Is Whistleblowing an Underused and Undervalued Corporate Governance Mechanism?

Whistleblowing enables employees to safely and confidentially report malpractice and wrongdoings within the workplace, such as discrimination, harassment, fraud or other illegal activity. By supporting a culture of accountability and openness, it is increasingly recognised by organisations around the world as an essential tool within corporate governance. Yet, its potential is often underused and undervalued.

Prompted by various socio-economic factors and macro trends, the need for transparency and ethical behaviours in the workplace is greater than ever. In this article, we will explore some of these factors and offer our guidance on why your organisation should consider whistleblowing an essential and valuable corporate governance tool.

Shifts in The Socio-Economic Landscape

Not only do today’s shareholders and society at large expect more, particularly from ‘big businesses’, several socio-economic trends are also reshaping our expectations of corporate governance.

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Macro trends such as income inequality, productivity slowdowns and the increasing cost of living have placed significant stress on families and communities around the world and this has heightened our scrutiny of corporate practices, particularly those perceived as exploitative or unfair.

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Once hushed and hidden behind boardroom doors, issues of misconduct and malpractice are now routinely subject to public scrutiny and widespread criticism and, due to the ‘always on’ nature of online news and social media, when a corporate integrity scandal hits the headlines, the story is amplified on a global scale.

In response to these trends, governments have mandated a raft of law reforms, royal commissions and enquiries aimed at improving corporate behaviour; as a result boards, owners and executives are under increasing pressure to conduct business in a more ethical, fair and transparent manner.

Whistleblowing, as a corporate governance mechanism, has the potential to thrive in this environment – but only if it is properly valued and implemented.

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Lack Of Trust – And Its Consequences

When the public’s trust in governments, corporations and senior executives begins to erode and concerns are not addressed properly, it can escalate and become serious. The danger is that it creates an environment where misconduct can flourish, increasing integrity-related issues.

Such a decline in confidence can undermine effective communication between colleagues and management, with employees ‘second guessing’ or even blaming one another. Fearful of retaliation or inaction - employees will be less likely to speak out and, over time, unchecked misconduct and poor communication leads to a toxic and dysfunctional workplace culture in which overt harassment, discriminatory jokes or other unethical behaviours risks will be allowed to persist, or even become normalised.

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Limitations Of Traditional Governance Mechanisms

Traditional governance tools such as internal and external audits or management reviews are often enough to detect serious misconduct. In its latest survey, conducted in 2024, The Association of Certified Fraud Examiners (ACFE), a global professional body examining fraud trends around the world, highlighted the limitations of these mechanisms:

• Audit Ineffectiveness

Many audits lack the ability to detect nuanced or covert unethical behaviours and fail to uncover large-scale fraud or misconduct, due to their limited scope and reliance on existing records and processes. 

• Value of Tip-Offs

According to the ACFE, the ‘tip-off’ is the most effective way to uncover unethical practices within an organisation. These often include different ‘whistleblower or reporting mechanisms,’ such as talking to colleagues, reporting to line management, escalation to HR or senior management, reporting through an independent reporting channel, or to a regulator or the police.

Despite the Tip-Offs proven value, many of the above channels remain underused and ineffectively designed in many organisations. The reporting frameworks are complex, policies are not well drafted,  which subsequently leads to a failure to promote reporting channels and effectively support whistleblowers – leading to fear felt by many of professional and social reprisal, deterring them from reporting misconduct.To realise the potential of the whistleblowing or ‘Tip-Off’ program in your organisation, there are a number of proactive steps you can take:

• Build trust and create a culture of transparent leadership through open communication and a demonstrated commitment to ethical behaviour.
• Establish and promote your core values to reinforce corporate integrity and accountability.
• Create a user-friendly reporting channel that is simple, confidential and accessible to all. 
• Regularly remind employees of the options available to report concerns safely.
• Guarantee confidentiality and provide support to individuals who come forward. 
• Assure whistleblowers of your support and forbid retaliation. 
• Clearly define the role of your whistleblower protection officers or third-party reporting mechanisms to help build confidence in the system.
• Use whistleblower data, trends and outcomes to identify systemic issues and make informed decisions to improve governance practices.

Veremark: Guiding Your Organisation to Ensure Transparency And Compliance

As socio-economic pressures mount and public scrutiny continues to intensify, organisations which embrace whistleblowing as a valuable and essential corporate governance tool stand to gain a competitive edge.

By simplifying reporting mechanisms and protecting whistleblowers, businesses can safeguard their integrity and transform whistleblowing from a compliance requirement into the foundation of their ethical and effective governance.

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With extensive experience in creating and managing whistleblower programs, our teams offer expert advice to Boards and Senior Management on protecting whistleblowers, streamlining escalation procedures and navigating regulatory requirements. Get in touch for more details on how Veremark Whistleblower Technology Solutions can help your organisation.