Whistleblowing is when an employee, contractor or supplier goes outside the normal management channels to report suspected wrongdoing at work, I e. speaking out in a confidential manner

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What is whistleblowing?

Whistleblowing is when an employee, contractor or supplier goes outside the normal management channels to report suspected wrongdoing at work, i.e. speaking out in a confidential manner. This can be done via internal processes set up by the organisation (internal whistleblowing) or to an external body such as a regulator (external whistleblowing). While public disclosure to the media can also be perceived as whistleblowing the IIA report focuses on formally prescribed channels.

Whistleblowing and corporate governance are closely linked; in an open and transparent corporate environment where policies on wrongdoing and whistleblowing are made clear, it is much easier to detect malpractice early, put right any wrongs and avoid a scandal that could be disastrous for your business.

Employees who become aware of corporate malpractice have the right to disclose what they know if it is in the public interest to do so. Activities that come under this umbrella might include any illegal or unethical practices that affect the public, as well as any attempts to keep these covered up. These can be events that happened in the past, are happening now, or even planned activities for the future.

Setting out your whistleblowing policy is a sign of strong corporate governance and a company culture that takes such claims seriously. It may act as a deterrent to those thinking of committing wrongdoing within the company and may also reduce the likelihood of false accusations, because employees will understand more clearly the consequences of their disclosure. It will also deter people from going straight to the media with their revelations instead of dealing with them through the correct channels.

It’s a good idea to have a designated person who is known to be responsible for your whistleblowing policy. This individual will be charged with communicating the company stance on whistleblowing throughout the organisation, training employees on the subject, and following the procedure when an employee confides in them.

Business ethics and corporate governance

Creating an open and transparent company culture needs to come from the top down. At board level, business leaders must lead by example; good corporate governance and ethics should permeate down to management level and throughout the organisation.

We’ve seen how whistleblowing and corporate governance are interlinked, and acting to implement transparent policies and procedures could make a vital difference to your company. With a knowledgeable and robust approach to whistleblowing at board level, companies could potentially avoid lawsuits, negative media coverage and damage to their reputation.

Examples of Whistleblowing in Business

Whistleblowers are company employees who report inappropriate or unethical behavior they discover at work. Whistle-blowing covers many areas of business in every industry, including but not limited to internal discrimination, predatory sales practices and dangerous working conditions. Business owners can learn the ramifications of well-known whistleblower examples to avoid catastrophic legal and financial penalties.

JP Morgan Chase: Alayne Fleischmann

Alayne Fleischmann was a securities attorney that worked for JP Morgan Chase. In her tenure at the company, Fleischmann witnessed repeated and egregious acts of securities fraud. Upon taking action, Fleischmann found herself unable to find a job in spite of her impeccable credentials. With a public lawsuit about to take center stage in the media, JP Morgan Chase settled with Fleischmann to keep the details of the fraud confidential. Fleischman received $9 billion, while JP Morgan Chase settled the case behind closed doors.

Kerr-McGee Nuclear Power Plant: Karen Silkwood

Karen Silkwood's story was memorialized in the movie starring CherSilkwood. Karen Silkwood worked for the Kerr-McGee Nuclear Power Plant and took action by reporting the company to the Atomic Energy Commission. Nuclear power plants are dangerous environments to work in under the safest of conditions. Silkwood noted numerous conditions that put herself and coworkers at increased risk, noting the major health and safety violations the company knew about.

Karen Silkwood could not enjoy her success in creating a safer standard in nuclear plant working conditions, because she was mysteriously found dead when she threatened company officials with taking her evidence to the media, namely The New York Times.

Enron: Sherron Watkins

Enron suffered one of the biggest corporate scandals in history thanks to the company's then-vice president, Sherron Watkins. She wrote a letter to her boss regarding the fraudulent accounting practices that equated Enron stock more to a Ponzi scheme than a publicly traded company. She demanded that the company take action. Her letter became public five months after she wrote it and was fodder for national outrage against those heading Enron, along with its accounting firm, Arthur Andersen.

In spite of the public and congressional scrutiny that followed the whistle-blowing, Watkins continued to work for Enron without being retaliated against.
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