The Whistleblower as a gatekeeper of good governance
The origin of the term ‘whistleblowing’ is uncertain. It may refer to English policemen blowing whistles to alert others to an illegal act or to an umpire blowing a whistle during a sports match to signal illegal or foul play. The term was first used in the US in 1963 but became part of the common vocabulary in the early 1970s after it was coined by the US civic activist, Ralph Nader.
Nowadays, the term whistleblowing is more likely to be used in a corporate context.It is a practice whereby individuals reportan illegal act or unethical behavior of a corporate or government body to the media or to the relevant authorities in total confidence and in the best interest of the public. The individual who ‘blows the whistle’ is referred to as a whistleblower.
A whistleblower may report his findings based on a hunch if s/he has strong suspicions that something does not ‘seem right’ or in cases where there are more obvious illegalities such as a breach of process or procedure that leads to gross negligence, miscarriage of justice and so forth.
Some typical instances of when someone blows the whistle could be when:
• the health and safety of individuals/employees or public is put at risk
• there is damage to the environment
• a gross breach of procedure or criminal offence is committed
• there is an illegal cover up of a wrongdoing
Essentially there are two types of whistleblowers: internal and external. Internal whistleblowers come from within an organisation, for example when an employee reports misconduct or illegal activity stemming from parts of the organisation or key individuals. The external whistleblowers may not necessarily have a connection with the organisation but report their observations to regulatory authorities such as law enforcement agencies or special protective agencies,. It is quite clear that of the two types, it is the internal whistleblower who takes more of a risk when making a disclosure because of the perceived high risk of loss of job, victimisationand other issues which may ensue following a disclosure.
Given how devastating a genuine disclosure can be to the image of an organisation or government agency involved, is it any wonder that there are not as many whistleblowers as they ought to be. The key ingredient for successful whistleblowing is anonymity. Making a disclosure knowing that you will enjoy certain protections makes it more likely that whistleblower will come forward with his or her disclosure. Upon review of the current framework or lack thereof for whistleblowers in Nigeria it becomes obvious that there is insufficient legal protection for any would be whistleblowers today in Nigeria.
Internationally, whistleblowing is recognised as a very important tool that can be used to maintain checks and balances within organisations and expose illegal practices that are being perpetuated. One observation is that regardless of jurisdiction, the risk for informants remain the same. High profile whistleblowing cases of the past decade e.g. Enron, Halliburton and Edward Snowden cases, involved informants who had to overcome a series of obstacles before their credibility could be established. In some cases it took years before legal action was taken against the organisations involved. In reality only a small proportion of whistleblowing cases are taken seriously and an even smaller proportion make the media headlines.
In Nigeria, the regulatory authorities recognise the importance of whistleblowing as a tool to promote good governance. The Securities Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) respectively announced plans to roll out new whistleblowing schemes before the end of 2013. These initiatives reinforce the importance of whistleblowing as an effective means of boosting levels of compliance as well as protecting investor confidence in the capital market. There are currently whistleblowing provisions contained in the SEC rules and regulations which puts the burden on the Compliance Officer to report incidents of non-compliance, breaches of procedures within an organisation.
In 2012, the CBN released its ‘Guidelines for Whistleblowing in the Nigerian Banking industry’ in attempt to curtail the growing prevalence of unethical and illegal practices in the industry, establishing whistleblowing as a mechanism for bringing violations to the fore. The codification of these rules now makes it mandatory for all banks and non-financial institutions to have internal whistleblowing policies which are made known to employees and stakeholders. The question is has that been enough to promote the culture of whistleblowing thus far?
A major challenge persists, which is establishing credibility and enhancing protection for informants. More often than not, it can be quite a task for whistleblowers to be taken seriously by senior management of their organisations.
In October 2006 a prominent case of whistleblowing in Nigeria involving Cadbury’s Nigeria led to the discovery of deliberate financial overstatementswhich had gone undetected for several years following an audit ordered by the parent company.The cost of rectifying the error was not just financial but also had reputational consequences for the organisation as this shook investor confidence at the time. Recently, there has been a media frenzy following the leak of the acquisition of the two armoured security vehicles by the Nigerian Civil Aviation Authority (NCAA) on behalf of the Ministry of Aviation by a public officer of the agency. Whilst little attention has been paid to the whistleblower involved it is somewhat discouraging to find his namebandied about by the press rather than preserving his anonymity. In order for any whistleblowing program to function effectively, a proper legal framework must be developed to ensure full protection is granted to informants.
Nigeria has signed up to and ratified various international conventions where the protection of the whistleblower isenshrined. These international conventions include the following:
1. Article 33 of the UN Convention against Corruption (UNCAC)-: Each State Party shall consider incorporation into its domestic legal system appropriate measures to provide protection against any unjustified treatment for any person who reports in good faith and on reasonable grounds to the competent authorities any facts concerning offence established in accordance with this Convention.
2. Article 5 (5) of the African Union Convention on Preventing and Combating Corruption- which states as follows:
For the purposes set-forth in Article 2 of this Convention, State Parties undertake to: Adopt legislative and other measures to protect informants and witnesses in corruption and related offences, including protection of their identities.
Despite the adoption of the above conventions, there is no legal protection for whistleblowers in Nigeria.
Although section 64 of the Independent Corrupt Practices and Other Related Offences Act 2000, and section 39(1) of the Economic and Financial Crimes Commission (Establishment) Act 2004 protect the identity of the informants there are no mechanisms to enforce this protection when such identity is negligently compromised.
By virtue of section 27 of the Nigerian Freedom of Information (FOI) Act 2011, public officers who disclose information to the public are protected. However such protection is only limited to preventing criminal or civil proceedings against the public officer where the information disclosed is:
· detrimental to the organization;
· given without permission but the officer believes such information shows;
· mismanagement, gross waste of funds, fraud and abuse of authority or;
· a substantial and specific danger to public health or safety.
Despite the explicit does not sufficiently provide the level of protection needed by whistle-blowers which would protect them from being subjected to maltreatment such as unfair dismissal, illegal suspension or demotion as a result of making a public disclosure. A Whistle-blower Protection Bill has been drafted to provide a legal framework protecting the whistleblowers from victimization and the fear of intimidation from within their organization however as it currently stands, this Bill has not yet been passed by the National Assembly and therefore whistleblowers are denied full protection.
In the US, a whistleblower award program has recently been implemented to incentivise whistleblowers whilst preserving their anonymity at the same time. Setting a precedent, the US SEC paid out a watershed sum of $1m on October 1, 2013 to an unidentified informant for providing information which led to a successful enforcement action and the recovery of large investor funds. The incentivisation scheme adopted in the US could set a new global standard for whistleblowing leading to enhanced protection as well as financial incentives for informants. Although there are ethical issues associated with incentivisation, if it is properly managed, the advantages could outweigh the disadvantages as it would still do more to encourage individuals to come forward. Good news for individuals who want to highlight internal corruption and bad practices but bad news for culpable organisations.
We have seen how powerful whistleblowing can be used as means of uncovering illegal and unethical practices whether in the corporate sphere or within a government agency. There are many questions that we need to start asking. How do we actively begin to promote the culture of whistleblowing in Nigeria? andHow can we encourage more whistleblowers to come forward and report incidents of corruption?There is a case for wide spread sensitization programs which advocate the use of anonymous hotlines, emails, or even social media which will enable individualssubmit their disclosures in complete confidence. The regulators need to assess the number of disclosures made every year and compare with the number of disclosures made internationally. The question is what can be done to encourage people to report wrongdoing?
Once we start to take stock of these issues, the paradigm shift can begin to take place, until then, we may continue to see only a trickle of new whistleblowing cases each year whilst widespread corruption and illegal practices continues in the background. It is clear that with the right framework in place and more advocacy programs, whistleblowing may become the most important means of promoting good governance in Africa in the years to come.
BY: Beverley Agbakoba-Onyejianya
BEVERLEY AGBAKOBA-ONYEJIANYA is a Compliance Officer with Renaissance Capital a leading emerging markets investment bank in Africa. She is also currently serving as chairperson of the Compliance Officers Rules and Review Committe of the Nigerian Stock Exchange. The views expressed by the author are hers and do not represent the views of Renaissance Capital.