Latimer, Paul --- "Heroes or traitors?" [2006] MonashBusRw 9; (2006) 2(1) Monash Business Review 34

Heroes… or traitors?

Paul Latimer

A good whistleblower policy can empower staff, help avoid crises, minimise bad press and reassure customers and regulators, according to Paul Latimer.

The pin-up whistleblower of recent times is former Enron Vice President Sherron Watkins who warned management of elaborate accounting hoaxes to inflate profits. She may have been sidelined, despised and reviled by Enron but to the rest of us she was Time Magazine’s Person of the Year in 2002, and a courageous thorn in the side of the Enron behemoth that had long since given up on tiresome trappings of corporate morality.

Whistleblowers like Watkins who go public on fraud or misconduct perform a valuable and essential public service, shining a light on the shadowy corners of corporate graft and corruption. However, the common law has mixed feelings towards whistleblowers and seems to oscillate between treating them as heroes and traitors.

Whistleblowers need strong protection laws to persuade them to come forward without fear of retaliation. Time Magazine reported in 1991 that:

[O]f 23 whistleblower studies, 90 per cent were sacked or demoted for their pains and 27 per cent faced law suits, usually for breach of confidence or defamation. About a quarter of the whistleblowers subsequently required psychiatric or medical treatment and a similar number admitted alcohol abuse. Some 17 per cent lost their homes, 15 per cent later divorced, 10 per cent attempted suicide and 8 per cent ended up bankrupt.

Who would do it?

Reasons for whisleblowing range from: a higher duty, revenge, to avoid punishment themselves, to attract attention, to reap a reward, or to act for personal safety by reporting defective machinery or dangerous work practices.

Whistleblowers in Australia are protected by Protected Disclosures Acts and Whistleblowers Acts in all jurisdictions (the Northern Territory is introducing legislation at the moment). Most follow the NSW Act which aims “to provide protection for public officials disclosing corrupt conduct, maladministration and waste in the public sector”. Whistleblower agencies or integrity institutions like the Ombudsman, the Auditor-General or equivalent, receive, screen and investigate disclosures, ensure advisory and counselling services are available and educate the public about the legitimacy of whistleblowing in a democratic society. There are often disclosure requirements – with whistleblower protection – in financial reporting legislation, passed to fight the underground cash economy, tax evasion and concealment of organised crime.

Good corporate governance

Whistleblowing should not be seen as confronting or troublesome. A whistleblower policy can empower staff, help avoid crises, minimise bad press and reassure customers and regulators that a company might hear about a wrongdoing in time to prevent serious damage. It saves resources which may otherwise be spent in crisis management and may also reduce the chance that workers will take their concerns to the media.

There must be independent whistleblower authorities/integrity institutions to encourage and receive whistleblower reports, and to provide backup and support. Such an authority should provide counselling, legal protection, legal representation and employment protection.

The following should be included in the ideal whistleblower model:

• A statement to support the principle of disclosure by whistleblowers

• Incentives and rewards for disclosure

• Application to both the public and the private sectors

• Disclosures of misconduct by Australian business overseas

• Matters of national security, police and security services should not be excluded from whistleblowing protection

• Wrongdoing that can be disclosed, such as fraud or misconduct, should be a protected disclosure

• Whistleblowers making protected disclosures should be relieved of civil and criminal liabilities so as to deter others from taking reprisals

• The whistleblower template should be both retrospective and prospective – we all know what is misconduct or fraud, and it should not be protected just because it occurred before the commencement of the legislation.

• There should be immunity for disclosure if the whistleblower believes on reasonable grounds that the information on fraud or misconduct was true or that it may be true. False, misleading or frivolous reporting could be discouraged with penalties under the template

• Codes of conduct and whistleblowing procedures should be mandatory for all organisations to facilitate the making of disclosures and to set out how they will be dealt with

• An independent whistleblowers’ authority or agency should be established to receive, screen and investigate disclosure; communicate its decision within a fixed time scale; ensure that advisory and counselling services are available; give advice and assistance, and educate the public about the legitimacy of whistleblowing in a democratic society

• The whistleblowers’ template should be reviewed and refined in the light of experience.

The modern whistleblower is a vital tool in the fight against financial and economic crime. Pressures not to blow the whistle must be identified and protected by adequate legislation.

Cite this article as

Latimer, Paul. 'Heroes… or traitors?'. Monash Business Review. 2006.; Monash University ePress: Victoria, Australia. http://www.epress.monash.edu.au/. : 34–35. DOI:10.2104/mbr06009

About the author

Paul Latimer

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Paul Latimer BADipEd (UNSW), LLM (Syd) is an Associate Professor in the Department of Business Law and Taxation. He is a principal researcher of an ARC-funded project on whistleblowing, Whistling While They Work: Enhancing the Theory and Practice of Internal Witness Management in Public Sector Organisations, based at Griffith University. He is best known for his book Australian Business Law (CCH), now in its 25th annual edition (2006).