Whistleblower protection is gaining traction in many nations but “much remains to be done” according to an OECD report published last month titled “Committing to Effective Whistleblower Protection”. For individuals reporting corporate misconduct such as bribery, this is especially true as whistleblower protection in the private sector is still “almost a legal vacuum”.
The report is largely provided in the context of the reporting of foreign bribery (through mechanisms such as the Foreign Corrupt Practices Act) because of the OCED’s work on the Anti-Bribery Convention and its implementation by the OECD Working Group on Bribery.
As much as we may find particular areas of protections here in the United States lacking, we are still proud that our country is considered a leader in anti-retaliation protection measures.
Public Sector Whistleblowing
Our emphasis here at McEldrew Young Purtell Merritt is rarely on “public sector” whistleblowers (by this we mean individuals working for the government), but it was heartening to note from the report that most OECD countries responding to a 2014 OECD survey offered some protection for public sector whistleblowers. There is also an “emerging consensus on the need for protection” according to the report with numerous multilateral anti-corruption treaties calling for protection of individuals reporting in good faith suspected acts of corruption.
Yet, even in an area where there has been improvement, it continues to occur on an “ad hoc basis”. We need to look no farther than here in the United States, one of the established leaders in this field, to see that there is still more to do over the next few years both in refining the scope of protections and changing attitudes so that the protections are less necessary.
For those interested in the public sector, it is a particular emphasis of this report. It provides case studies of how the whistleblower protections work for public sector employees in Belgium, Canada, Chile, Ireland, Switzerland and the United States of America.
Private Sector Whistleblowing
Private sector protections for bribery whistleblowers have fallen short in many countries, according to the OECD Report. Of the 41 Parties to the Anti-Bribery Convention, only 14 have adopted satisfactorily the 2009 Anti-Bribery Recommendations for whistleblower protections.
Issues with protecting whistleblowers may explain the low internal and external reporting of corruption problems. Only 2% of foreign bribery cases are brought to the attention of law enforcement by whistleblowers. A higher percentage of self-reporting companies first learn about the foreign bribery through whistleblowers, with 17% receiving an internal report, but that still falls short in comparison to the amount discovered through an internal audit or M&A due diligence.
Although we would expect employees on the ground to be an important line of defense against corruption, those numbers seem shockingly low. We will have to wait to see if these numbers are ultimately impacted by the authorization of rewards for FCPA whistleblowers through the Dodd-Frank Act and SEC whistleblower program.
The OECD report also noted the need for protection of both internal and external reporting by individuals of an organization. The 2015 OECD Survey on Business Integrity and Corporate Governance exposed a big problem for internal compliance programs relying on internal reporting: 86% of corporations have a mechanism to report corporate misconduct but over one-third of these businesses lack a policy protecting whistleblowers or the surveyed employee was unaware that a policy existed.
We have seen the importance of internal whistleblower protections play out here in the courts through the Dodd-Frank Act, with the Securities and Exchange Commission steadfastly arguing in favor of anti-retaliation protections for internal reporters as a necessary keystone to encourage external reporting. Hopefully, as retaliation protections and awareness increase internationally, the percentage of both insider and external reports will grow.
The United States has been at the forefront of both authorizing financial rewards for whistleblowers as well as anti-retaliation protections over the past decade. We are hopeful that other countries will adopt additional protections over the next few years, as they begin to recognize the important role external tips can play in law enforcement actions and unmasking corporate wrongdoing. It is still too early to say how that movement will play out, but it is encouraging to see reports such as this one that details international players thinking about the importance of these issues.
For the report, click here.