Strategy & Operations » Legal » The price of blowing the whistle

THE QUESTION of whether those who lift the lid on malpractices at their companies – so-called whistleblowers – should be handsomely financially rewarded has been generating significant debate in the UK.

In the US, providing monetary incentives is commonplace. A recent high-profile example being the multi-million dollar payout to the whistleblower at the multinational biopharmaceutical giant Amgen over allegations it paid kickbacks to long-term care pharmacies to increase the use of an anaemia drug in nursing homes.

So, should we adopt the same tactic in the UK and pay whistleblowers for coming forward? Would it incentivise more staff members to expose wrongdoing – understanding the pressure that many feel to ‘keep quiet’ – or would it instead be a catalyst for divisive, potentially malicious workplace behaviour?

Current levels of protection for UK whistleblowers were enshrined in statute with the introduction of the Public Interest Disclosure Act in 1998, which ensures that workers are not deterred from raising exceptionally sensitive matters, such as disclosure of a criminal offence, breach of a legal obligation, danger to the health and safety of any individuals and damage to the environment.

The Act also makes the UK one of the strongest regimes in Europe for the protection of whistleblowers against retaliatory behaviour by their employer. It makes the dismissal of an employee who makes a ‘protected disclosure’ automatically unfair and compensation is unlimited.
The disclosure is protected if it is made under certain conditions e.g. to the employer, either directly or via procedures authorised by the employer for that purpose.

Importantly, disclosures must be made in the public interest and when the worker can reasonably believe the information is substantially true. If it is made to third parties, such as journalists, it must not be for personal gain. So providing a large personal financial reward would overturn one of the principles underlying the original law.

The basis for offering a reward is in recognition of the barriers to whistleblowing and the potential cost paid by the individual in terms of stress and the possibility that he/she will never find employment again. Paul Moore, the HBOS whistleblower and former group head of regulatory risk, said in an interview with the Financial Times last year that the process ‘nearly killed him’. He is probably not alone in finding there can be a high price to pay when it comes to ‘doing the right thing’.

That said, paying recompense is seen by the majority of our members as a step too far when they were surveyed following the publication by the Department for Business Innovation & Skills of The Whistleblowing Framework (July 2013). It is also the view of Philip Sack, the IoD’s senior adviser on employment policy. There seems to be no appetite from employers in this country for additional regulation on the issue or greater individual rewards that might encourage spurious claims.

There is undoubtedly a need to find the right balance between encouraging genuine whistleblowers with useful information to put forward to the board, and deterring mischievous individuals who might use the process for less constructive or self-serving purposes, but current UK legislation seems to do a pretty good job in striking this balance.

However, directors can usefully take steps to protect their organisations through whistleblowing policies that require staff to comply with specific internal reporting procedures when they become aware of malpractice. This ought to include the option of raising concerns outside of line management and access to confidential advice from independent bodies – which may raise the concern on behalf of the member of staff. In addition, it should be as much a disciplinary matter to victimize a bona fide whistleblower as it would be to make malicious or false accusations.

In reality, this approach may be expected within larger companies. But, taking this one step further, those same boards might consider adopting the recommendations of the Parliamentary Select Committee on Banking which were to make whistleblowing the responsibility of individual board members. Something to consider, perhaps.

Roger Barker is director of corporate governance and professional standards at the Institute of Directors