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Snitches (No Longer?) Get Stitches—the Recent Changes to Whistleblowing Policies

Mehar Chawla discusses the recent changes to whistleblowing policies — are they enough to improve corporate governance and culture?

Following the Banking Royal Commission, the regulation (or lack thereof) of corporate entities has dominated the public discourse, revealing systemic failings within legislative structures and government regulatory authorities. Corporate misconduct costs Australia over $8.5bil per year and comprises 40% of its total crime,[1]not to mention the loss of faith in corporate culture. Although whistleblowing did not occupy the limelight as much as other issues, it is an area in which reforms have been long overdue.

The abstruse, and often clandestine, nature of corporate structures render internal whistleblowing one of ‘the most effective means to expose and remedy corruption’,[2]as those associated with the company are most likely to witness misconduct firsthand. The recently passed Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 (‘the Act’) finally acknowledges this fact. The reality is that Australia’s financial regulators—the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA)—are ill-equipped and over-burdened, unable to deal with the ubiquitous corporate misconduct which pervades Australia’s private sector. Alongside this, we have a system which not only fails to facilitate whistleblowing, but actively persecutes those who ‘blow the whistle’.

The Act amends parts of the Corporations Act 2001(Cth), the Taxation Administration Act 1953 (Cth), the Banking Act 1959 (Cth) and the Insurance Act 1973 (Cth), in its creation of a single whistleblower regime designed to cover the corporate, financial and credit sectors. Indeed, this is significant in itself—having a consolidated regime makes information more accessible, as well as more legitimate. More importantly however, the Act modifies Australia’s previous treatment of whistleblowers and the whistleblowing process—a regulation that has long been deemed inadequate when compared to international practice and our domestic public-sector frameworks.[3]

The major changes are as follows: pecuniary penalties for breaches have been increased to amounts which might actually fulfil their purpose as a deterrent; the criteria of who qualifies as a ‘whistleblower’ and the types of disclosures which can be made have both expanded; bodies who have authority to hear disclosures has been increased and there is a requirement for companies to have their own whistleblowing policy.

Importantly, the law also increases the protections of whistleblowers, which can be said to demonstrate an emphasis on improving corporate governance and culture. Previously, whistleblowers faced extensive backlash if they did not satisfy the multitude of strict criteria before making their disclosure, including the onerous requirement of making a disclosure in ‘good faith’. This duty to act in ‘good faith’ means to act ‘honestly and reasonably’—a rather unhelpful definition consistent with the tendency of legislative language to be vague and indeterminate. Ostensibly, this requirement was a safeguard against disclosures which could be vexatious in nature or made without absolute confidence. However, its interpretation placed greater emphasis on the ‘motive of the whistleblower, rather than the veracity of the disclosure’.[4] The dominant purpose of the disclosure had to be the public interest. If there were a possibility of the whistleblower benefitting from the disclosure, they would fail to satisfy the ‘good faith’ requirement and thus be denied the relevant protections. The result is a ‘fate you wouldn’t wish on your worst enemy’,[5] including financial, legal and social reprisal. Whistleblowers were often threatened, derided, ostracised and as a result, discouraged from speaking out against malfeasance. The Act removes this ‘good faith’ requirement, increases the eligibility of potential whistleblowers, provides more avenues for reporting and offers the protection of anonymity if they so desire.

Perhaps most significantly, the law obliges all public companies and large proprietary companies to implement their own whistleblower policy (The Act, s 1317AI). The policy must include information about whistleblower protections, criteria for eligibility, and the means by which the company will support whistleblowers and investigate their allegations. Given the historical inadequacies in the whistleblowing regime, this requirement will be beneficial for all parties. First, effective internal means of redress would mean less of a legal, financial and emotional burden on the whistleblower, who would otherwise be forced to seek out much more cumbersome external avenues. Second, companies having their own whistleblowing policies acts as a public endorsement of whistleblowing as a legitimate institution. These are all important steps in improving not only corporate culture, but wider societal perceptions in regard to ‘snitches’.

There is an argument that the legislation does not go far enough. In its attempt to provide companies with flexibility, it mandates the creation of a ‘policy’, not actual processes and procedures to facilitate whistleblowing. Policy is not legally enforceable, can be easily changed, and should not be seen as a substitute for concrete legal obligations. Resultantly, the effectiveness of a given company’s policy will be dependent on the nobility of their management and their commitment to good corporate governance. For those of you who are sceptical of profit-oriented companies regulating themselves out of the goodness of their own hearts, note that there is still one safeguard: public perception. A company’s first priority is always to maximise their shareholder returns. Developing a clear and comprehensive policy—one that demonstrates a ‘commitment to ethical behaviour’,[6]will be advantageous to a company trying to uphold shareholder expectations or restore a damaged public image.

Moreover, the increased protections given to whistleblowers in the Act, as well as the increase in penalties associated with breaches, provides companies with an incentive to resolve matters internally. An effective internal mechanism to process disputes and disclosures reduces the risk of dissatisfied whistleblowers taking matters to regulatory bodies or the media.

Ultimately, it is hard to predict the effectiveness of this Act in actually reducing the rates of corporate misconduct and holding private sector crime to account in the same way as other crimes are. The success of internal whistleblower policies will be heavily contingent on how comprehensive and accessible they are, and how well ASIC and APRA can handle the increase in the volume of disclosures that will likely ensue following the Royal Assent of the Act. While the Act’s future legal effectiveness may be suspect, there is no question that it will have a normative role in changing attitudes towards whitecollar crime. A more transparent corporate world where snitches do not ‘get stitches’ is not only more ethical, but will hold companies accountable to the public alongside shareholders. At the very least, this Act signals what can only be described as a long-overdue shift in the government’s acquiescent attitude toward corporate crime.


[1 ]Explanatory Memorandum, Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 (Cth)

[2] Simon Wolfe, ‘Breaking the Silence: Strengths and Weaknesses in G20 Whistleblower Protection’ (2014)

[3] Explanatory Memorandum, Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 (Cth)

[4] Olivia Dixon, ‘Honesty Without Fear? Whistleblower Anti-Retaliation Protections in Corporate Codes of Conduct’ (2016)

[5] Christopher Knaus, ‘Corporate Whistleblowers ‘Desperate’ for New Protections (The Guardian)

[6] Sulette Lombard and Vivienne Brand, ‘Corporate Whistleblowing: Public Lessons for Private Disclosure’ (2014)

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