Whistle-blowing could have prevented all sorts of corporate collapses in Australia- from ones involving downright fraud like HIH to ones where inexperienced management lost … well, the entire State Banks of Victoria and South Australia.

An essential ingredient in any whistle-blowing program is the commitment from each organisation to encourage reporting, act on the reports where they have been verified and to protect reporters from any adverse consequences. The first required element in a best practice whistle-blowing program is a clear statement by senior management of organisations in support of the concept of reporting wrongdoing and the principal of whistle-blowing. Senior management also need to commit themselves to undertaking a credible investigation process upon receipt of reports and, where some wrongdoing or failure has been verified, acting upon that. Not only should these commitments be reflected in policies and procedures, they need to be actively pursued on a day-to-day basis.

This means that organisational management need totake every opportunity to commit themselves to encouraging reporting and protecting reporters – walking the talk. This needs to be backed up with training and awareness. The research has shown that in many organisations, even where there is commitment from senior management to the principles of whistle-blowing, that line managers can sometimes be sceptical and obstructive.

In Australia, legislative frameworks have long been considered fundamental to encouraging and managing public interest disclosures. Since 1993, almost all Australian jurisdictions have put in place relevant legislation - including the Corporations Act's new Part 9.4AAA entitled “Protection for Whistleblowers.”

This legislation affects all Australian companies and establishes a framework designed to encourage employees, officers and subcontractors engaged by a company to report suspected breaches of the corporations legislation to either ASIC or throughinternal company channels.. A whistle-blower hotline is probably the easiest and least expensive means available to improve corporate governance.  Waste, fraud, and the abuse of authority can all be combated by having an independent reporting mechanism that uses employees to report malfeasance. In 2005, the American Institute of Certified Public Accountants recommended that all organisations implement a whistle-blower system for reporting wrongdoing.  "A key defence against management override of internal controls is a process for anonymous submission of suspected wrongdoing … Various forms of fraud are detected 40 percent of the time by tips, which [makes] this the leading method of detecting fraud."

Investigations often demonstrate that co-workers are aware that something was amiss well before management had a clue.  While some employees are comfortable reporting concerns through an open-door policy, others are not.  Despite policies to the contrary, there is sometimes still the fear of retaliation by either informal peer groups, or by supervisors.

A compliance program may well turn something up before it gets to ASIC, corporqte losses or criminal prosecution. Ask us for details.