It basically says that: 'We take our business seriously. We do not tolerate unethical, fraudulent, or other improper behaviours'
Recently, the B.C. Securities Commission (BCSC) announced it will start paying people who provide helpful information about investment fraud and other serious types of market misconduct.
The awards will range from $1,000 to $250,000 and be determined by how quickly the information was reported, how much the information contributed to the enforcement outcome, and the seriousness of the misconduct, among other considerations. A whistleblower also could receive more than one award for the same information, with the maximum payout capped at $500,000.
“The BCSC always encourages people to report suspicious activity, and we think these awards provide an added incentive for people to contact us and provide information that will help make our market more honest and fair,” said Brenda Leong, chair and CEO.
For organizations — especially those with outside investors and shareholders — instituting a proper way to report wrongdoing such as a whistleblowing program provides many important benefits.
Benefits of whistleblowing programs
“These programs are in place to promote corporate accountability, effective governance,” says Shana Wolch, partner in the labour and employment group at McCarthy Tétrault in Calgary.
“Usually they are in high demand for ESG ratings to be more attractive to investors. [Their] intention is to address potentially concealed illegal, unethical, fraudulent or other damaging conduct but then also it’s a very effective way to deal with these issues, hopefully in-house before we go to external regulators, which can really help reduce financial, reputational, morale and other similar types of damaging harm.”
As many jurisdictions have legislation protecting whistleblowers and their privacy, finding a way to fit the policy into these requirements can be complex, says Wolch.
“It’s important to note that there are limitations when investigating due to an M&E [monitoring and evaluation] requirements, and there are ways to ask questions to get more ahead of what you just need to do to satisfy yourself that you’re investigating.”
Nova Scotia recently implemented a program for certain government employees to alert authorities about any financial improprieties, and B.C. recently put in place protection for health-care workers who speak up about wrongdoing in the workplace.
By having a robust whistleblowing process, the message it sends to the outside world is strong, according to Wolch.
“It basically says that: ‘We take our business seriously. We do not tolerate illegal, unethical, fraudulent, or other improper behaviours that could create losses for your companies or our investors,’ and it is excellent for governance, and ESG ratings: it shows that the company is willing to grow and is open to feedback and takes reporting very seriously.”
Crafting an effective policy document for whistleblowing
When beginning the process of setting up such a program, a policy document is key to define the scope of that program.
“Outlining the kind of conduct that should be reported is very important so that sets the parameters,” says Wolch.
So what areas should be covered under such a policy?
“A really important component includes protection against reprisal because usually people go through this because that’s what they’re afraid of. And the benefit of having that as well, besides encouraging reporting, is that it also typically aligns with many legal obligations that could be affiliated depending on the type of complaint and what statutes it falls under so, it’s obviously important to include an option for anonymity,” says Wolch.
Employees also need to be provided with a clear process for how they can submit the report, she says, “and it’s important to include at the outset, telling them that the investigator might have questions and the expectation is that they will do their best to answer them in the followup.”
The policy should also walk employees through such things as how far anonymity goes and cover the limitations of that anonymity, says Wolch, “making whistleblowers aware that they can start anonymous and then later disclose if they feel comfortable.”
Employees should also be provided with alternate policies that might be more applicable, as well as the relevant laws that might apply.
Who should run the program?
When it comes to managing the process, there are a number of different ways to do so, according to Wolch.
“These days, we usually see a compliance department… or human resources, but also with some sort of affiliation with other internal or external legal departments. It could also be set up by a neutral third party,” she says.
The whistleblowing responsibility can also be found at the top of some organizations.
“A lot of those processes do go way up to the chair, so the highest levels in the organization but sometimes it could be the chair, who it is reported to or some sort of special committee may be identified,” says Wolch.
While companies might want to outsource the responsibility, there are pros and cons to both choices.
“Obviously in-house, there’s a lot of immediate know-how about how the company works, which is beneficial in terms of responding, investigating. Obviously, it can be more cost effective. The con would be if you don’t have, for example, the capacity or the training,” says Wolch.
For those organizations who have “capacity issues,” handing off the responsibility to a third party also brings on benefits.
“It could take that off your hands but the other is that it helps with the confidentiality, it helps with privacy, it helps with the integrity of the process where people feel like they can speak freely and the whole purpose of going through that process, which is: ‘I didn’t feel comfortable going to my manager or to the board or whatever the case is,’” she says.
For HR professionals, while they might not always play an active role in the whistleblowing process, they can become champions of its success, she says.
“They can be responsible in encouraging a speak-up culture in the organization with proper channels and policies and reinforcing those policies,” says Wolch.
