Corporate Social Responsibility
From pariahs to protectors: The evolution of how employers are treating whistleblowers
Whistleblowing used to be a dirty word for employers and senior management. But Shannon Walker, founder and president of Vancouver-based WhistleBlower Security (WBS), said she has seen a “paradigm shift” in how organizations are handling allegations of wrongdoing.
“I can remember meeting with board members of some forestry companies out here and mining companies. And they were like ‘Why would I want a whistleblower? I don’t want a snitch line.’ And that was the approach,” she said.
Whistleblowers themselves were often put through the wringer, she said. One of the most infamous cases of whistleblowing involved Sherron Watkins, a vice-president at Enron in the United States. In 2001, she cast a spotlight on the company’s dubious accounting practices, which involved inflating profits and hiding debt off the balance sheet. While she wasn’t fired for her efforts to highlight wrongdoing, she lost friendships and it changed the trajectory of her career.
“They view me as the person that blew everything up when I’m not the one that cooked the books or allowed the books to be cooked,” she told NBC News in Houston in 2021.
Enron collapsed in 2001, filing for bankruptcy — the largest firm ever to go under at that point in U.S. history. The fallout from that meltdown included the conviction of top executives and the creation and passing of the Sarbanes-Oxley Act (SOX) in the United States. That law set a precedent for the future of corporate ethics by mandating protection for whistleblowers in publicly traded companies.
But compliance isn’t the only reason companies are actively encouraging employees to come forward. Another incentive for organizations is money.
“There are financial rewards that come out of encouraging this type of behaviour,” said Walker. “It’s about reputational protection.”
City of Hamilton’s hotline
In Ontario, the City of Hamilton set up a confidential hotline to report fraud, waste or wrongdoing at the municipality. Between July 2021 and June 2022, it received 107 allegations — and Charles Brown, the city’s auditor, was able to prove 32% of the claims. In real dollars, it amounted to $710,000 in waste or mismanagement, including a manager awarding “substantial business” to two individuals over a period of several years, according to a report by CHCH. There was also a case where city-issued iPads ended up being sold on Facebook marketplace.
It led to at least two terminations with some other employees resigning or retiring, according to the report. And, Walker added, it led to a lot of coaching at the city and a “bunch of processes that had to get retrofitted based on that information.”
Another example she pointed to involved an anonymous employer that was having an issue with someone leaking information about its biggest client. They set up a hotline and held a special town hall for all staff where the CEO spoke directly about the problem and asked for people to come forward.
“Within 24 hours they had the perpetrator identified,” said Walker. “They had employment lawyers there and they cleaned everything up. But the really important part of this story is that the staff said, ‘Thank you for putting this system in place, because now we know you want to hear what’s going on.’ It was really powerful for the organization to come together in that way. I think that their front-line staff felt that management didn’t care.”
Creating a ‘speak-up culture’
For whistleblowing to be effective, organizations need to create what Walker calls a “speak up culture” — and be serious about it.
That means open lines of communication, encouraging feedback and having anti-retaliation language in your policies, she said.
“We expect feedback, so if you see something is amiss, you are expected to speak up and we’re going to provide you with the tools to speak up, confidentially and anonymously if you wish,” said Walker.
There are a number of ways employers can enable staff to speak up, including using basic employee surveys.
“Ask how everything is going in the office. Are there any issues, flags of any kind and just do a more generic pulse check of the organization,” she said. Another route is to consider putting an anonymous complaint line in place that allows people who might be intimidated about speaking up or filling out a survey to have a voice.
While it’s not possible in every case, Walker also advocates for closing the loop on complaints and sharing information with staff. Too often, organizations don’t act on information and that can cause cynicism.
“Or maybe it makes them nonchalant. Why am I going to bother reporting because they’re not going to do anything about it?” she said.
“It’s a holistic approach to it, where you encourage a speak-up culture, you share what you can about the reports or the feedback that you get from staff, and then you share the outcomes — at a level that you can, so they know their feedback is actually being heard and acted upon.”
One client, for example, sends out a “sanitized” case in the company newsletter about a report that came through the hotline.
“It sort of becomes water cooler discussion. People would be shocked or laugh their heads off at the types of schemes that people did at their organization,” said Walker. “It became kind of part of the corporate culture.”
Walker argues that employers should seek to hire workers with a whistleblower mindset. The best way to do that is to actively promote the speak-up culture and that you expect transparency from your staff while recruiting, she said.
“People who whistleblow are people with a moral compass, and they’re trying to do the right thing,” she said. “
This is where the stigma from the past really needs to be discouraged, because I think whistleblowers should be celebrated. Those are the employees that you want, because they’re going to protect your organization.”
She points to the Time magazine cover in 2002 with the headline “The Whistleblowers.” It named Enron’s Watkins, along with Cynthia Cooper of Worldcom and Coleen Rowley of the FBI, as its “Persons of the Year.”
“Time magazine was holding them up to say these are the people who should be celebrated, because they were trying to save catastrophic disaster for their organizations,” said Walker.
Beyond SOX, there are more rules and regulations — and best practices — coming into force all the time. In the European Union, for example, companies with more than 250 employees are already required to have a whistleblower mechanism in place.
“And at the end of this year, companies with over 50 employees have to have at least an internal mechanism in place for people to be able to be safe and speak up,” said Walker. “This regulatory support is also moving us along that continuum to say that we want to hear from our front-line staff.”
She also points to the so-called “Iceberg Theory” that states management is only about 4% aware of issues facing an organization while front-line staff are aware of 100% of the issues.
“This disconnect is really quite detrimental to an organization,” said Walker.
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