Institutionalization of Whistleblower Protection in Australia - Case Study Example

Whistleblower Case Name Institution Date Executive Summary Corporate governance provides a structure, which comprises of objectives, performance expectations, processes and systems for controlling corporations. This structure ensures organisations are governed correctly and comply with regulations and laws within their jurisdictions. These laws step in when organisations fail to apply principles of corporate governance. Whistleblower laws provide protections to individuals or groups of people who wish to disclose information about a corporation’s unethical or illegal practices. Australia protects whistleblowers through the Whistleblower Protection Act, the Corporations Act 2001, the Equal Opportunity Act 1984 and the Public Interest Disclosure Act. The institutionalisation of these Acts varies by jurisdiction (South Australia, Queensland, Victoria, Western Australia, New South Wales, Australian Capital Territory, Northern Territory, Tasmania and Commonwealth). Their effectiveness of these laws is hindered by lack of institutional and government support, lack of protections (vulnerability) for employees, no recognition for whistleblowing in intelligent agencies and aggressive corporate cultures. There is a need to address these inefficiencies and to provide more protections that allow the use of different avenues for information disclosure, diverse reporting systems and cover the legal costs for whistleblowing services for employees and the public. . Whistleblower Case Corporate governance is important to companies. It helps corporations to ensure that there are governed correctly (Maria 2002). It is concerned with how company authorities make corporate decisions as well as interrelationships between company employees, management, shareholders, the board and stakeholders. These interrelationships and decision-making are guided by a structure or framework referred to as corporate governance. This structure provides a set of objectives, performance expectations, processes and systems for controlling corporations. Effective corporate governance should provide systems for control and accountability. These controls would be guided by the company’s boundary of conduct, core practices, legal requirements, and regulations on expected conduct (Ferrell, Fraedrich & Ferrell 2013). Compliance to these controls and accountability systems would not only institutionalize business ethics but would prevent corporate collapses such as the Enron scandal. Enron’s corporate culture may have contributed to the collapse because executives expressed the pride in their employees’ abilities to manage risky transactions and because their execution plans focused on personal enrichment rather than generating shareholder wealth (Ferrell, Fraedrich & Ferrell 2013). The company’s collapse depicted gaps in its corporate governance with regards to questionable accounting practices (such concealing losses through special purpose entities), ethics, lack of employee integrity and non-compliance to regulations and legal requirements for financial reporting. The whistleblower action of Michael Kopper who was the managing director during Enron’s collapse was useful in revealing these gaps in corporate governance. Kopper, in addition to other executives, received lighter sentences for providing information about money laundering and theft at Enron (Ferrell, Fraedrich & Ferrell 2013). This paper examines the institutionalization of whistleblower protections in Australia and its effectiveness. Institutionalization of Whistleblower Protection in Australia Whistleblower protection is necessary because whistleblowers threaten the interests of people who believe that their power is more significant than the law (Ramirez 2007). Whistleblower refers to an individual who discloses information about illegal practices of company, its operations or employees to an authority (Brown 2006, p.4). They also include people who disclose information about the administration practices of public officer in carrying out their government functions. The Ombudsman of Australia posits that the whistleblower should have sufficient knowledge and belief that the information being disclosed is true and is sufficient to warrant public disclosure to the police, Auditor General or Ombudsman (Legal Services Commission of South Australia 2014). Australia has a number of laws to protect whistleblowers. In total, there are nine Acts adopted by Australian states including South Australia, Queensland, Victoria, Western Australia, New South Wales, Australian Capital Territory, Northern Territory and Tasmania. These Acts are the Whistleblower Protection Act (1993-1994), Corporations Act 2001, the Equal Opportunity Act 1984 and the Public Interest Disclosure Act (Brown 2006, p.2; Legal Services Commission of South Australia 2014). The Whistleblower Protection Act makes it unlawful for a company or individual to penalize another person who discloses information for public interest to an authority. This information includes breaking the law, misuse of public money, mismanagement of public resources or actions that pose a risk to the environment or the health of the public (Legal Services Commission of South Australia 2014). In addition, the Act protects whistleblowers from any criminal or civil liability. It also recognizes that whistleblowers may be victimized and contains a provision for making an official compliant of victimization under the Equal Opportunity Act. The complaint would then be forwarded to the Equal Opportunity Commission (Legal Services Commission of South Australia 2014). The Corporations Act (Cth) also protects whistleblowers. The Ombudsman states that the Act protects public officers and company employees who provide information on unethical or illegal practices in corporations. It offers this protection by penalizing the victimization of the whistleblowers. Similarly, the Public Interest Disclosure Act 2013 protects public officers who make disclosures from criminal or civil liability (Legal Services Commission of South Australia 2014). The institutionalisation of these whistleblower legislations varies by jurisdiction (Bowden 2005). The provisions for public interest disclosure in South Australia are either silent or meet the bare minimum or conventional expectations (South Australia 2013). For instance, the provisions have a conventional objective but are silent on the eligibility of whistleblowers for protection. The provisions are silent on whether public officials, employees, public contractors, organisational members and internal witnesses are eligible for the protections. In addition, the South Australian Whistleblower Act 1993 is silent on how corporations can protect themselves against illegal or immoral practices (South Australia 2013). It does not explain how organisations should handle policy disputes, personal grievances, abuse of process and discretions. Moreover, the Act does not have provisions on the legal protections in anti-reprisal offences, receipt of public reports, media disclosure and the role of integrity agencies in managing witnesses, monitoring and compensating whistleblowers. However, the Act does provide provisions for best practice on categories of illegal activity, wrongdoing by public offices and management of witnesses and whistleblowers (Brown 2006). Institutionalisation in Queensland is much higher. The Queensland Whistleblower Act of 1994 contains adequate provisions for the eligibility of individuals for whistleblower protections, investigation and handling of disclosures, role of integrity agencies in managing witnesses and monitoring illegal activities in corporations, and the management of information from whistleblowers (such as elements of confidentiality, reprisal risk and disclosure procedures) (Brown 2006). The Act also contains provisions for best practices in the provision of legal protections (such as industrial remedy, intervention and injunctions), guarding against corporate misuse and the types of offences that can be disclosed (including thresholds for criminal activity). Queensland’s Act is more institutionalised compared to South Australia because its provisions are adequate and are applicable for best practice in private and public organisations (Bowden 2005). The Public Disclosures Act of 1994 in North South Wales (NSW) and the Australian Capital Territory (ACT) has similar provision rankings as South Australia’s Whistleblower Act (Bowden 2005). In both jurisdictions, the Act provides adequate provisions for determining the eligibility of whistleblowers or witnesses, disclosure of offences, guarding against these offenses, management of whistleblowers and the legal protections for different offences (such as injunctions and civil law). NSW’s Act is more silent on the role of public integrity agencies and the handling of disclosures (such as independent reviews, investigations and public reporting). There are also major omissions in the ACT legislation such as lack of an objective, categories of offenses and the disclosures made to non-government participants such as the media and members of parliament (Brown 2006). Victoria’s Whistleblowers Protection Act of 2001, Western Australia’s Public Disclosures Act 2003, Northern Territory’s Public Interest Disclosure Bill 2005 and Tasmania’s Public Interest Disclosures Act have higher provision rankings compared to the legislation in SA, Queensland, NSW and ACT (Bowden 2005). The provisions for Victoria and Tasmania are more than adequate and qualify for best practices especially on the eligibility of individuals for whistleblower protections, disclosure of different offences, guarding against misuse, the receipt and investigation of disclosed information and the management of whistleblowers. Western Australia and ACT Acts are silent or inadequate on the eligibility of individuals who seek whistleblower protections, types of information that can be disclosed, the types of protections to be offered to whistleblowers, how to manage the whistleblower and the role of public integrity agencies in ensuring whistleblower protection is achieved (Brown 2006). Overall, Australia has enacted legislation for whistleblower protection. Only three legislations provide consistent definitions of the term (Tasmania, NSW and Commonwealth) while only two laws address public sector wrongdoing (Queensland and SA). SA, Queensland and WA provide comprehensive descriptions for public-sector offences with WA being the only jurisdiction to allow public disclosures about individuals who work as public contractors. All of the laws recognize the need to protect the whistleblowing process but have varying differences in the way disclosures are investigated and handled. Tasmania, Victoria and NT do not differentiate between disclosure for public interest and protected disclosure (Brown 2006). The review of whistleblower legislations in the different legislations shows that they provide some degree of protection but that there is a need for more protections to ensure that whistleblowers can use different avenues for disclosing information for public interest and systems for disclosure reporting (Brown 2006). Presently, the Australian Securities and Investments Commission (ASIC) (2014), people who provide the commission with inside information do so at their own risk. The Commission can only provide a Whistleblower Liaison Officer who would conduct investigations and inform the whistleblower on the progress of the investigations. The Officer, however, does not act on behalf of individuals who provide public interest information and only responds to specific breaches to Corporations Act (ASIC 2014). Effectiveness of Whistleblower Protections The Public Interest Disclosure Act 2013 aims to facilitate and encourage the disclosure of public-interest information, protect those who make the disclosures from negative consequences and to investigate the disclosures properly (Australian Public Service Commission [APSC] 2014). Section 16 of the Act contains the provisions for protecting whistleblowers from discrimination or victimisation by their colleagues or employer. It prohibits employees of the Commission from strategising or adopting any retaliatory actions as a way of victimising the whistleblowers. These protections are also guaranteed by the Fair Work Act which prohibits an employee’s termination because of filing complaints or proceedings against employees who violate regulations or laws (Lewis & Carr 2010). However, these protections are not completely effective due to lack of institutional and government support. Cohan (2014) conducted three interviews on the consequences of whistleblowing to report that people who disclose legal or ethical violations by a company face negative consequences such as unemployment and victimisation. From the interviews, the interviewees said that they disclosed company information after they had made efforts to resolve the practices internally. However, the regulatory authorities did not take these disclosures seriously and failed to apply the confidentiality clause to ensure the anonymity of the whistleblowers. The regulators were unwilling to conduct investigations on the allegations which gave the employers the confidence to fire the whistleblowers. In addition, the unwillingness of the regulators could have prevented members of the public from reporting unethical practices due to fear of reprisals to their family (Latimer & Brown 2007; Ramirez 2007). Secondly, unethical corporate cultures can encourage illegal practices and discourage public disclosure since employees fear repercussions such as discrimination (Sawyer 2004). An aggressive culture at Enron made employees unwilling to testify. According to Ferrell, Fraedrich and Ferrell (2013, pp.400-401), employees felt that the government did not guarantee that their testimony could not be used against them. Arthur Andersen, the auditor, could have provided information about the fraud, but was unwilling because he conveyed his concerns to his senior. Cohan (2014) reports that that where Securities Exchange Commission has made payments to anonymous whistleblowers, these payments are made in secret and construed as hush money since the public and company shareholders lack information on the disclosure. Lack of support from regulators and the government for public disclosure of illegal or unethical company practices and the enforcement of whistleblowers protections make the laws ineffective since they dissuade individuals from disclosing information for public interest (Sawyer, Johnson & Holub 2005; Stewart 2013). Thirdly, whistleblower regulations do not cover public intelligence agencies. According to Stewart (2013), Australian whistleblower laws do not protect spy agency employees from discrimination or victimisation. The Public Interest Disclosure Bill states that people who victimise whistleblowers can be imprisoned for a period of two years. However, these protections are guaranteed for civil servants but not to people who whistle blow against intelligence agencies and politicians. For instance, Edward Snowden, a government contractor, had his United States (US) passport revoked after state officials discovered that Snowden leaked intelligence information on government surveillance (Stewart 2013). Lastly, the Public Interest Disclosure Bill is ineffective is that it does not cover the legal costs for whistleblowing services. It encourages the whistleblowers to obtain legal advice but does not explain who will cover those costs (Stewart, 2013). Conclusion Australian whistleblowing laws are a step in the right direction in as a far as encouraging the disclosure of information for public interest. However, these laws need some improvement. A comparison of the laws in different jurisdictions shows gaps in content and application. Key application issues, which affect the effectiveness of these legislations, are lack of protections for employees who usually have insightful information about company practices, vulnerability of these employees, no recognition for whistleblowing in intelligent agencies, and lack of support or follow-up from government and institutions that receive the complaints or disclosed information. References Australian Public Service Commission 2014, Sect 4.17 Whistleblowing, viewed 23 September 2014, Australian Securities & Investments Commission 2014, ‘Whistleblowers and whistleblower protection’, Information Sheet, no.52, viewed 23 September 2014, Brown, AJ 2006, Public interest disclosure legislation in Australia: Towards the next generation. An issues paper, Commonwealth Ombudsman, Canberra City, ACT. Bowden, P 2005, ‘A comparative analysis of whistleblower protection’, Australian Association for Professional and Applied Ethics, vol.8, no.2, pp.1-15. Cohan, WD 2014, ‘The personal price of exposing financial wrongdoing can be devastating. William D Cohen meets three men who went public and paid for it’, Financial Times Magazine, viewed 23 September 2014, Ferrell, OC, Fraedrich, J & Ferrell L 2013, Business ethics: Ethical decision making and cases, 9th edn, South-Western Cengage, Mason, OH. Latimer, P & Brown, AJ 2007, ‘Whistleblower laws: International best practice’, UNSW Law Journal, vol.31, no.3, pp. 766-794. Legal Services Commission of South Australia, ‘Whistleblower protection’, Law Handbook, viewed 23 September 2014, Lewis, DB & Carr, I 2010, ‘Combating corruption through employment law and whistleblower protection’, Industrial Law Journal, vol.39, no.1, pp.1-30. Maria, W 2002, ‘Common law-common mistakes: The dismal failure of whistleblower laws in Australia, New Zealand, South Africa, Ireland and the United Kingdom’, Presentation at the International Whistleblowers Conference, University of Indiana. Ramirez, MK 2007, ‘Blowing the whistle on whistleblower protection: A tale of reform versus power’, University of Cincinnati Law Review, vol.76, pp.183-232. Sawyer, KR 2004, ‘Courage without mateship’, Paper presented at National Conference of Whistleblowers, Melbourne, Australia. Sawyer, K, Johnson, J & Holub, M 2005, ‘The necessary illegitimacy of the whistleblower’, viewed 23 September 2014, South Australia 2013, ‘Whistleblowers Protection Act 1993’, viewed 23 September 2014, Stewart, RM 2013, ‘Australia enacts whistleblower law: New legislation safeguards public servants, but does not cover spy agencies’, Wall Street Journal, viewed 23 September 2014, Read More