Ensure your company is clean as a whistle

In the flurry of activity that comes with a new financial year, you may have overlooked significant changes to the Corporations Act which better protect whistleblowers. Even if you’re confident everything is ‘above board’ in your business, the new legislation is noteworthy for all public companies and large proprietary companies because it requires a compliant whistleblower policy to be in place by 1 January 2020, and made available to all employees. 

Even if you’re not required to have a policy, the new provisions introduce a range of new protections for whistleblowers and obligations on all companies, regardless of size. Flouting this legislation carries some severe penalties, including fines and jail time, so it’s essential to pay attention to these new protections.

Why do we need a policy?

Financial penalties aside, having a rigorous whistleblower policy in place is a matter of good corporate governance and risk management. Whistleblowers are often compelled to come forward, despite the personal toll it can take on their mental and financial health. The strengthened protections enable them to come forward and report wrongdoing by reducing the risk of reprisal.

Being transparent about how you’re prepared to handle disclosures of wrongdoing can also instil greater compliance while also promoting a culture that values ethical behaviour and openness. A good whistleblower policy has the added benefit that if something were to ever go awry, there’s an increased likelihood it will be reported while it can still be fixed – reducing the probability of financial and reputational damage.

In the wake of the Financial Services Royal Commission, there’s greater demand for companies to align with community expectations and embed mechanisms to hold wrongdoers to account. Governance is no longer about compliance but being proactive about being an exemplary corporate citizen.

What must the policy cover?

To ensure you have a complying policy it must include; –  
  • the protections available to whistleblowers
  • ways of making a disclosure (and how it will be investigated) 
  • how the company will support and protect whistleblowers 
  • how the company will ensure fair treatment of employees who are mentioned in whistleblower disclosures  
There’s no one size fits all approach to handling whistleblowing. Often, a company’s size and structure will need to be considered. If a company has multiple reporting lines or overseas operations, there’s an added level of complexity. As Australia has some of the most stringent whistleblower protections in the world, it may be desirable to adopt the policy on a global basis.

What else do I need to know?

The enhanced whistleblower protections have other implications than just the need for a policy. It also expands the scope of people eligible for protection to anyone who deals or has dealt with the company including former employees, current or past contractors and suppliers, and their family members.

Perhaps the most significant change is the ability for the whistleblower to remain anonymous and still be protected. This development brings a new set of challenges because companies must find a way to guarantee anonymity. To address this issue, you may want to turn to a third party which provides whistleblowing solutions such as an online portal or hotline. You may also want to assign a designated ‘Whistleblower Protection Officer’ to support employees who come forward.

Regardless of whether a whistleblower wants to remain anonymous or be public in their claim, it's important that structures and processes are in place to protect the whistleblower. It would be dangerous to assume that a whistleblowers would prefer to take leave or resign just because they’ve made a disclosure, as many go on to have successful careers within the same company after uncovering wrongdoing.

An external specialist can also be recruited to run the investigation, which may be preferable when it also involves a workplace claim. It’s worth noting that ‘mixed’ whistleblowing claims, (concerning both a workplace grievance and an integrity issue) are now protected. These types of claims represent a significant proportion of whistleblowing disclosures and are often poorly handled.

It’s worth being aware that equivalent provisions have been inserted in the Taxation Administration Act relating to an improper state of companies’ tax affairs and these also carry penalties of fines and jail time. Whilst the protections don’t allow for emergency or public interest disclosures, the scope of information which can be protected is arguably wider than that under the Corporations Act, as it relates to any information that may assist the commissioner in their functions or duties.

How can we help?

All companies, regardless of size, will be subject to the new whistleblowing laws. With the deadline fast approaching to implement a whistleblower policy, Moore Stephens Victoria is available to assist in its drafting and to provide the necessary training support. Even if you already had an existing whistleblower policy prior to the new laws coming into force, it’s unlikely to be compliant.

Inaction is the biggest risk. Whistleblowers can make protected disclosures to a range of people and organisations. In certain circumstances, they can also turn to parliamentarians or the media and still receive protection. 

Ultimately a strong culture of ethical behaviour, including whistleblower protection, is likely to be one of a company’s best safeguards. It's often corporate fraud or wrongdoing that's brought to light, from employees stealing money to managers engaging in conduct that leads to an investigation or fine. The earlier you can uncover it, the earlier you can lessen its impact.