Corporate Whistleblowing: Reporting Illegal and Unethical Conduct in the Workplace

Introduction

Generally, whistleblowing means reporting or disclosing an actual or suspected crime, violation of law or regulation, unethical conduct, health or safety hazard, breach of internal policies, breach of confidentiality or cover-up of any of the foregoing. Report of personal grievances and complaints are usually not regarded as whistleblowing. In the workplace, a whistleblowing procedure may clearly provide for the following: (i) purpose and scope, (ii) procedure for making a disclosure, (iii) assurance of anonymity or confidentiality, (iv) procedure for investigating a disclosure, (v) feedback to the whistleblower, and (vi) protection of the whistleblower from retaliation and victimization.

Case Studies

Speaking Up – Ms. Laurence do Rego

On August 6, 2013, Ms. Laurence do Rego, a director at Ecobank (the “Ecobank”) informed the Securities and Exchange Commission (“SEC”) that Ecobank’s board is not operating in the interest of shareholders. According to Ms. do Rego, amongst others, Ecobank was attempting to: (i) sell off non-core assets of Ecobank below market value; (ii) write off debts owed by a company related to Ecobank’s chairman; and (iii) manipulate the 2012 financial statements of the bank. Ecobank had suspended Ms. do Rego a day before her report to the SEC and subsequently terminated her employment. However, a few months after her termination, she was reinstated to her previous position. The chief executive and the chairman left Ecobank. KPMG and EY were engaged by SEC and the board of Ecobank, respectively, to investigate Ms. do Rego’s allegations. Ms. do Rego currently serves as the Group Chief Regulatory & Compliance Officer of the Ecobank Group.

Banking on Anonymity – John Q Public

In 2016, Barclays Bank (“Barclays”) received letters signed “John Q Public”, raising personal concerns about an executive who had been employed at the request of the chief executive of Barclays, Mr. Jes Staley. The letter was circulated among the management of Barclays and not treated as a whistleblower complaint. After, being questioned by the board, Mr. Staley unsuccessfully attempted to ascertain the identity of the “whistleblower”. Mr. Staley was fined GBP 642, 000 for that attempt following an investigation by the Financial Conduct Authority and the Prudential Regulation Authority. The regulators believed that Mr. Staley’s action could undermine the whistleblowing procedure at Barclays. They stated that he should have identified that he had a conflict of interest in relation to the complaint and distanced himself from the investigation of the matter. Barclays also cut his bonus by GBP 500, 000. Similarly, the New York State Department of Financial Services fined Barclays USD 15,000,000 over the incident.

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Protection of the Law

In Nigeria, by virtue of section 306(1) of the Investment and Securities Act (the “Act”), an employee of a public company or a capital market operator has the right to report the commission or likely commission of a crime or the non-compliance with a legal obligation in his/ her workplace. In such cases, public companies and capital market operators are prohibited from subjecting the disclosing employee to any detriment (including dismissal, termination, redundancy, withholding of benefits and entitlements, suspension and any other act that has negative impact on the employee); section 306(5) of the Act. The foregoing provisions and protections cannot be precluded by agreements such as confidentiality agreements and non-disclosure agreements.[1] Similarly, public and/ or regulated companies are required to have whistleblowing policies and procedures under paragraph 19 of the Nigerian Code of Corporate Governance 2018. Businesses operating in the pensions, banking and finance, and insurance industries are also required to have whistleblowing mechanisms and procedures, the specifics of which may differ from industry to industry.[2]

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It may also be possible to blow the whistle outside the mechanism stipulated in the workplace. A whistleblowing disclosure related to a crime or a violation of a regulation may be made to law enforcement agencies or the relevant regulator as applicable. For example, where a public company or capital market operator fails to act on a whistleblowing disclosure, the whistleblower can escalate the issue to the Securities and Exchange Commission.  Also, the Nigerian Stock Exchange has a whistleblowing mechanism called X-Whistle[3] for the report of market abuse, financial fraud, undeclared conflicts of interests and so on. The X-Whistle portal is open to any member of the public, the broker-dealer community, shareholder associations, employees and directors of listed companies and of capital market operators, media professionals, auditors and reporting accountants and staff of regulatory bodies.

 

Under the whistleblowing policy of the Federal Ministry of Finance, any person may report violations such as mismanagement of public funds and assets, fraud, bribery, etc. using the following channels: SMS:   09098067946, email: whistle@finance.gov.ng   and web:   http://whistle.finance.gov.ng. Reports under the policy should be in the public interest. Where a report under the policy directly leads to the voluntary return of stolen or concealed funds or assets, the reporter would be entitled to a monetary reward.

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What Should Employers Do?[4]

Employers should encourage and not deter whistleblowing. Employers should have a whistleblowing policy or procedure which satisfies relevant laws and regulations applicable to them. A whistleblowing policy or procedure should clearly set out the nature of matters that may be disclosed; where it expressly excludes certain matters (such as personal grievances), it should provide guidance on the channels for resolving the excluded matters. Such policies and procedures should also allow for written and oral disclosures; anonymous disclosures; and may incorporate email, letter, hotline, or in-person disclosures. Whistleblowing policies and procedures should be easily accessible to employees. They should ensure protection for whistleblowers from victimization and retaliation. Employees should be sensitized and trained on these policies and procedures. Whistleblowers should be given feedback on the actions taken in relation to disclosures. Where a whistleblower is dissatisfied with the feedback, there should be clear guidance on the internal measures he/ she can take.

 

Adebisi Sanda, Governance Supervisor at Oando Energy Resources Inc.,

 

The foregoing is only intended to provide general information and does not by itself create a client/attorney relationship between readers and the writers. Specialist legal advice should be sought about the readers’ specific circumstances when they arise.

[1] Section 306 (12)

[2] For detailed analysis, see Ozofu ‘Latunde Ogiemudia and Chukwunedum Orabueze, Nigeria – Whistleblowing | DataGuidance, August 2019, accessed July, 2021 https://www.uubo.org/media/1774/nigeria-whistleblowing-_-dataguidance.pdf

[3] For more information on X-Whistle, call or email: 01-4489373, 0817243061, 081206463 x-whistle@nse.com.ng

 

[4] See also, UK Department for Business, Energy & Industrial Strategy, Whistleblowing Guidance for Employers and Code of Practice, March 2015, accessed July 2021 <https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/415175/bis-15-200-whistleblowing-guidance-for-employers-and-code-of-practice.pdf>

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