made additions to the directive’s text, including adding specific protections for anonymous reporting and removing terminology that would have allowed for sanctions for ‘malicious’ or ‘abusive’ reporting.
The European Parliament will take this approved text to its ‘trilogue’ discussions with the European Commission and the EU Council, aimed at finalising the text. With the European Parliament elections coming up in late May 2019, however, there’s some concern that the legislation won’t be passed before the Parliament’s term ends on 18 April.
For Halford-Hall, the EU directive will help to drive improvements, but does not go far enough; she advocates a debate about a proper compensation scheme for whistleblowers, pointing to results in Nigeria and the US as demonstrating the effectiveness of such schemes in encouraging people to speak out. ‘However,’ she adds, ‘it is not just the “reward” but the structure that allows whistleblowers to remain anonymous, protected and represented by specialists.’
Internationally, standards remain fragmented, which is problematic because whistleblowers receive different treatment when bringing claims. In the US, for example, a whistleblower might expect to receive a share of the assets taken from a company found to have committed wrongdoing; while in other jurisdictions, whistleblowers face a harsh environment and the threat of sanctions. What this creates, says Morvant, are situations where ‘an employee works in one jurisdiction for a multinational company, and in his country there’s no incentive to whistleblow. He could go to the US where he would get a share of the confiscated assets, so the employee informs the US authorities.’ The result is that claims aren’t necessarily brought forward in the most relevant jurisdiction.
Ambler hopes the EU directive paves the way for additional discussions at a global level in harmonising standards. ‘Countries are reviewing legislation in the absence of standards, but the amendments don’t correlate internationally due to the lack of harmonisation,’ she says. ‘Globally, anti-corruption standards are far behind. Even in the UN Convention against Corruption, the relevant Article on whistleblowing [Article 33] is not mandatory. Modifying or amending a Convention is difficult.’
Ambler admits ‘there’s a dream among whistleblowing advocates to get a standalone whistleblowing convention at UN level, but this is far off.’
The All-Party Parliamentary Group on Whistleblowing’s survey continues to be open until at least April 2019 and can be taken at www.wbuk.org/appg-whistleblowing-survey
