Whistleblowing

What is whistleblowing?

According to the International Organization for Standardization (ISO), whistleblowing “is the act of reporting suspected wrongdoing or risk of wrongdoing”. Janet P. Near and Marcia P. Miceli offer a more detailed definition, stating that whistleblowing is the disclosure by current or former organization members of illegal, immoral, or unlawful practices under the control of their employers to individuals or organizations that can take appropriate action.

There are two types of whistleblowing:

• Internal: This involves reporting irregularities within an organization, such as a bank.
• External: This involves reporting irregularities to an external entity, such as a regulator or government bodies.

Where does the concept of whistleblowing come from?

Whistleblowing figuratively suggests sounding the alarm or drawing attention to improper or illegal behavior. The term was popularized by Ralph Nader, a politician and attorney. In 1971, Nader co-organized the Conference on Professional Responsibility, dedicated to the topic of whistleblowing, where he expressed the view that whistleblowing is the act of individuals who, believing the public interest outweighs the private interest of their organization, report corruption and illegal or dishonest workplace practices.

Whistleblowing in legal terms globally

Since the 1970s, the concept of whistleblowers has been variously defined and codified by different countries. To harmonize legislation among member states and legal standards related to the protection of whistleblowers, the European Parliament and the Council of the EU established a directive on the protection of persons who report breaches of Union law on October 23, 2019. Member states were required to implement appropriate executive measures by December 17, 2021.

In the United States, whistleblower protections are well-established through various federal and state laws. Key federal statutes include:

• The False Claims Act (FCA): Enables individuals to file lawsuits on behalf of the government for false claims and includes protections against employment retaliation.
• The Whistleblower Protection Act of 1989: Safeguards federal employees who report government waste, fraud, or abuse.
• The Sarbanes-Oxley Act of 2002 (SOX): Provides protections for whistleblowers in publicly traded companies who report fraud or violations of SEC rules.
• The Dodd-Frank Act of 2010: Broadens protections, particularly in the financial sector, and offers monetary incentives for reporting that leads to successful SEC enforcement actions.
• The Occupational Safety and Health Act (OSHA): Defends employees who report workplace safety violations.

Additionally, many U.S. states have their own laws that protect whistleblowers, and many companies have internal policies to protect and encourage reporting of misconduct. This legal framework incentivizes whistleblowing to maintain transparency and accountability in both the public and private sectors.

Who is a whistleblower?

A whistleblower is “a person who exposes information that he or she reasonably believes, at the time of disclosure, to be true and to constitute a threat or harm to a specified public interest, such as a violation of national or international law, abuse of authority, waste, fraud, or harm to the environment, public health or public safety”.

A whistleblower must always act in good faith, supporting their actions with facts and should not be primarily motivated by personal reasons – e.g., a sense of injustice, desire for revenge, or personal interests. Their motivation might be driven by an internal sense of justice, resistance to playing the role of a silent witness, empathy, or a sense of responsibility for their duties. Importantly, the motivations of the whistleblower at the time of disclosure should also be irrelevant to assessing their protected status.

A whistleblower can be, for example:

• a full-time employee of a company, a temporary worker, or a worker employed under a civil law contract;
• an entrepreneur, shareholder or partner, a member of a legal entity or an organizational unit without legal personality;
• a person working under supervision and management of the contractor, subcontractor, or supplier (including under a civil law contract);
• an intern, volunteer, trainee;
• officer, or soldier (in relation to their service in a given entity).

However, a person can also be considered a whistleblower before starting employment or after its termination if they have information about irregularities in a given company.

Whistleblowing: Benefits and opportunities

Whistleblowers are often condemned as traitors or informants, and reporting irregularities is still viewed by many as detrimental to a company or institution. Many irregularities and threats remain unreported because potential whistleblowers fear negative consequences such as exclusion or dismissal from work.

However, it is in the best interest of companies and institutions to promptly receive reports of irregularities, as early detection and resolution of problems:

• Helps avoid significant financial losses (prevents loss of assets or aids in recovering lost assets) or criminal liability;
• Attracts and retains employees who identify with the values and culture of the company;
• Builds the company's image as an ethical organization in the eyes of customers, competitors, and other stakeholders.

Therefore, it's important for an organizational culture to present the process of reporting irregularities in a positive light and to actively encourage employees to engage in such activities. Moreover, a company should:

• Demonstrate that all its employees, including top management, comply with the law and adhere to ethical principles;
• Clearly define the values on which its culture is based and the principles it implements in daily operations, including desirable and unacceptable behaviors and attitudes;
• Consistently implement values and maintain standards;
• Organize internal processes according to ethical principles and monitor whether these principles are actually being adhered to, e.g., by conducting regular surveys and training personnel;
• Limit and prevent harmful treatment of whistleblowers and other involved individuals;
• Provide employees with access to tools that enable the free reporting of irregularities while maintaining anonymity.

How can a company protect its whistleblowers?

A whistleblower can report irregularities openly, confidentially, or anonymously.

By opting for open reporting, a whistleblower agrees to full disclosure of their identity – both to those involved in clarifying the report and to outsiders. Such a report could be made, for example, during a 1:1 meeting with their supervisor.

In the case of confidential reporting, the identity of the whistleblower is known, but their personal data is kept secret and not shared with unauthorized individuals.

Anonymous reports do not disclose the personal data of the reporter and in no way allow for their identification (e.g., through the use of communication channels that prevent identification).