Small Business

Blow me down

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With some major corporate scandals rocking the business world in the past five years, you have to wonder whether these disastrous events could have been avoided.

For example, if someone had blown the whistle in the early stages in the cases of HIH Insurances and One.Tel, would these companies be operating today? Would the damage caused have been less severe? Would the parties who lost so much be in a different position?

According to Simon Longstaff, executive director of the St James Ethics Centre in Sydney, a whistleblower is a current or past employee of an organisation who makes accusations against that organisation.  

The questions is: are we a culture that believes it’s wrong to blow the whistle on corporate crime? Is loyalty to our employers, our firms and our back pockets preventing us from doing what is right?

“There is no denying that whistleblowers face a dilemma in determining whether or not to draw attention to matters which so trouble their consciences that they feel bound to expose themselves and others to censure,” explains Longstaff.

“From one point of view, whistleblowing might be regarded as evidence of failure. On such an account, the finger of blame could point in many directions – at organisations that have tolerated intolerable behaviour; at individuals who have put private advantage above the interests of others; at whole groups of people whose custom and practice have left them blind to corruption; and to others who, through apathy, fear, prudence or whatever, have failed to accept responsibility for saying ‘no’ to harmful attitudes and behaviour.”

Rob Ward, at PricewaterhouseCoopers, agrees that it can be hard to blow the whistle, but believes Australia has come a long way in its fight against corporate crime. “There has been some big changes in the past 20 years, and it is manifesting in many ways,” he explains.

“In terms of social attitude, it’s coming out in institutions such as churches; it’s coming out in corporate behaviour such as cracking down on unacceptable behaviour by board and management; and it’s coming out in terms of politician accountability.

“Our economy is now more sophisticated and, as connectivity and sophistication increase, the impact of bad behaviour is much broader and is also a very public matter,” says Ward.

Ward believes that while there were a couple of spectacular failures in the ’90s, in corporation to the total economy, corporate Australia has preformed rather well. “When you look at the general behaviour of corporate Australia, it has been pretty good,” he maintains.

“The couple that have hit the wall have been very high impact.”

On an international scale, Ward believes we are competent whistleblowers. “Australians won’t tolerate behaviour that makes them feel like they have been unfairly treated,” he says.

“We compare very well to the rest of the world. There have been some great examples of people power in Australia in the past three years.  The public thought bonuses were unacceptable with One.Tel and others.  There was significant people power saying that this behaviour was unacceptable and to give the money back.”

Professor Ian Ramsay, dean of the University of Melbourne’s Law School, believes that there is little variation in the degree of whistleblowing in developed countries.

“Compared to other developed countries with sophisticated economies and capital markets, we are no better and no worse,” he explains.  “But from my travels into South-East Asia, we are clearly well ahead of some of these countries in terms of an ethical culture.”

So how can we encourage people to blow the whistle on corporate crime? Longstaff believes that structures need to be erected that allow “light to penetrate the veil of corruption”.

“Such a structure needs to be built out of existing resources – such as the common law, various codes affecting the professions, the media and so on,” he explains. “However, the foundation will have to be general feeling within the community that various corrupt practices must be stopped because they are wrong.

“People are realising that unethical behaviour causes harm not only at the level of the hip-pocket nerve. They are also seeing that a corrupt society is harmed in less obvious, but nonetheless tangible respects. All of this may lead to a growing sense that integrity should be ‘rewarded’.”

Professor Ramsay agrees that legal structures need to be put in place.

“I believe that in some circumstances it may be necessary to provide some legal protection for whistleblowers,” he says.

“Even incentives such as the recent ACCC policy on cartels, whereby if you ‘dob in’ someone in your cartel you will be treated more leniently.”

Ward believes it is crucial to have the support of the shareholders, a board that can direct management and a board that can withstand scrutiny.

“This will then provide a tone of honesty for making decisions that are in the best interests of the stakeholders,” he says. “The board and management need to act quickly when there is inappropriate behaviour in the organisation.

“I think you need to set a tone that clearly identifies what is acceptable and what is unacceptable behaviour.”
 

Published on: Monday, July 20, 2009

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