“An effective whistle-blowing framework for reporting any illegal or unethical behavior minimizes the Company’s exposure and prevents recurrence.” Principle 19, Nigerian Code of Corporate Governance, 2018.
Whistle-blowing is generally defined as the disclosure by members of an organization (former or current) of illegal, immoral or illegitimate practices under the control of their employers, to persons or organizations that may be able to effect action. Within the corporate context, whistle-blowing is the disclosure of information by an employee or any stakeholder who alleges willful misconduct carried out by an individual or group of individuals within the organization. The CBN Guidelines on Whistle-blowing for Banks and other Financial Institutions in Nigeria describes whistle-blowing as “the reporting of alleged unethical conduct of employees, management, directors and other stakeholders of an institution by an employee or other person to appropriate authorities”.
Principle 19 of the Nigerian Code of Corporate Governance, 2018, requires the Board to establish a whistle-blowing framework which encourages stakeholders to bring unethical conduct and violation of laws and regulations to the attention of an internal and/or external authority so that action can be taken to verify the allegation, apply appropriate sanctions or take remedial action to correct any harm done.
The Buhari Administration introduced a National Whistleblowing Policy under which according to Zainab Ahmed, the Minister of Finance, has led to the recovery of N605billion as at May 2019. At the corporate level, the 2018 Association of Certified Fraud Examiners (ACFE) Report to the Nations on Occupational Fraud and Abuse, reported that tips are by far the most common initial detection method with 46% of cases being detected by a tip. The report also states that globally, fraud losses were 50% lower in organizations with whistleblowing hotlines than those without.
The NCCG Code recommends that Boards should ensure that a reliable and accessible whistle-blowing mechanism exists which guarantees the anonymity of the whistle-blower. All disclosures resulting from whistleblowing are required to be treated in a confidential manner with the identity of the whistle-blower kept confidential. The Board should ensure the effectiveness of the whistleblowing mechanism and continually affirm publicly, its support for and commitment to the Company’s whistle-blower protection mechanism.
The content of a whistle-blowing policy or “speak up policy” may include additional sector-specific legal requirements and peculiar industry practices. An effective whistle-blowing policy should set out the objectives of the policy and emphasize that the Company’s interest in the disclosure of unethical conduct is beyond regulatory compliance. It should clearly state the Company’s intention is to encourage and enable stakeholders raise serious concerns within the company, rather than ignoring a problem or ‘blowing the whistle’ outside especially to the press. The policy must clearly define its scope and those to whom it applies – which typically would be staff, shareholders, customers/clients and other stakeholders.
It is also a useful practice to describe the kind of information the Company desires to be disclosed. Whilst disclosures often relate to financial information such as fraud, embezzlement and misappropriation, the NCCG Code emphasizes that a whistleblower can disclose any information related to a violation or suspected violation of any law or internal policy connected with the business of the Company, its employees or stakeholders. The policy should encourage disclosure of concerns that could have a significant impact on the company- such that it is differentiated from routine feedback and grievance channels available to employees. The whistleblowing policy could be linked to the company’s code of conduct and cover serious code violation. The code of conduct should provide examples of possible breaches of the code of conduct and guide employees on how they should evaluate whether an act (or inaction) constitutes Code violation.
A whistleblowing policy should provide details of internal and/or external persons to whom disclosure may be made. The NCCG Code recommends that the team responsible for managing disclosures obtained through the whistle-blowing mechanism should provide the Audit Committee with a summary of reported cases, cases investigated, the process of investigation and the results of the investigations. The team may comprise internal persons such as line managers, the Managing Director/Chief Executive Officer, Head of Human Resources, Internal Audit, Company Secretary or Legal Counsel, designated Ethics Officer, Board Audit Committee or Chairman of Statutory Audit Committee. Line management is generally perceived as less independent. Although line managers can be included as potential recipients of disclosures, the policy should include persons who are likely to be more independent of Management. The policy should also require all complaints to be documented.
It is not recommended that the whistleblowing policy prohibits or strongly discourage employees from raising concerns to external parties, such as the regulatory bodies but must encourage stakeholders to exhaust internal reporting procedure prior to external communication. The policy should not be an attempt by the organization to circumvent disclosures to regulatory bodies, ass such disclosures may be justified in certain cases – including tax fraud or software piracy.
The policy should require giving the company the opportunity to investigate the complaint whilst allowing the use of an external reporting mechanism where the whistle-blower is of the view that the complaint is best handled externally. The report must be made in good faith and not for the purpose of personal gain. It is not unusual for companies to outsource their whistleblowing mechanism to a third party. While outsourcing the Whistleblowing apparatus typically guarantees anonymity, confidentiality, independence and effectiveness, it should not substitute the oversight role of the Board.
The policy should also be designed to ensure that concerns can be raised about wrongdoing or malpractice within the company without fear of victimization and reprisal in any form. The Board should pay keen attention to the treatment of whistleblowers. The Code provides that the Board should ensure that no whistle-blower is subject to any detriment on the grounds that he/she has made a disclosure. Where a whistle-blower has been subjected to any detriment, he may present a complaint to the Board and/or regulators and may be entitled to compensation and/or reinstatement as appropriate.
Acknowledging the receipt of a disclosure if the identity of the whistleblower disclosed provides comfort that the issue is taken seriously internally and forestalls escalating the concerns externally. Investigation and confidentiality should be assured and the whistleblower should be informed of the progress and outcome of the investigations.
The policy should clearly detail sanctions for those found to have taken reprisal actions or victimized the whistleblower. Whilst discouraging malicious allegations by prescribing disciplinary action for such, it should be emphasized that complaints made in good faith and with reasonable belief will not result in disciplinary action.
The Code provides that anonymous reporting should not be prohibited or disregarded. The policy should state that concerns expressed anonymously will be investigated with consideration given to the seriousness of the issue raised, the credibility of the concern and the likelihood of confirming the allegation from other sources.
The whistleblowing policy should be widely disseminated to relevant persons covered by the policy. This may include posting the policy on notice boards, including the policy in the employee handbook and in particular, on the company website. Periodic information sessions should be used to communicate Management’s commitment to the policy.
Whistleblowing does not only have the capacity to eliminate wrongdoing but can also bring rewarding effects to both the organization and the employee. It plays a critical role in enthroning good Corporate Governance practices and organizational growth. A whistle-blowing policy is a useful tool for the Board to actualize its top priorities- ensuring transparency and good governance. It engenders a culture that reduces risk and enhances transparency and ethical conduct which in turn is by far the surest way of ensuring the sustainability of the enterprise. Corporate Strategy as crucial as it is in corporate success, crumples like a pack of card in the face of corrosive unethical corporate culture.