Why You Need A Whistleblowing Channel
In January 2011, Oswald Bilotta, a Novartis pharmaceutical sales representative based in the eastern end of Long Island, New York, filed a suit against Novartis under the False Claims Act, describing remuneration to physicians, namely lavish dinners at restaurants, costly tickets to sporting events and entertainment, gift cards, and catering for events in the lives of the doctors’ children. Novartis is a global healthcare company based in Switzerland.
In an exclusive interview and article by Gretchen Morgenson on NBC News, Bilotta’s whistleblowing efforts to uncover malpractice at Novartis paid off, culminating in a US$642 million settlement resolving allegations of improper payments to patients and physicians in 2020, as announced by the U.S. Department of Justice.
In a press release by the Justice Department, Acting U.S. Attorney Audrey Strauss for the Southern District of New York mentioned that Novartis “spent hundreds of millions of dollars on so-called speaker programs, including speaking fees, exorbitant meals, and top-shelf alcohol that were nothing more than bribes to get doctors across the country to prescribe Novartis’s drugs” for over a decade.
This exemplary case is one of the many past instances that highlight the importance of whistleblowers in unearthing a slew of corrupt behaviour in businesses, organisations and governments.
Transparency International defines a whistleblower as an individual who discloses information about corruption or other forms of wrongdoing committed in or by an organisation to entities with the authority to take action, such as the organisation itself, authorities or the public.
In Malaysia, the Whistleblower Protection Act 2010 protects those who disclose improper conduct in the private and public sectors to enforcement agencies. Whistleblowers gain identity confidentiality, immunity from civil and criminal action for revealing improper conduct, and protection from any actions causing loss or injury.
Whistleblowers can be anybody – an employee, a director, or even foreign labour. Despite the noble cause to sound the alarm on unethical behaviour, whistleblowers are often vulnerable, subject to retaliation and pressures to remain silent with risks of consequences such as loss of employment or threats of violence.
Why is whistleblowing important?
The ability for organizational insiders to speak up and disclose wrongdoing and the actions taken after in terms of corrective responses and treatments signifies the health of all institutions and regulatory processes.
According to the Global Economic Crime and Fraud Survey by PwC report in 2018, 42% of respondents say that a strong corporate structure that encourages detection methods such as tip-offs and whistleblowing hotlines to be the most effective at rooting out crime in Malaysia.
In the Asia Pacific region, where Malaysia is included in a 2019 survey carried out by the Association of Certified Fraud Examiners (ACFE), 44% of fraud and corruption detection cases came from tips or concerns raised through whistleblowing channels. About half of the tips came from internal staff.
Let’s review several reasons having a whistleblowing channel is important, whether you are a private or public-listed company.
First: it’s a regulatory requirement in Malaysia. Specifically, a whistleblowing channel fulfils requirements of Section 17A of the Malaysian Anti-Corruption Commission (MACC) (Amendment) Act 2018 that requires commercial organisations to have the Adequate Procedures as a defence to ensure that internal and external parties are aware and have access to a reporting mechanism.
Section 17A of the MACC Amendment Act 2018, which came into effect on 1 June 2020, states that the organisation, along with its employees and associates are held liable if the commercial organisation is found to have committed an outbound bribery.
On the other hand, public-listed companies are required to list anti-bribery and whistleblowing policies on their websites to comply with requirements laid out by Bursa Malaysia (under the Bursa Malaysia Securities Berhad Main Market Listing Requirements, Chapter 15 Corporate Governance, Part H – Anti-Corruption and Whistle-Blowing).
Beyond the regulatory requirement, a strong culture of reporting is the way to go because it protects your company. If an employee observes potential problem areas and wishes to speak up, it is far better than those who do not care to do so. Having a strong culture of whistleblowing may also open up opportunities to discover other types of risks that may not involve employee misconduct, such as external cybersecurity attacks, or operational risks that involve physical machinery.
A whistleblowing channel also encourages accountability and potentially minimizes wrongdoing.
Having such a channel will make employees or insiders who scheme and plan unjust ways for personal gain think twice before carrying out those activities as others will call them out. If your company’s top management strongly endorses whistleblowing – it is even better.
Overall, it speaks volumes for a company that encourages internal reports and mitigates arising issues. Over time, you will gain strategic advantages over companies that do not prioritize addressing internal problems.
In a 2019 analysis – “Evidence on the Use and Efficacy of Internal Whistleblowing Systems” – of 10 years’ worth of records from NAVEX Global, which monitors whistleblowing reporting for 8,500 companies by Kyle Welch of George Washington University and Stephen Stubben of the University of Utah, companies that have its employees actively use internal whistleblowing systems and the reports followed up by the management are more profitable.
In an interview with CNBC, Welch described that increased active participation in reporting by the employees is positively associated with the accuracy of the firm in monitoring the reports. The authors also found reduced instances of material lawsuits against the firm.
How should I form a whistleblowing policy?
Considerable thought should be given to crafting a sound whistleblowing policy for your organisation.
Notably, you should be prepared to answer these questions:
- Does the whistleblowing policy allow anonymous reporting?
- Does the whistleblowing policy protect the whistle-blowers, including third parties?
- Does the whistleblowing policy prohibit retaliation?
- Are the whistleblowing channels accessible to members of the public?
- Do you train your internal and external stakeholders in relation to your company’s whistleblowing policy and procedures?
Additionally, think about providing a range of issues that should be reported, with examples as references. Other supplementary information includes the available channels individuals can submit reports (i.e., email addresses or hotlines) and any procedures for using those channels.
The key is being clear and transparent about the processes involved in reporting any red flags.
Implementing a whistleblowing policy
With that said, a whistleblowing policy should not only exist on a piece of paper. The procedures that follow – independent investigation, enforcement, and reporting – are fundamental to the efficacy of the whistleblowing channel; the policy itself must be implemented.
Ultimately, fostering a culture of whistleblowing in a workplace needs a top-down approach, coupled with appropriate channels and measures in place to protect the whistleblower, followed by strong procedures that follow up and enforce the policy.
At whichever stage you may be in implementing or forming a whistleblowing policy, know that the efforts to make this available will pay off in the long run.
References and Resources
Association of Certified Fraud Examiners (ACFE). 2020 Report to the Nations: Asia-Pacific Edition. Copyright 2020 by the
Association of Certified Fraud Examiners, Inc. Retrieved from https://www.acfe.com/report-to-the-nations/2020/
Bursa Malaysia. (2020). Chapter 15, Corporate Governance. In Bursa Malaysia Securities Berhad Main Market Listing Requirements. https://www.bursamalaysia.com/sites/5bb54be15f36ca0af339077a/content_entry5ce3b50239fba2627b2864be/5ce3b5ce5b711a163beae1bd/files/MAIN_Chap15__Anti-corruption_1June2020.pdf?1590748016
“Listing Requirements.” BURSA MALAYSIA, Retrieved from www.bursamalaysia.com/regulation/listing_requirements/main_market/listing_requirements
Malaysian Anti-Corruption Commission (MACC). (2020). “Section 17A Of MACC Act 2009 (Amendment 2018) Comes Into Force Today”. MALAYSIAN ANTI-CORRUPTION COMMISSION. Retrieved from https://www.sprm.gov.my/index.php?page_id=105&contentid=539&language=en
Stubben, S. R., & Welch, K. T. (2020). Evidence on the use and efficacy of internal whistleblowing systems. Journal of Accounting Research, 58(2), 473-518.