Whistleblowing as protection against corporate criminal liability and damage to property and reputational damage

8. 9. 2021

Authors: Robert Nešpůrek, Richard Otevřel

Source: FairWhistle Blog

Correct implementation of a whistleblowing system, as required by the proposed Whistleblower Protection Bill in the Czech Republic, must be understood as part of an organisation’s risk and compliance management.

However, we believe that although it is a regulatory obligation, the introduction of a whistleblowing system can be beneficial to an organisation if handled correctly. The aim should be to create a system that the whistleblower trusts so that the internal communication channel is their first choice. This will give managers or owners a chance to learn about potential problems in the organisation before they start making the headlines. For the whistleblower, the option to make a safe report within the organisation could be a way to remedy a problem they have learned about without causing damage to their employer. Indeed, we should not think of the typical whistleblower as an enemy – in countries where whistleblowing is more common, it is a person who wishes to make things better. If whistleblowing is a well-designed as part of internal processes and is supported by management, such an optimal result can be achieved.

Let’s now take a closer look at what you can gain by implementing a functional whistleblowing hotline:

Reducing the risk of corporate criminal liability

A model compliance management system, which includes a functional whistleblowing system, is recognised by the methodology of Czech Republic public prosecutor offices as an example of measures that can avert corporate criminal liability. It should be emphasised that the mere set-up of compliance programmes and formal introduction of a whistleblowing system is not enough. Instead, the organisation must be able to demonstrate that it promotes, enforces and adequately monitors these instruments within its personnel structure, and that it is fully prepared to respond to identified deficiencies in the event of a breach.

Protecting your reputation

If the whistleblower has confidence that nothing will happen to them if they make an internal report and that the matter will indeed be investigated, this reduces the likelihood of them going public with their report to the Ministry of Justice or becoming entitled to publish their report in the media or on social media. This prevents major damage to your organisation’s public image and helps protect your trade secrets.

Preventing financial damage

If you identify a problem early, it is more likely to be resolved internally quickly and efficiently before it escalates. This can limit the actual damage (such as the costs of product recall), avoid financial penalties (but sometimes more serious penalties such as a ban on activity), a loss of profit due to damaged reputation, compensation claims and finally legal costs.

Staying in control of decision-making

Any manager will be pleased if they can manage sensitive matters internally, without the intervention of journalists or even public authorities. If you are the first to know about employee complaints, you will be able to manage such matters within the legal boundaries on your own, i.e. investigate and possibly resolve them without the involvement of external parties.  The truth is that once problems are made public, they can live a long life of their own, and unfortunately, often regardless of their veracity.

Complying with your statutory duty

The implementation of whistleblowing will become a statutory duty and the law will punish inconsistency in implementation with high fines amounting to millions of Czech crowns.

Enhancing compliance

Whistleblowing complements the general structure of an organisation’s compliance and risk management function by giving it an effective tool to discover potential deficiencies and areas for improvement that are commonly identified through lengthy and costly audits.

Strengthen your credibility as a socially responsible company

The introduction of whistleblowing is gradually becoming a standard for companies with a high ethical business culture, which will be increasingly required by investors, shareholders, your business partners (especially international), in public procurement, and also by potential employees.

You might think that you already deal with your internal problems without a whistleblowing hotline. This is certainly a sign of well-functioning relationships within the organisation. But are you sure that you are aware of all cases that you could resolve effectively? Whistleblowing need not be about changing how you solve problems, but it can serve as a useful complement to what you already do in your company. If an opportunity presents itself, why not take advantage of it?