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Introduction
This article seeks to explore the possible benefits and drawbacks of whistleblowing in commercial transactions. Whistleblowing has no universally accepted definition.[1] However, it is generally used for any disclosure about unethical or corrupt acts.[2] That is, an act of someone who, believing that the public interest overrides other interests he serves, blows the whistle that someone or an organization is involved in an illegal, fraudulent, corrupt or harmful activity.[3] This alleged misconduct may be ‘a violation of a regulation, law or direct threat to the public interest such as health /safety violation, fraud and corruption.’[4]
There are generally two types of whistleblowing: internal and external.[5] Internal whistleblowing occurs where the recipient of the report of wrongdoing is the higher management in the organisation. Whereas, it is external if the whistleblower irrespective of whomever, decides to go public,[6] and this often occurs where no channel of reporting exists or the whistleblower is not comfortable or confident to use the internal channel or there has been delays or lack of response to concerns raised.[7]
Commercial activities generally thrive on good business enabling environment, and this includes norms and customs, laws,[8] guidelines,[9] policies[10] etc, that facilitate the movement of a product or service along its value chain. One of such policies is a Whistleblowing policy (WP). A WP creates an open, transparent and safe working environment where workers feel free to speak up. It generally covers the nature of the information to be disclosed, avenues of reporting, process, aims and objectives of the policy, duty to disclose, option to report anonymously, protection from retaliation etc.
Benefits of a Whistleblowing Policy
A. It offers the opportunity to make positive change and also helps in preventing wrongdoings.
At times, people may desire to expose illegal activities but find it difficult to, due to situations they find themselves. They may be faced with an unappealing circumstance of either covering the illegal act or potentially harming the public,[11] or exposing the illegal act and facing the fear of rejection based on betrayal. A WP offers opportunity to such potential whistleblowers who want to make such positive change. It also encourages employees to disclose wrongdoings and also protect those who are courageous enough to disclose such information.
B. Anti-Retaliation Provisions.
A WP always has anti-retaliation provisions. This is because whistleblowers often face dangers[12] such as retaliation against the whistleblower, in form of loss of job,[13] forced retirement,[14] and even death.[15] This anti- retaliation provisions should clearly provide an appropriate sanction that will be levied against perpetrators to deter reprisals, compensate whistleblowers and increase effective whistleblowing.[16] Thus, once a whistleblower establishes a prima facie case of suffering adverse treatment from the superior, investigations should be conducted by the appropriate authority, disciplinary action against the perpetrator instituted and restitution made to the whistleblower for any loss suffered where necessary.[17]
C. Channel of Reporting.
A WP always has different channels of disclosing wrongdoings. It may be made openly, confidentially, or anonymously. Most potential whistleblowers may be attracted to anonymous reporting because of the very high personal cost they may face for whistleblowing, and the reluctance to sacrifice a steady income. Anonymous reporting has the advantage of protecting the whistleblower better and causing people to focus on the merits of the message that is being conveyed rather than the possible motives of the discloser.[18] However, anonymity may seem unfair to the perpetrator, who is denied the identity of those who accuse him and the opportunity to answer them.[19]
D. Reward.
Most WPs attach financial or some form of non- financial incentives for potential whistleblowers. Like the Nigerian Whistleblowing Policy promises a whistleblower who has met all requirements a reward of, between 2.5 and 5% of any voluntarily returned funds.[20] This reward is essential to encourage the attitude of disclosing illegal activities. However, financial incentives as argued may not necessarily encourage whistleblowing[21] but rather may lead to unethical behaviour like malicious reporting, entrapment etc.[22] This arguably may not arise or maybe curtailed, as most whistleblowing policies make it mandatory that a whistleblower who makes false or malicious disclosure may face prosecution unless the whistleblower reasonably believes, as at the time of disclosing the information, that he believed the same to be true and made in public spirit and good faith.[23]
Drawbacks of Whistleblowing Policy
- Ethical Issues.
Generally, it is often emotionally, professionally, and otherwise, difficult to blow the whistle on ‘one’s employer, colleagues, or friends’.[24] Whistleblowing is a venture fraught with risks and dangers, with severe possible threats to safety.[25] It can affect the integrity and profitability of a business, and in some cases incur some financial impacts in terms of costly court cases, fines imposed by regulators, or compensation payouts, depending on the nature of the activity exposed. Also, some potential whistleblowers may not be forthcoming because of the very low probability of perpetrators being punished or in some cases the funds recovered or information disclosed being properly utilised.
- Anonymity and Protection from Victimisation, personal Losses and Liability.
Even with the anti-retaliation provision in the WP providing for a restitutionary relief, a whistleblower who exposes illegal activities, especially major fraud may suffer personal losses, including dismissal from work. Further, the fear of being ostracised by social groups may discourage whistleblowing. Ostracism may range from giving the whistleblower cold shoulders to full blown rejection, and this can pose a psychological challenge to the whistleblower. Whistleblowers may also suffer blacklisting in form of negative employment references, and maybe concerned as to violations of any fiduciary duties or confidential contractual agreements with the employer. A whistleblower who is unsure how his or her identity will remain confidential within the regulatory or investigating authority, or does not have the assurance of remaining anonymous may be reluctant to whistleblow for fear of victimisation.
- Data Protection Issues.
Data privacy rights may be an issue in whistleblowing procedures.[26] This is because whistleblowing schemes mainly involve the disclosure, collection, registration, storage, or destruction of data related to an identifiable person.[27] Organisations will need to be careful in handling such data.
[1] S Taiwo, ‘Effects of Whistle Blowing Practices on Organizational Performance in the Nigerian Public’ (2015) 6 (1) Journal of Marketing and Management 45.
[2] J Near and M Miceli, ‘Organizational dissidence: The case of whistle-blowing’[1985] 4 Journal of Business Ethics 4.
[3] R Nader and others, ‘Whistle blowing’ in N Rongine (ed), Toward a coherent legal response to the Public Policy Dilemma Posed by Whistle Blowing’ (1972) 23(2) American Business Journal 28; M Khan, ‘Auditors and the Whistleblowing Law’ (Accountants Today, April 2009) 13 <www.researchgate. net/ profile / Rashid_Ameerpublication/25603 6409_ Role _Typology_in_Corporate _ Governance_Buddies_Bullies_and_ More/links/ 0a85e52ec619dabbd6000000 / Role-Typology-in-CorporateGovernanceBuddies-Bullies-and-More.pdf>accessed 28 June 2022.
[4] N Hannigan,‘Blowing the whistle on health care fraud; should I?’ (2006) 18((11) Journal of American Academy of Nurse Practitioners 512.
[5] J Zhang and others, ‘Decision-Making Process of Internal Whistleblowing Behaviour in China: Empirical Evidence and Implications’ (2009) 88(1) Journal of Business Ethics in Greater China 26.
[6] H Bindu, ‘An empirical study of whistle blowing in pharmaceutical’ (2016) 3(6) International Journal of Multidisciplinary Research and Development 130.
[7] ‘Whistleblowing Guidance’ (Office of Gas and Electricity Markets (OFGEM) Research and Information Centre, 2013) 5 <www.ofgem.gov.uk/ofgem-publications/91022/external whistle blowing guidance-28-10-14 policyformat-pdf > accessed 28 June 2022.
[8] US’s Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 (Dodd-Frank Act.
[9] Central Bank of Nigeria (CBN)’s Whistleblowing Guidelines for banks and other financial institutions
[10] Nigerian Whistleblowing Policy 2016 (NWP 2016).
[11] J Pearce-Smith, ‘Fiduciary Duties of Employees’ (St John’s Chambers, June 2015) 3 <www.stjohnschambers. co.uk/dashboard/wp-content / uploads /Fiduciary-duty-talk-22.6 .15 .pdf> accessed 28 June 2022.
[12] S Wilmot, ‘Nurses and Whistleblowing: The Ethical Issues’ (2000) 32(5) Journal of Advanced Nursing 1056.
[13] G Rapp, ‘Beyond Protection: Invigorating Incentives for Sarbanes-Oxley Corporate and Securities Fraud Whistleblowers’ (2007) 87(2) Boston University Law Review 120.
[14] J Rothschild and T Miethe, ‘Whistle-blower Disclosures and Management Retaliation: The Battle to Control Information about Organization Corruption’ (1999) 26(1) Work and Occupations 107.
[15] F Alford, Whistleblowers: Broken Lives and Organizational Power (Cornell University Press 2007) 1.
[16] Rapp (n 13) 114.
[17] NWP 2016 (n 10).
[18] OFGEM (n 7).
[19] D Lewis, ‘Whistleblowing and Data Protection Principles: Is the Road to Reconciliation Really that Rocky?’ (2011) 2(1) European Journal of Law and Technology 2.
[20] NWP 2016 (n 10).
[21] ‘Financial Incentives for Whistleblowers: Note by the Financial Conduct Authority and the Prudential Regulation Authority for the Treasury Select Committee’ (FCA and PRA, July 2014) 2 <www.fca.org.uk/ publication/ financial-incentives-for-whistleblowers.pdf> accessed 28 June 2022; J Lee, ‘Corporate Corruption and the New Gold Mine: How the Dodd-Frank Act Over incentivizes Whistleblowing’ (2011) 77 Brook Law Review 315 – 20.
[22] Ibid.
[23] NWP 2016 (n 10) 3 and 4.
[24] P Bucy, ‘Private Justice’ [2002] 76 Southern California Law Review 61.
[25] ‘Whistleblowers Play a Key Role in Nigerian Anti-Corruption Push…at Their Own Risk’ (Fresh Speech Radio News, 26 April 2017)<https:// fsrn. org/2017/04/whistleblowers-play-a-key-role-in-nigerian-anti-corruption-push -at-their-own-risk/> accessed 28 June 2022.
[26] David Lewis, ‘Whistleblowers, Reasonable Belief and Data Protection Issues’ (2006) 35 (3) Industrial Law Journal 326. See also Bolton School v Evans [2006] IRLR 500 (Employment Appeal Tribunal).
[27] Ibid.