What is the Whistleblower Policy?

Explanation

The above policies make the stakeholders aware of what falls within the purview of illegal or unethical practices that one must report through whistleblowing. Furthermore, it gives them a complete set of actions they need to take in various situations and tells them how to protect themselves in case of facing the wrath of the people involved in illegal or unethical actions.

These activities might be simple acts of corruption or even serious offenses such as money laundering. Therefore, the stakeholders need to be very alert and aware of such activities and report them immediately.

Purpose of the Whistleblower Policy

You are free to use this image on you website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Whistleblower Policy (wallstreetmojo.com)

  • Encourage employees: A whistleblower policy encourages employees to report in good faith if they see any misconduct because they are made aware they must report such instances. But, of course, one will take care of their anonymity.Create awareness: Employees are aware of the possible issues under this category and for educational purposes. Otherwise, such acts might go unnoticed. Guide for stakeholders: The policy contains a step-by-step guide of what the employee or other shareholder needs to do when he sees misconduct and whom to report such instances. Therefore, they achieve the resolution quickly and efficiently. Without such a policy, the stakeholder might not know what to report an incident.Corporate Governance: Corporate governanceCorporate GovernanceCorporate governance is a set of rules or practices through which an entity is directed and controlled to increase shareholders wealth by increasing the economic value and is concerned about its relations with various entity stakeholders.read more is the process in which the interests of staggered shareholdersShareholdersA shareholder is an individual or an institution that owns one or more shares of stock in a public or a private corporation and, therefore, are the legal owners of the company. The ownership percentage depends on the number of shares they hold against the company’s total shares.read more and external stakeholders are protected because they cannot be a part of the company’s day-to-day activities. Therefore, they are vulnerable to misconduct.

Imperatives of a Whistleblower Policy

An anonymity clause is one of the most vital aspects of a whistleblower policy. A whistleblower must be convinced that the act of whistleblowing will not put him in danger, be it that of losing his job or the faith of his colleagues, even at times when there is a threat to his life or facing any legal consequence of his actions. If the whistleblower feels safe, he will report an incident. Otherwise, he will not, which can defeat the policy’s purpose.

Further, it needs to make the whistleblower aware of under which circumstances he should take internal and external actions. At times, taking an internal action might lead to tipping off the person performing misconduct, and then he might become alert and lay low for a while to prevent getting caught.

Whistleblower Policy vs. Ethics Policy

Code of ethics of any company or general is a much broader term. It deals with many other aspects of proper behavior or company stakeholders apart from just those the whistleblowing policy sells. Therefore, this policy is a subset of the larger ethics policy.

For example, in investment bankingInvestment BankingInvestment banking is a specialized banking stream that facilitates the business entities, government and other organizations in generating capital through debts and equity, reorganization, mergers and acquisition, etc.read more, the clients sometimes give gifts to portfolio managers Portfolio ManagersA portfolio manager is a financial market expert who strategically designs investment portfolios.read more for their good performance. One cannot accept such facilities if they exceed the value of the acceptable gifting policy of the investment bank. Even if such gifts are within acceptable limits, they must disclose if they have a significant value. That is to preserve the objectivity of the portfolio managers and prevent them from taking excessive risks.

The act of gifting is not illegal in itself. It is just a company policy not to accept them. That does not require an action from the whistleblower.

However, if the portfolio manager passes insider informationInsider InformationInsider Information is a piece of fact, information or an understanding (M&A, New Contracts, R&D breakthrough, new product launch etc.) which could impact the prices of a listed entity or publicly-traded organizations once disclosed in the public domain. Trading based on such information is considered to be illegal.read more to his relatives, they profit from it, then, the portfolio manager receives a share in the same, such acts require whistleblowing action.

Advantages

  • Keeps a Check on Misconduct: Having a policy makes all stakeholders aware of the misconduct. Further, they fear getting exposed if they perform an act of wrongdoing because they know that person telling would not face any threats due to anonymity. So, reporting misconduct would be efficient.Quick Reporting and Resolution: In bigger organizations, monitoring all the departments and offices around the globe is not always possible. Therefore, acts of misconduct might go unreported if the supervisor only must observe them. The policy helps share such responsibility, and whoever finds out about such transgression can report it as soon as it comes to their notice. Therefore, one can resolve it quickly.

Disadvantages

  • Anonymity Not Maintained: When the policy is inefficient, the stakeholders might hesitate to report an incident because they have seen that the anonymity is not maintained properly. It is a practical concern. Therefore, a person who considers misconduct fears going on the wrong side of those performing such misconduct.Disrepute: If the misconduct is huge, then the press comes into the picture and takes a toll on the company’s overall reputation. Therefore, at times, there is no action taken.Challenges Faced by Whistleblowers: Even though there are legal protections for whistleblowing, some whistleblowers face actions such as being shifted to another office or a department or may have to quit their jobs altogether. Further, their whistleblowing history makes it harder to be employed elsewhere.

Conclusion

The whistleblowing policy is a must in all organizations, whether big or small, to prevent misconduct and uphold the interests of all the stakeholders, internally or externally. It needs to maintain anonymity to encourage the whistleblowers to act when they see wrongdoing.

However, in practicality, whistleblowing is not free from danger as the whistleblower may face challenges such as being laid off, not getting a new job, or even threats to their lives. Therefore, the proper implementation of the policy is highly important.

This article is a guide to Whistleblower Policy and its meaning. We discuss the purpose, and workings along with advantages and disadvantages. You may learn more about financing from the following articles: –

  • Business EthicsEthical InvestingAccounting EthicsEnron Scandal