RegulationCorporate GovernanceWhistleblowers: keep dirty linen private

Whistleblowers: keep dirty linen private

A reliable whistleblower policy can help protect against unmanaged disclosures

Sherron Watkins

High profile: whistleblower Sherron Watkins brought down Enron and Anderson

With businesses looking to maintain a tighter hold on corporate governance,
the treatment of whistleblowers is now firmly in the spotlight. According to
recent research by Grant Thornton, the majority of workers who have blown the
whistle in the UK will encounter difficulties. This is because only 40% of UK
businesses have measures in place to accommodate those wanting to expose

Perhaps the best-documented example of whistleblowing, Sherron Watkins’ now
infamous memo sent to former Enron chairman Kenneth Lay, paints a very different
picture of the common exposé. While the then vice president of corporate
development was later hailed for her actions in exposing the company’s
accounting irregularities, the same certainly cannot be said for all
whistleblowers, many of whom are unwilling to disclose wrongdoing for fear of


While a whistleblowing policy is not necessary as a matter of law under the
Public Interest Disclosure Act 1998, it is certainly advisable and of clear
benefit in reducing the risks associated with unmanaged disclosures.

Importantly, it falls on business to protect those who wish to simply ‘do the
right thing’.
Such a policy must be built on a foundation of positive commitment from the very
top, not just to policy implementation, however, but to operating the business
in a manner designed to create a culture of openness and support for those
revealing malpractice. A statement of intent to this effect should be included
at the start of the policy, which should welcome input from staff and trade
unions to ensure it works in practice.

It is good practice to stress an expectation for the whistle to be blown on
wrongdoers, together with a reassurance for implicated parties to come forward
because this could result in lighter disciplinary sanctions. This approach would
mirror recent Treasury proposals, which could result in immunity from
prosecution for those identifying market abusers, alongside greater powers for
the Financial Services Authority – all prompted by the recent HBOS share price

The whistleblowing policy is not simply a grievance policy by another name
and this should be made absolutely clear. Individual complaints are more
appropriately raised through other means, including the grievance, equal
opportunities, or dignity at work policies. In addition, the whistleblowing
policy should not be seen as an appeal mechanism for any of these issues.

It is important for management to remain firm with employees who would use
whistleblowing to further their own agendas. Any person who has made allegations
which are found to be malicious or in bad faith, should be subject to
disciplinary action and this should be expressly stated.
Workers must have the ability to make disclosures through various means.

The first port of call should be the individual’s line manager but, should he
or she be believed to be responsible for, or complicit in, the wrongdoing, an
alternative route to board level, or equivalent, should be open. Although
whistleblowing policies should aim to deal with matters internally, an external
route should also be clearly communicated.

Steps in the investigatory process should be detailed and provisions should
be made for the whistleblower to be kept informed at regular intervals about the
progress of any investigations and proceedings.

Moral support

An individual making a disclosure should be treated as a ‘witness’ rather
than a ‘complainant’ and should be reassured if they make a disclosure in
confidence, they will be protected.

However, they should also be made aware there may be circumstances where the
matter cannot be resolved without their identity being revealed, such as where
their evidence is required in any subsequent court or employment tribunal
proceedings. Fostering a culture in which individuals feel they will be
supported through the process is, then, vital and you may wish to point
individuals towards a source of independent advice, for example, the charity
Public Concern at Work.

Once the policy is drafted, it must be clearly communicated and promoted,
making it less likely individuals will take their concerns outside the
organisation. This should also help deter people from wrongdoing in the first
place, given the increased chances of getting caught if colleagues are
encouraged and supported to report malpractice.

However effective a written policy sounds on paper, it needs be seen to be
working in practice.

Staff need to see it is taken seriously, with all reports investigated
thoroughly and responses which are consistently quick and effective. Adopting
such an approach to whistleblowing should help ensure any potential for
malpractice is caught while it is still a ripple, and is not allowed to become
the ‘wave of accounting scandals’ that Watkins’ memo forecast.

Protecting the whistleblowers

The Public Interest Disclosure Act 1998 (PIDA) provides protection against
dismissal and detriment for those looking to blow the whistle in the workplace.

Information which, in the reasonable belief of the individual disclosing it,
tends to show one or more of the following type of malpractice has, is, or is
likely to take place, will potentially qualify for PIDA protection.

a) A criminal offence (possible financial impropriety, fraud or corruption);

b) Failure to comply with a legal obligation;
c) Endangerment of health or safety;
d) Damage to the environment;
e) A miscarriage of justice; or
f) Deliberate concealment of any of the above.

The worker then has to show the disclosure was made in good faith and to
certain specified categories of person. Although PIDA encourages internal
disclosure to employers, in limited circumstances external disclosure to
government ministers, prescribed persons or bodies can also receive protection.

‘Workers’, including home workers, trainees and agency workers, have the
right not to be subjected to any detriment on the ground that they have made a
protected disclosure.

There is also a right not to be dismissed if the reason for which is the
making of a protected disclosure. This applies to the narrower category of
‘employees’. One year’s service is not required in order to bring a claim
related to whistleblowing. The protection applies from day one in any job and
there is no cap on the amount of compensation that can be awarded.

Jane Fraser, partner and head of the employment team at
Maclay Murray & Spens

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