Can the new whistleblowing laws destigmatise disclosure?

Even with wider protections, it's best to seek legal advice before coming forward

After several years in the making, the first major update of Australia’s whistleblowing protections in almost two decades came into force on July 1. It aims to significantly improve the protections available for whistleblowers who report company misconduct. 

The new regulation applies to a range of entities defined under the Corporations Act.

Paul Andon, a professor in the school of accounting at UNSW Business School, has published research on whistleblowing. He spoke to BusinessThink about the new regime.

Who is legally able to be whistleblower?

The new legislation widens the net of possible people who can be eligible for protection as a whistleblower. Previously it was just people such as a current employee, officer, or contractor. Now, former employees and officers, as well as current and former suppliers, unpaid workers, and relatives of any of these categories of people can also be eligible whistleblowers.

What are some other expanded protections?

Other than broadening who is considered an eligible whistleblower, the new legislation also expands the net of eligible people you can report information to. Now you can actually be protected under certain conditions for public interest or emergency disclosures made to a journalist or a parliamentarian. Previously, eligible recipients were limited to an organisation’s auditor, senior manager, authorised representative, or the Australian Securities and Investments Commission (ASIC). The new legislation also notes that anonymous disclosures may be made, and expands the nature of the disclosures covered.

What is protected disclosure?

There are a number of things, and again the new legislation expands what sort of things can be disclosed. In the past it has mainly been around transgressions or contraventions of the Corporations Act, or the ASIC Act. 

But now you can disclose information on contraventions of financial sector law, which is interesting in light of circumstances that led to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. 

The new legislation also allows for disclosures of Commonwealth offences punishable by 12 months or more in prison, and also things that may not necessarily be legal transgressions, but may otherwise be deemed a danger to the public or financial system. 

'There's always been an issue around dobbing in your mates in the Australian culture and that likely permeates through work life as well'

PAUL ANDON

Do the new legal markers improve prospects for a would-be whistleblower?

I guess there are always issues around being cautious to make sure that if you do wish to whistleblow, you fall within the provisions of the new Act. In the past, the ASIC guidelines have always stressed that you should seek legal advice before acting on a whistleblowing matter, and I imagine the new legislation still comes with such advice. 

It is interesting to note that potential whistleblowers are protected under this legislation if they disclose matters to a legal practitioner for the purpose of seeking legal advice on their whistleblowing intentions.

How would you improve on the new legislation?

There was discussion and debate about whether the new whistleblowing provisions should include rewards and incentives for people making disclosures. It was decided that whistleblowing incentives would not be introduced as part of the new legislation. 

Whether to reward whistleblowers for speaking up raises interesting ethical questions. Aside from that, research suggests that rewards and incentives can encourage whistleblowing in certain circumstances, which is perhaps understandable given the risks and challenges that potential whistleblowers face in coming forward. 

In the US the Dodd-Frank legislation, which allows for a percentage reward to be paid if there is an enforceable action that comes out of whistleblowing disclosure, is claimed to be highly successful in encouraging whistleblowing. 

In relation to the American situation, some US$326 million has been paid out to whistleblowers – only 59 whistleblowers, so successful whistleblowers tend to get highly rewarded, but obviously in relation to matters that are quite significant. This is also in the context of some 23,000 tips that have gone through to the Securities and Exchange Commission since the scheme started in 2011.

However, and perhaps more importantly, I think it is imperative for organisations to consider how they can encourage a culture of disclosure so that material instances of inethicality, or immoral behaviour, or indeed criminal activity can be addressed before they get out of hand. 

There's always been an issue around dobbing in your mates in the Australian culture and that likely permeates through work life as well. I think organisations need to get serious about how to effectively respond to this culture. 

Under the new legislation, affected companies will need to introduce a whistleblowing policy. But effective whistleblower policies should also be seen by organisations as beneficial to have. For example, industry surveys such as the one conducted by the Association of Certified Fraud Examiners repeatedly show that fraud is most often revealed through tip-offs. 

This highlights the importance of effective whistleblowing policies and procedures in circumventing financial crime that collectively costs Australian organisations billions of dollars each year. As the ACFE survey also shows, when left unreported, the costs of fraud to an organisation escalate dramatically. 

With no payment incentive in Australia, it's discouraging for whistleblowers when many have fared badly after coming forward.

That is an issue. But this does not mean that whistleblowers have no financial recourse in Australia. Compensation orders can be made by courts for whistleblowers suffering detriment as a result of their actions, and such orders can include financial compensation.