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Executive summary: Americans may think that whistleblowing systems don’t work abroad because workers and governments don’t want them. Companies should therefore regularly review their whistleblowing policies and procedures to ensure their effectiveness. They should also establish performance measures for their whistleblowing initiatives, and benchmark the effectiveness of their initiatives against those of peer organizations or industry standards.That is according to a new report from The Conference Board.The belief that outside the United States, whistleblowing systems encounter cultural resistance from employees and even governments is virtually an article of faith. For example, many company respondents to a 1998 Conference Board survey reported serious difficulties in getting employees to use hotlines—particularly in Europe. They attributed this aversion to the unhappy legacy of governmental and occupation forces’ use of informers. Typical of this view was the statement of the chief ethics officer of a U.S. manufacturer: “Hotlines have an ugly history in many parts of Europe, notably Germany, The Netherlands, Spain, and Italy.” Outside of Western Europe, the most frequent explanation for worker refusal to blow the whistle (aside from legitimate fear in certain situations) was the hierarchical or clan-like structure of Asian and Latin American societies that fosters deference to authority or unwillingness to speak unfavorably of group members to outside persons. |
Yet, despite widely accepted beliefs about Asia to the contrary, the same 1998 survey that documented Western European resistance found that Japanese companies were nearly as likely as other surveyed companies to have a hotline (40 percent) and no Japanese company reported significant opposition.
More recently, a Conference Board-World Bank case study of a North American communications company found that in 2000 the proportion of East Asia Pacific region “help line” calls was roughly the same as the number that originated in other regions and that the helpline was “a viable resource” in East Asia Pacific.
Still, even if there is growing evidence that whistleblowing systems can be successfully implemented outside the United States, the notion of Western European resistance has not yet been put completely to rest. Within the last year, it gained currency not due to employee disuse but from governmental opposition to U.S.-style company hotlines in France and Germany. In May and June 2005 the French data protection authority Commission nationale de l’informatique et des libertés (CNIL) and the German Labor Court invalidated certain hotlines established by U.S. multinationals pursuant to the Sarbanes-Oxley Act (2002) and other compliance standards such as the Organizational Sentencing Guidelines.
The French and German cases present different issues. The French concern was that false statements or that indiscriminate dissemination of reported conduct (whether true or false) was a greater risk than any benefits that such a system could achieve. In a letter to then SEC Chair William H. Donaldson, CNIL Chair Alex Turk said:
“The Commission notes the possibility of carrying out an ‘integrity warning’ in an anonymous manner could only increase the risk of a slanderous denunciation . . .Additionally, the Commission believes that the system is out of proportion with the goals and risks of slanderous denunciations and stigmatization of employees named in an ‘integrity warning’.”
The French-U.S. Differences
Rather than being CNIL’s last word on whistleblowing, this
letter was the first step in a frank exchange of views between affected
parties.7 On November 10, 2005 the CNIL issued a “Guideline Document”
for the implementation of whistleblowing systems in compliance with French
privacy laws in which it stated that it had “no objections in principle to
such schemes,” subject to certain conditions. The key provisions are
summarized below:
Scope: “the scope of such a whistleblowing scheme should be limited . . . Schemes with a general or indiscriminate scope . . . raise an automatic difficulty with regard to the French Data Protection Act due to the risk of abusive or disproportionate incrimination of the professional, or even the personal integrity of the employees concerned.”
Definition of categories of affected persons: “the categories of personnel who may be incriminated through a whistleblowing system must be precisely defined in reference to the reasons supporting the setting up of this system.”
Restrictive handling of anonymous reports:
“The possibility [of handling] anonymous reports can only increase the risk of slanderous reports. . . However the existence of anonymous reports, even and especially in the absence of organized confidential whistleblowing systems is a reality. . . In any event, the organization must not encourage the persons who are to use the system to do so anonymously, and the publicity which is made on the existence of such a system must be designed by taking this requirement into account.”
Accurate notification of the incriminated person:
“notification to the person identified in an alert must in principle be carried out by the person responsible for the system, no later than at the time when the relevant data is recorded . . . so as to enable him or her to exercise his statutory right to object promptly to his or her data being processed, for a legitimate reason.”
According to Fabrice Baumgartner, an attorney with the Cleary Gottlieb Paris office, the CNIL resistance stems from a complementary rather than opposing view. U.S. policymakers and companies believe that whistleblowers can provide critical information that can enable management to avert or at least contain serious operational risk. The issue is whether this benefit outweighs the CNIL concerns about a whistleblowing system’s potential for “slanderous denunciations” from anonymous sources.
Defamation: Protecting employees
The French view that wrongful denunciations can unduly damage an
employee’s reputation cannot be dismissed. It ought to be possible for an
effective whistleblowing system to include protections for reported
employees and procedures that subject anonymous reports to an appropriate
degree of care and skepticism.
Indeed, one can see in its use of language about principle how the CNIL’s evolution to an accommodative posture toward company whistleblowing systems has evolved over time. The Commission’s first statement (May 26, 2005) on the subject had “reservations as a matter of principle” regarding whistleblowing systems.
This position softened in its November 10 communiqué, which said that the CNIL was “not opposed to whistleblower procedures as a matter of principle.” In its December 8 so-called Safe Harbor ruling the CNIL omits any mention of principle.
The Safe Harbor requirements:
• Limit scope of information reported to identification of
Sarbanes-Oxley related
accounting and audit problems and French legal requirements regarding
internal
controls for financial, banking, and anticorruption matters
• Restrict type of data collected to objective facts (e.g., target of
complaint, facts
established by investigation). Allegations must be clearly labeled as
such
• Require that employees be fully informed about whistleblowing
procedures
• Permit but do not encourage anonymity
• Restrict data dissemination
• Require that transmission of data to the United States comply with U.S.
Department
of Commerce Safe Harbor Principles or be pursuant to a contract
consistent with
the European Commission standard contractual clauses guaranteeing
privacy rights9
• Limit data retention
• Require that confidentiality be ensured and that target of complaint be
informed.
In compliance with the French Data Protection Law, the person must
have a right to
access the data and upon showing of proper cause to have it rectified
or deleted
Germany: Works councils to be consulted
The German decision rested on the failure of the companies
instituting hotlines to enter into appropriate consultation with their Works
Councils. The Works Constitution Act 10 requires organizations with five or
more employees to establish independently or in concert with other employers
a Works Council to deal with “matters of direct concern to the
establishment or to the employees.” Under the Act an “employee” is a
wage earner, salaried employee or person employed for vocational training
purposes. Executive staff (e.g., persons who can hire and fire, sign
documents on behalf of the organization) “unless the Act expressly
provides” (which it does not) are not employees and, as such, are not
eligible to be Works Council representatives.
The German decision noted that other compliance program initiatives also required Works Council consent (e.g., gift policies, personal relations restrictions such as dating and nepotism polices, and drug testing).11 As the German concerns are procedural, they raise issues of a more practical nature. Specifically, have the Works Councils proven to be credible alternatives to whistleblowing systems as conduits for generating sensitive information? Conversations with U.S. senior company ethics officers familiar with German business practice affirm that the Works Councils can be highly effective in this regard.
Resolving the conflicts
Both of the recent cases entail governmental objections and the
parties are working to resolve the conflicts. Neither incident affirms the
view that for historical or cultural reasons, resistance to hotlines in
certain cultures makes them an impossible sell. Although there is evidence
worldwide of significant variations among countries with regard to the
percentage of employees that believe they can report misconduct without fear
of retribution, whistleblowing program support or lack of same based on
cultural determinants cannot be predicted. For example, Patricia J. Harned,
President, Ethics Resource Center notes that according to a recent survey
conducted by the organization:
- 71 percent of surveyed U.S. employees said that they were able to report infractions without fearing retaliation.
- Three countries/regions with very different cultures, Hong Kong (74), Mexico (73) and Canada (72) had slightly higher percentages. - While three others that are often cited as places where employees would be unlikely to utilize the system reported slightly (Germany—68 percent) to significantly lower (Japan and France—49 percent) percentages.
It is difficult to find cultural characteristics that explain these variations. Using certain national cultural “dimensions” (acceptance that power is distributed unequally (PDI), individualism (IDV)— everyone is expected to look after himself—and uncertainty avoidance (UAI)—the extent to which individuals fear uncertainty and want written rules) to explain employee resistance, the survey finds that among the top four regions/countries, Hong Kong and Mexico have “high” PDIs and “low” IDVs while in the United States and Canada, it is the reverse. As for UAI, Hong Kong, Canada and the United States are low, while Mexico is high.
These data suggest that cultural differences do exist—but not as an excuse for a failed program. Instead, cultural variations need to be taken into account and dealt with in an effective way.
Conclusion: Systems have proven their
value
Whistleblowing systems can generate culture-driven governmental
or employee resistance that requires some degree of system adaptation; but
national or ethnic-based employee disuse is not the only source of
culturally determined employee opposition.
It could also occur within different industries in the same company or even in the same industry but in functions that have different cultures (e.g., sales, manufacturing).
Whistleblowing systems have proven their value. In designing, implementing, and monitoring them for effectiveness, it is worth the effort to seek the common ground in different cultures to gain acceptance for these programs and ensure their effectiveness.
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Read more:
http://www.conference-board.org/
http://europa.eu/int/comm/justice_home
/fsj/privacy/docs/wpdocs/2006/wp117_en.pdf
