The prevalence of corporate scandals continue to reinforce the need to enthrone processes and policies aimed towards averting corporate governance failure. The respective industry corporate governance codes as well as the soon to be released Nigeria Code of Corporate Governance 2018 place significant emphasis on whistle blowing as a mechanism for reporting corporate misconduct. Significantly, the Enron and Satyam scandals were uncovered following “anonymous memos” to the Board of Directors of both companies.
The corporate governance codes recognize the fact that employees have significant insider knowledge of misconduct and seek to encourage them to “blow the whistle” as appropriate. The Sarbanes-Oxley Act requires that corporations provide a standardized channel for employees to report organizational misconduct to official monitors within the corporation. The Central Bank of Nigeria (CBN) makes it mandatory for all Banks to have a whistle blowing policy, and for the policy to be made known to all employees and stakeholders. The Securities and Exchange Commission (SEC) and National Insurance Commission (NAICOM) Codes of Corporate Governance also make it mandatory for the regulated entities to have whistle-blowing policies which should be known to employees, stakeholders such as contractors, shareholders, job applicants and the general public.
However, it is pertinent to consider whether or not adequate incentives exist to encourage whistle blowing. The best incentive a whistle blower requires is adequate protection against reprisal. The absence of this protection acts as a disincentive to whistle blowing as the anxiety of potential retaliation is enough to deter a would-be whistleblower and this obviates the moral obligation he or she has to make such disclosures. The CBN Code has done well in this regard as it provides comprehensive whistle blowing guidelines with emphasis on protecting the whistle blower.
Section 4.5 of the guidelines provides that “no bank or financial institution shall subject a whistle blower to any detriment whatsoever on the grounds that he/she has made a disclosure in accordance with these guidelines”. A whistle blower who has been subjected to any detriment by reason of the disclosure made shall present a complaint to the CBN, pursuant to which such whistle blower would be entitled to compensation and/or reinstatement. Stiff sanctions also attach to contravention of the provisions of the guidelines.
However, as well-intentioned as this appears to be, a lot more is required to protect the whistle blower and encourage employees to report corporate misconduct. Whistleblowers may be perceived as disloyal employees and troublemakers. Reporting misconduct has caused some employees to be victimized by their employers as well as fellow employees thus employees generally do not feel protected enough to come forward with information on misconduct.
Some strategies towards achieving protection for the whistle blower include adequate training company-wide on whistle blowing and the treatment of whistleblowers. Also an open-door policy encourages employees to speak with their superiors and express their concerns. Managers who encourage whistle-blowing set a positive example in the company and cause people to come forward when they have relevant information. Encouraging anonymous reporting to protect the whistleblower’s identity (e.g. blank emails, hotlines) is also another strategy. However, when placed side-by-side with a desire to promote a culture of transparency and accountability, anonymity may not always be desirable. The ultimate protection however lies with appropriate legislation in this regard and a vibrant judicial system.
Without a doubt, defining and enthroning a corporate ethical culture is by far the surest way of ensuring the sustainability of the enterprise. Corporate strategy as crucial as it is in corporate success, crumples like a pack of card in the face of corrosive unethical corporate culture.
Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comments and reactions to firstname.lastname@example.org.