Comments from ACCA to the Whistleblowing Commission, 21 June 2013
Comments from ACCA to the Whistleblowing Commission 21 June 2013.
ACCA welcomes the opportunity to comment on this whistleblowing consultation. We feel that it is both timely and topical as the incidences of whistleblowing across both the private and public sectors are on the increase. We have addressed most questions with the exception of questions 10, 11, 12 and 13.
In our view implementing an effective whistleblowing policy is essential for promoting openness and accountability in the workplace both in the private and public sectors. As well as it being integral to good governance, it is an important anti – fraud and corruption measure and risk management tool.
With respect to the private sector, there is in fact no express requirement under the Code on Corporate Governance for companies to establish whistleblowing procedures, although there are indirect references to them in the Code and supporting guidance as being conducive to effective risk management and internal control arrangements. However, a more explicit recommendation to establish channels of communication is contained in the OECD governance principles. We would certainly support greater emphasis being given to the contribution that whistleblowing arrangements can make to ensuring good governance, and there is no reason why this should not apply beyond the listed company sector.
Unlike the private sector, there is no unified good governance code for the public sector. However, the general principles contained in the Corporate Governance Code have been widely translated into most parts of the public sector and therefore we would welcome whistleblowing arrangements being made more explicit in public bodies’ governance codes.
Whatever the form that any new regulatory encouragements might take, for whistle blowing procedures to be effective in terms of providing a channel for exposing failures in governance or operational management, there needs to be a genuine commitment on the part of senior management and those charged with governance, including specialist board committees, to regard those procedures as forming an integral part of good and open governance. They must also be prepared to treat any information that is disclosed through these channels as an essential corporate discipline that will help them to achieve that goal. These are outcomes that are not necessarily achievable by the adoption of procedures themselves: the recent report of the Parliamentary Commission on Banking Standards into the collapse of HBOS underlined in graphic terms the ultimate weakness of regulatory strictures if the form of the procedure is respected at the expense of the substantive purpose. These need to be cultivated, within every entity, a value-driven culture that prioritises the corporate mission of the entity (which will incorporate, where appropriate, wider societal and stakeholder concerns) and which values the presentation of any information, from whatever source, which helps ensure that the mission is achieved.
This aspect of cultural commitment to the value of whistleblowing is key to addressing the question of the motivation of prospective whistleblowers. It is vital that those who are minded to disclose relevant information are convinced that, where they do so in good faith, the information they disclose is going to be treated seriously and, where appropriate, investigated and dealt with in the right way: if individuals do not believe that this will happen then matters which are potentially important to the governance of the entity will not be made.
In relation to embedding best practice and gaining cultural commitment, so far as the public sector is concerned, we believe that lessons can be learnt from the introduction other legislation, such as the Race Relations (amendment) Act 2000, which required public bodies to comply with a positive race equality duty. This required public bodies to go beyond the policies and put arrangements in place to raise staff awareness through training programmes and on-going monitoring & support. This approach was critical for raising staff awareness about their responsibilities under the Act and what it meant for their work. It also helped to instil confidence in the process. A lack of awareness in the law, procedures and confidence by staff were key areas of weakness as highlighted in the Francis Report.
Whistleblowers also need to be persuaded that, if their identities are subsequently discovered, either within or outside the organisation, they will suffer no detriment as a result of their actions. It is unfortunately the case that, too often, those who make disclosures, both within and outside an enterprise, are regarded as trouble-makers who cannot be relied upon and their career prospects are adversely affected. While we believe that an employer should retain a basic right to expect employees to respect the confidentiality of information that they come across in the course of their work, it is grossly unfair, and an obstacle to the achievement of high governance standards across both the private and public sectors, for responsible disclosure activity to lead to punitive behaviour against those making the disclosures. There needs to be a broad-ranging cultural acceptance that whistleblowing, where justified in the circumstances of the case, is not a sign of disloyalty but a positive action which is in the interests of stakeholders and/or wider society.
We hope that the work of the Commission will help to engender this cultural change.
We believe that financial or other rewards for whistleblowers and not consistent with the culture and philosophy of UK in the context of 'public interest' disclosure. Financial reward touches on the fundamental issue of the person’s motivation for coming forward.
The motive for blowing the whistle should always involve not the prospect of personal gain but a concern to disclose information which is material to the cause of good and open governance, the non-disclosure of which would allow an illegal, unethical or otherwise dysfunctional situation to continue. The prospect of financial reward should not as a rule influence a decision as to whether or not to disclose relevant information. The danger, as we see it, is that a regime which offered substantial financial pay outs to whistleblowers as an encouragement to the reporting of information would undermine the integrity of the concept of whistleblowing, and make it more difficult to achieve the buy-in of management and governance bodies as we suggested is desirable in our response to Q1. It might also encourage unfounded or vexatious actions which would be against the spirit of the concept.
However, we would agree that, where whistleblowers do suffer material detriment as a result of well-founded disclosure actions, in the form of victimisation, career blight or similar, they should be entitled to some form of financial compensation; provision for this to happen would also amount to a positive incentive to make disclosures where the absence of any such provision would be likely to withhold disclosure.
The PIDA Act is a strong piece of legislation and many countries have used it as a model to implement their own whistleblowing legislation e.g. Jamaica.
The key problem areas relate to the implementation of the legislation/policies. For example, establishing effective internal arrangements for handing concerns, communicating procedures and raising awareness among staff to instil confidence. For example, in the case of the public sector although it was a legal requirement to have ‘whistleblowing’ arrangements in place, one-quarter of probation authorities did not have them in place in time for the 2002 Audit Commission audit. Although this data is relatively old, the recent findings of the Francis Inquiry re-emphasise the problems associated with the practical implementation of whistleblowing procedures. The Commission’s focus should be on providing support to strengthen arrangements and implementation.
The current categories remain, in our opinion, suitable for this purpose since category b) – failure to comply with legal obligations – is very broadly framed. The US example of misuse or abuse of authority would be a useful addition to the list as long as the parameters of authority are clear in any given case. The second US example cited, gross waste or mismanagement of public funds, is in principle attractive, though would appear to pose greater problems in terms of proof and attribution to specified individuals, and would conceivably risk encouraging politically-motivated or ill-informed actions.
In our view an alleged breach of employment contract, on its own, was not intended to be caught by the remit of PIDA and it is reasonable to make proportionate amendments to the Act to dis-apply protection where only contractual breach is an issue. If there is an additional public interest dimension, eg where an employee’s contractual rights are breached in the course of some public interest-related activity, or as a pre-emptive or retaliatory strike against the employee concerned doing anything about it such activity, then that should be capable of being covered by the Act. We believe that the Government’s amendments are sufficient to do this.
Given the changing nature of the workplace and increasing categories of worker we would agree that a broader more flexible definition should be designed to capture not least those categories outlined in the consultation, such as trainees, volunteers, interns, etc.
We agree so long as all employees are capable of being covered by such protections – they now have to wait two years before qualifying for unfair dismissal protection; the proposed protection should apply however long a person has being employed, as is the case with PIDA. We would suggest also that, should there in future be any provision for financial compensation, employees victimized in this situation should qualify too.
This is a concern and there is evidence to suggest that is an issue. The Francis Inquiry found that the nurse who was a whistleblower struggled to gain re-employment and was hounded out of the community. There is some merit in strengthening legislation along the lines of other legislation. Whistle blowers should be entitled to at least the same rights as trade unionists. In our view there is a good argument for saying that the blacklisting of a person subsequent to the making of a public interest disclosure should be a criminal offence.
It is often problematical for legislation to specify an exhaustive list of prescribed bodies for this purpose given the propensity for reorganisations to occur at this level over time. Also, more often those complainants will adopt a scattergun approach when making a complaint. In many cases this is because he/she is unclear about which regulator to approach e.g. the regulator, auditor or ombudsman etc. Because the complex regulatory system makes it difficult for individuals to navigate it effectively, it would make sense that more attention and clarity be given to clearly seeing out a list of prescribed persons within organisations procedures and codes to avoid the scatter gun approach.
The legislation will have to be amended to accommodate the National Audit Office’s new responsibilities as prescribed person for local authorities following the abolition of the Audit Commission in 2015. Also, there is an argument for the Financial Reporting Council to be added to the list of prescribed bodies, given that the FRC has oversight responsibility over accountancy and audit.
As an additional solution, we suggest that the possibility of some clearing house system, perhaps managed by Public Concern at Work be to address the likelihood that prospective reporters may not know which specific body to report to and the undesirable consequence that they will lose protection if they report to the wrong body.
Auditors in the public sector such as the Wales Audit Office currently have an active role in assessing arrangements for whistleblowing. For an auditor it is an important test of good governance. Auditors also have special responsibilities to fulfil as ‘prescribed persons’ under whistleblowing law. Some also publish results of PIDA investigations so that lessons can be learnt and improvements made. But this is not in all cases and in our view more can be done to achieve both consistency and collaboration between auditors and regulators. There are examples of good practice and these should be disseminated more widely e.g. The ‘Wales Audit Office Whistleblowing Update’. These types of arrangements could be extended across sectors.
Rather than the creation of a whistleblowing ombudsman we would prefer to see whistleblowing policies and procedures embedded into existing regulatory bodies. We don’t believe an additional layer of regulation will necessarily mean that investigations will be undertaken more effectively.
We agree that there should be some specialisation.
Yes, we agree that the referral of PIDA claims to a regulator should be mandatory.
Yes we agree that that genuine public interest claims should be treated separately.
Yes, we agree that the ET should have the power to refer regulatory or criminal matters to the appropriate bodies.