by Janette Minnaar
The topic of whistle blowing always invokes lively debate amongst employees and communities. Taking all the pros and cons into account, I believe that organisations and communities alike may greatly benefit from a sound whistle-blowing facility, to which crime and bad/dishonest service delivery may safely be reported. In this article, I shall focus on the losses suffered by businesses and how a whistle-blowing facility can assist them.
A 2003 global fraud survey by Ernst & Young showed that nearly 40 per cent of all frauds were prevented and/or detected by either internal or external whistle blowers. A study by the Association of Certified Fraud Examiners in the United States of America, during 2002, revealed that organisations with an anonymous whistle-blowing mechanism were losing an average of 50 per cent less money to fraud than organisations without such a mechanism.
More recently, KPMG’s 2007 “Profile of a Fraudster” survey found that 89 per cent of fraudsters were employees of the victims, that members of senior management represented 60 per cent of all fraudsters and that an additional 26 per cent of such crimes involved management. Deloitte’s Tip-offs Anonymous reported that white-collar crime has increased by 200 per cent over the 12 months to July 2008. There was also an increase in senior executives abusing their powers and circumventing controls.
Apart from these statistics, there are many other compelling reasons for the reporting of criminal conduct:
• There are legislative obligations on an organisation to report crime, such as the Prevention and Combating of Corrupt Activities Act of 2004.
• The Public Finance Management Act of 1999 requires that the name of guilty parties be reported to the authorities. The Public Finance Management Act also places a responsibility on accounting officers of public companies to prevent losses from criminal conduct and to report al criminal conduct.
• The Protected Disclosures Act of 2000 states that every employer, as well as every employee, has a responsibility to disclose criminal conduct.
• The King II report on corporate governance (although not constituting legislation) states that a whistle-blowing facility is a key corporate-governance responsibility. The King III report (to be published in 2009) will echo this responsibility, because it forms part of a broader duty to act in a socially responsible way.
• The rules and directives of many companies demand reporting of criminal conduct.
• It is the ethical (right) thing to do.
• The commercial sustainability of an organisation may depend on reporting of criminal conduct.
• Crime affects the profitability of a company.
Sadly, crimes are often not reported. Some of the reasons are:
• Fear of victimisation (it is imperative for prospective whistle blowers to feel safe);
• lack of confidence in the ability of the police;
• lack of confidence in management’s ability or commitment to take action against crime;
• an ineffective criminal justice system;
• a desire not to tie up the organisation’s own resources, for example, by having to give evidence in court;
• fear of negative publicity and embarrassment; and
• a belief that it is too inconvenient to do something.
The use of a whistle-blowers’ line is promoted in the Protected Disclosures Act 26 of 2000. Thius Whistle-blowing Act provides that:
• Every employer and employee has a responsibility to disclose criminal and any other irregular conduct in the workplace; and
• whistle blowers may not be subjected to discrimination if they reported in good faith. The Act protects such persons from being subject to “occupational detriment”. Occupational detriment is any form of damage or victimisation and includes harassment, dismissal, transfer against one’s will, withholding of promotion, a denial of appointment or being adversely affected in any way.
The Whistle-blowing Act invokes the remedies provided by the Labour Relations Act:
• An employee who believes he/she was unfairly dismissed may approach the CCMA (Commission for Conciliation, Mediation and Arbitration) for conciliation and, thereafter, the Labour Court, where he/she can claim up to two years’ salary.
• A person who was not dismissed, but otherwise prejudiced, may claim compensation or ask the court for some other form of relief.
The Whistle-blowing Act prescribes a procedure for reporting. In order to gain the protection of the Act, the person making a report must reasonably believe the report to be true (be bona fide) and must not be making the disclosure for personal gain. Good faith does not mean an individual has to be right, but it does mean that the individual must believe that the information provided is truthful.
Disclosures may be made to the following parties:
• An employer (protected if made according to the procedures of the employer – if there is no procedure, it will be protected if it was made to the employer);
• a lawyer (protected if the disclosure was made to obtain legal advice);
• a Minister or MEC (protected only if the employer is a person or body appointed by the Minister or an organ of State falling under the authority of the Minister);
• the Public Protector or Auditor-General (protected if it is a matter with which the Public Protector or Auditor-General usually deals); or
• anyone else (protected only if the employee believed he/she would be prejudiced if he/she made the disclosure to the employer, the employee believed that the employer would destroy the evidence, the employee had already made the disclosure and nothing had been done about it, or the corruption is extremely serious.)
The Whistle-blowing Act does not apply to reporters who choose to remain anonymous, because the Act cannot protect a person who is faceless. The Act does also not protect employees who engage in malicious reporting, Further, the Act does not protect employees who abuse the provisions of the Act to conceal their own involvement in criminal activities and/or irregularities from criminal prosecution, disciplinary action or civil liability to third parties. Employees who knowingly provide false information or spread false rumours should be subject to disciplinary action.
A person is malicious when ulterior motives motivate the person to make a false allegation with the intent unjustly to discredit or harm an individual or organisation.
There have been repeated calls for the amendment of the Protected Disclosures Act, because a number of shortcomings have been identified. The Act has been in a process of review for a long time and it is hoped that the amendments will soon be finalised.
Although a whistle-blowing facility is not an easy mechanism to implement, it is one of the most important tools that an organisation can use in the fight against crime. Such a facility, however, has to be governed properly and administered fairly.