Baker McKenzie has just released a new survey report that looks at the emerging trends in whistleblowing reports across APAC, and how companies are handling these whistleblowing reports.
Whistleblowing reports on the rise; regional variance in organizational preparedness running risk of compliance breaches
- 41% of business leaders reported an increase in whistleblower reports in the past year, and this trend is likely to continue
- 72% cited bullying, discrimination and/or harassment as the number one type of whistleblowing complaint received
- 30% of companies have accidentally breached confidentiality obligations
- Australia and Japan-based companies lead in ESG compliance monitoring, while those in Mainland China and Hong Kong fall behind
Companies in APAC are seeing more whistleblower reports than ever before, and many companies are at risk of compliance breaches for failing to meet the confidentiality obligations and local law requirements, according to Baker McKenzie's new report, Asia Pacific Whistleblowing Landscape: Benchmarking and Best Practices.
The report, which is based on a survey of 523 business leaders in Australia, Mainland China, Hong Kong, Singapore and Japan, reveals that 41% saw an increase in whistleblower reports over the past year, and this figure goes as high as 74% for Mainland China respondents and 61% for Hong Kong. This trend is likely to continue, driven by new whistleblowing regulations, increased public and media attention, and offering of financial incentives.
With a significant majority (80%) of the complaints coming from current employees, 'Bullying, discrimination and/or harassment' was the top whistleblowing complaint, according to the majority (72%) of respondents. This was followed by 'breach of internal policies' (62%) and 'workplace health and safety issues' (55%). One-third (33%) of the business leaders said they have received complaints about environmental, social and governance (ESG) issues, and this figure is likely to rise further over the next few years given the growing awareness of the ESG agenda, and governments and regulators stepping up their environmental protection efforts to mitigate climate change.
Against this backdrop, the pressure is mounting on companies to manage and respond to complaints effectively. While the research reveals 89% of the companies have a formal written whistleblower policy, more than half (53%) applied the global policy uniformly to all jurisdictions, without any local adjustments.
Mini vandePol, Asia Pacific Head of Compliance and Investigations Group said, "Given the complexities and nuances of individual markets (both at a legal and cultural level), and the way in which regulation is evolving in different ways in different jurisdictions, a one-size-fits all approach will not cut it."
The research also uncovered regional variance in effectiveness on how companies manage and respond to complaints. Australia-based companies were the top performers, followed closely by organizations in Singapore. In contrast, Mainland Chinese companies performed the poorest with as many as 69% receiving criticisms about the way in which whistleblower reports have been handled. Hong Kong companies were not far off, with 42%. Where such complaints do occur, the main reasons include a lack of transparency with the process, a lack of trust in the personnel charged with carrying out investigations, and frustration about the lack of updates on the case.
The research further revealed that almost a third (30%) of companies admitted to having breached the confidentiality obligations set out in their whistleblowing policies, even if it was inadvertent. This issue is particularly prevalent among Mainland Chinese companies with 67% reporting such breaches. Organizations in Hong Kong (39%), Japan (34%) and Singapore (13%) also reported such problems, exposing these companies to the risk of employee disengagement. Where whistleblowers do not have faith in their organization's processes, there is greater potential for them to seek to be heard elsewhere, putting the companies at risk of reputational damage.
Georgie Farrant, Head of the Australian Compliance & Investigation Group noted, "Investing in whistleblowing procedures which encourage individuals to report issues they have identified in the organization can result in real benefits to the company. However, those procedures also need to be robust enough to protect the company and the individuals within the organization charged with dealing with reports from potential claims by whistleblowers or regulators who allege that their reports were not handled correctly. It is worth taking the time to make sure that balance is achieved."
The research also showed that most companies recognize the importance of raising awareness of the whistleblowing program in order for it to be effective, with 86% of the companies offering training at the point of an employee's induction. However, the efforts tend to be short-lived, as the figure drops significantly with less than half (45%) of the companies providing regular/ periodic training.
Michael Michalandos, Partner in the Australian Employment & Compensation Practice said, "The lack of regular and detailed training to executives responsible for receiving whistle-blower disclosures is definitely a cause for concern. Whistleblowing laws can easily be breached unwittingly. Company officers and executives face significant personal liabilities, while employers can vicariously be liable for the acts of their staff." He added, "It is critical that officers and executives are trained to identify protected disclosures, comply with anonymity obligations, and ensure that each disclosure is reviewed properly. Protected disclosures also need to be distinguished from personal workplace grievances. The latter should be dealt with separately through human resources mechanisms."
ESG becoming an integral part of whistleblowing program; vexatious and self-preservation reports remain a challenge
With increased demand from regulators, consumers, investors and employees for more ethical and sustainable ways of doing business, more than half (60%) of the business leaders said their whistleblower reporting program now covers breaches of ESG and sustainability policy to ensure their corporate behaviour meets company commitments and public statements on ESG. In this respect, organizations in Australia and Japan lead the region with 85% and 82% respectively and include all aspects of ESG in their whistleblowing program, in contrast with 35% and 43% in Mainland China and Hong Kong. The omission of ESG in the whistleblowing programme has impeded companies' ability to move ahead with investigations into any alleged ESG misconduct, according to a Mainland China respondent.
Another challenge for companies is dealing with vexatious reports or reports that are prompted by self-preservation. Almost three-quarters (72%) of respondents from Mainland China stated that they had received vexatious or self-preservation reports, including potentially from their competitors. This contrasts with respondents from Singapore (25%) and Australia (19%) who indicated they received vexatious reports.
Relevant to this is concerns raised by respondents as to whether giving out financial incentives is the right move in influencing behaviours. Respondents' views are split with 83% suggesting financial rewards would increase the risk of false claims but 50% nevertheless thought that such incentives would encourage whistleblowers to report legitimate misconduct they otherwise might not.
Bridging the compliance gap
Whilst companies across the region have stepped up their efforts in keeping pace with change in the face of mounting scrutiny toward whistleblower programs and policies, more still needs to be done in order to bridge the compliance gap. The tone from the top will often be the deciding factor on whether or not a whistleblowing program will be successful. Companies are advised to make local adaptions to their whistleblowing programs, provide regular training to raise awareness of the whistleblowing process and maintain an appropriate level of transparency during the process to build trust between employers and employees.
Paul Arkwright
Publisher
