A safe alternative to silence

It is the belief of one high-profile commentator that “to prevent whistleblowing you need to encourage whistleblowing.” Stefan Stern considers the paradox

Right now, in a courtroom in Houston, Texas, we are being reminded on a daily basis of the importance of letting the light in on malpractice. As former Enron chairman, Ken Lay, and chief executive, Jeffrey Skilling, finally have the full charge sheet read out to them - Skilling faces 31 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces seven counts of fraud and conspiracy for allegedly continuing with the scheme after Skilling resigned in August 2001 - the business world looks on with a mixture of horror, schadenfreude, and relief.

“Thank God it’s not us in the dock,” some bosses may say to themselves, “and thank goodness we don’t have similar problems lurking in the dark waiting to bite us.” But, of course, this provokes another question: how do you know something like this isn’t going on and, if it were, would staff feel able to tell you about it?

Former Enron employee, Sherron Watkins, famously wrote an internal memo in the summer of 2001 attempting to bring her worries to the attention of chairman Lay. (An interview with her appeared in accounting & business, February 2004.) But although she later achieved fame, appearing on the cover of Time magazine in 2002 - a year Business Week magazine labelled “the year of the whistleblower” - what Watkins did was not really whistleblowing in the true sense.

For one thing, it was already far too late to save the company from its eventual collapse and ultimate debts of $32bn. And Watkins’ memo was an internal one, not released to any independent external authority. As one critic, Charles Ganske, a fellow at the American Freedom Center - a think-tank in Austin, Texas, puts it: “Watkins blew the whistle in a soundproof room.”

Besides, as Lynn Brewer - another former Enron manager and now chairman of the Integrity Institute, a US campaigning body - explained in her book, Confessions of an Enron Executive, real, attempted whistleblowing had been going on at the firm for months, but to no avail.

“Before leaving the company, nearly a year before the implosion, I telephoned Enron’s employee assistance hotline from my company-issued cell phone,” she writes, “and laid out the details of what I had discovered, only to be told ‘Inasmuch as our fees are paid by Enron, I can’t take your call. You’ll have to hire a private lawyer.’” (As Cora Daniels was to write later in Fortune magazine: “For every Sherron Watkins, there are 200 to 300 whistleblowers you don’t hear about who don’t fare so well.”)

None of this surprises Guy Dehn, director of Public Concern at Work, the leading UK based charity and campaigning body. “Enron had a best in class anonymous reporting facility,” he says. “It just didn’t operate properly.”

If chief executives want to avoid ending up in court, they need to understand that the whistleblower is really their friend, not a threat. Or, as Lilanthi Ravishankar of the Markkula Center for Applied Ethics at Santa Clara University, California, has put it: “To prevent whistleblowing you need to encourage whistleblowing.”

Creating a business where mistakes, potential danger and wrongdoing can be reported quickly and thoroughly is not easy. Culture and practice are established over years, not cleaned up in an instant by sending an all-staff e-mail. However, there are steps business leaders can take to make it clear that urgent bad news will be received without recrimination, and that messengers will not be shot.

The UK’s Committee on Standards in Public Life has offered this check-list of measures that any senior management team should consider introducing:

• a clear statement that wrongdoing is taken seriously in the organisation, and an indication of the sorts of matters regarded as wrongdoing
• respect for the confidentiality of staff raising concerns if they wish, and an opportunity to raise concerns outside the line management structure
• access to independent advice
• penalties for making false and malicious allegations, and
• an indication of the proper way in which concerns may be raised outside the organisation if necessary.

The distinction between confidentiality and anonymity is a crucial one. As Guy Dehn points out, anonymous disclosures may carry much less force and may be taken much less seriously. “Anonymity will always be the cloak preferred by a malicious person,” he says. “Anonymity raises real problems, as it makes the concern more difficult to investigate, the facts more difficult to corroborate and excludes the possibility of clarifying any ambiguous information, or asking for more.”

Confidential reports of potential problems are much more useful. Public Concern at Work defines them this way: “A confidential disclosure is where the recipient knows the identity of the person but agrees not to disclose it when he uses the information.”