Whistleblowing

Changing the perception of whistleblower as martyr means new obligations for companies

By:
Gregor Alaküla,
Andre Kaldamäe
Grant Thornton Baltic saade Kasvukursil Äripäeva raadios
A whistleblower has to feel safe in order to have the courage to start shining the light on problem areas in an organization. An EU directive soon to come into force imposes specific requirements on companies to ensure that those who point out problems would not end up like martyrs.
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At the end of last year, a directive came into force in the first member states requiring companies to protect whistleblowers. Among other things, confidentiality and security must be ensured for those reporting problems in-house. Nor may anyone be fired or passed over for promotion just because they criticized the organization’s activity.

“A whistleblower may not be treated differently from others, discriminated against or persecuted as a result of the fact that they have alluded to some problem,” emphasized Kai Paalberg, Head of Risk Management Services at Grant Thornton Baltic, on the Äripäev daily’s radio broadcast “Kasvukursil”. “The most important is protection of confidentiality, so that the tipster would not feel exposed and that their information would be kept confidential throughout the time that it is processed and not disclosed without permission of the whistleblower.”

In essence, the directive requires undertakings to ensure that all of their employees have the right to file an anonymous complaint and create a secure system or other solution to enable that. “A hotline may come in different forms, telephone or a website, or a physical mailbox to leave a tip,” said internal auditor with Ramirent Group, Andre Kaldamäe.

National legislation transposing the directive’s requirements for protection of whistleblowers has thus far been passed by Sweden and Denmark where the rules are expected to come into force on 17 December 2022. In Estonia, the corresponding draft law has passed the first round of endorsements and is currently being supplemented in the Ministry of Justice.

Although the requirements described herein are not yet being adopted in the form of legislation, both Kaldamäe and Paalberg say implementation of new rules should be considered early. It is important to remember that for now the directive will pertain only to companies with more than 250 employees. Soon, though, companies with 50 and more employees will be added.

A past success story that serves as a role model

At the same time, Kaldamäe emphasizes that the new directive does not mean a whistleblower is completely immune from firing. “It’s just that they can’t be treated differently to others – if there is other reason to fire them, they can be terminated, just not punished for a hint,” said the expert.

Kaldamäe has long experience with a hotline, as Ramirent, which employs him as internal auditor, has been using such an anonymous channel since 2009. “We were then on the Helsinki stock exchange and because of this the duty of care is even higher and introducing a tip line helped us fulfil this. It’s always better to know what is wrong than to read it in the press.”

At Ramirent, problems can be reported via hotline or directly to managers and executives. The hotline is a website where people can leave confidential hints and only internal audit sees the content. The internal auditors are independent of the company and have their own budget; they cannot be dismissed as easily.

“When a hint is received, we decide who will start investigating or re-route it, in re-worded form, to someone better poised to deal with it,” Kaldamäe said. He said in the latter case, it was important to ensure that if the hint was about a specific unit with a small number of people, the whistleblower would not be identifiable.

Kaldamäe stressed that the duty of the person processing the hint was to determine as precisely as possible the facts of the matter but not to pass judgment. “We clarify the facts, we have access to data and people but we don’t resolve the problem, we forward the info to management and they decide what to do, whether it’s time to say ‘goodbye’ to someone or something else.”

Quality of the hint counts

Whistleblower reports are generally made in the sincere belief that something is wrong. “At the same time, the tip can be general or inaccurate, we can’t understand what the problem is, and there’s not more that we can do with those tips,” he said. “But there are also tips where there’s much more to investigate and that usually comes unexpectedly,” he said, noting that it can throw off the rhythm of the tip line. Kaldamäe says that they also come across tips that can just amount to mudslinging.

According to experts, it is imperative that the whistleblower would sense the importance of their problem. They want to see results or see that the tip is being dealt with. Otherwise, people might go seek help elsewhere and soon the problem again can be read about in the media. “Since a tip involves risk, knowing there will not be any result can dissuade people from taking that risk,” said Kaldamäe.

Ramirent units have a total nine hotlines, and they receive about 15 hints a year.

People are hesitant

Besides employees worrying about their confidentiality and hence security, setting up a tip line also means it is necessary to make sure the tip is not easily recognizable. “Often it’s possible to narrow down a range of possible whistleblowers to 1-3 people. So it’s important that the tip is made fuzzy or reworded when it is forwarded to others,” said Kaldamäe.

The management’s principal fears also include the belief that spotlighting problems is “ratting”. “This is a historical baggage, the culture of informers is like a bad taste, yet tips help companies improve their processes.”

Then there is also the fear that if a tip line is set up, there will be too many reports. “In actuality, I haven’t heard of many tips being received, on the contrary there is even a feeling of wanting to know more than there are people who are ready to send a tip,” said Kaldamäe, debunking that myth.

As one fear, Kaldamäe also highlights people’s reluctance to sling mud. “Here a well structured investigative process is helpful, in that case an unjustified attempt to engage in mudslinging does not do harm to anyone; besides the whistleblower, it is necessary to protect the subject of the complaint,” he said.

Paalberg says all fears can be overcome and communication and transparency of the system are important. “All employees have to know how tips are processed, who deals with them and how their security is handled – that increases trust in the system.” The expert stresses that if no tips come in, that doesn’t mean that all is well; instead it could signal lack of trust in the system.

“Collecting tips is the most common way of identifying fraud and violations, make the process of whistle blowing simple and convenient, involve the managers and consider different opinions, also appoint a person in charge who is responsible for keeping the tip line running. That way it is likely that problems will come to light quicker than even any internal auditor would be able to identify them,” he said.