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WHAT IS WHISTLEBLOWING

Some people explain whistle blowing as the disclosure by current or former members of an organisation of immoral, illegitimate or illegal practices under the control of the employers, to organisations or persons that might be able to effect action. It has also been defined as the disclosure by an employee of “confidential information relating to some danger, fraud or other illegal or unethical conduct connected with the workplace, be that of the employer or of his fellow employees”. Essentially, Whistleblowing is defined as raising a concern about wrongdoing within an organisation. Whistleblowing, in essence, refers to the situation where an unauthorised disclosure is or should be transformed into an authorised disclosure of wrongdoing following certain prescribed processes and procedures in order to prompt action to address organisational wrongdoing and to protect the whistle-blower from harmful action for reporting wrongdoing in a controversial or unauthorised manner. “Since the actions of whistle blowers can protect the health, safety, or security of the general public or those within an organisation, whistle blowing is an act that benefits others and can therefore be considered as altruistic behaviour for the public good”. In essence, whistleblowing happens when employees recognise that there are certain wrongdoings in the organisation and decide to expose such wrongdoings to someone who is able to do something about it. Such behaviour may be borne out of a form of organisational citizenship, - “in which people go beyond the call of duty to contribute to the well-being of their organisation and those in it", usually without intending to gain any rewards for themselves.

WHAT ARE THE DIFFERENCES BETWEEN INTERNAL AND EXTERNAL DISCLOSURES?

Internal vs external disclosure internal whistleblowing refers to reporting to people or managers internal to the organisation that are in higher positions in the organisational structure Management is perceived to be the wrongdoers and the protectors of their own interests. Internal whistleblowing may take place using both existing communication channels such as hotlines (Johnson & Wright, 2004) or unexpected communication channels, if this is the only option remaining (Dehn, 2001). Internal whistleblowing is emphasised in the literature as the most desirable option for whistleblowers because it offers an earlier opportunity to correct the matter, as it may avoid the more damaging consequences of external whistleblowing (Barnett, 1992; Davis, 1989; King III, 1999; Trevino & Bart, 1992) or non-reporting. External whistleblowing refers to the disclosure of information to bodies outside the organisation, such as the media, politicians, ombudsmen, government bodies, regulatory bodies, public interest groups and enforcement agencies (Miceli & Near, 1992). “[e]xternal disclosures bring unwanted public attention to organisations, and since such disclosures concern alleged wrongdoing, they usually put organisations in the worst possible light”. Furthermore, by challenging the organisation’s authority structure, external whistleblowing may be seen to raise more questions about the capabilities and character of management, and, as a result, whistleblowers are more likely to experience harsher retaliation because of their choice of external reporting (Barnett, 1992, p. 2; Morehead Dworkin & Baucus, 1998, p. 1286). Other disadvantages of external reporting include litigation and the costs thereof and unfavourable media attention.

WHY DOES NVEST BELIEVE IT IMPORTANT TO HAVING A WHISTLE BLOWING MECHANISM?

Disclosure mechanisms are regarded as one of the most essential tools for combating corruption and enhancing democratic principles such as accountability and transparency. Experts agree that financial disclosure, standards of conduct, and whistle-blowing protection are the most important components of a framework for tackling conflicts of interest.

A 2003 global fraud survey by Ernst & Young showed that nearly 40 per cent of all frauds were prevented and/or detected by either internal or external whistle blowers.

A study by the Association of Certified Fraud Examiners in the United States of America, during 2002, revealed that organisations with an anonymous whistle-blowing mechanism were losing an average of 50 per cent less money to fraud than organisations without such a mechanism.

More recently, KPMG’s 2007 “Profile of a Fraudster” survey found that 89 per cent of fraudsters were employees of the victims, that members of senior management represented 60 per cent of all fraudsters and that an additional 26 per cent of such crimes involved management. Deloitte’s Tip-offs Anonymous reported that white-collar crime has increased by 200 per cent over the 12 months to July 2008. There was also an increase in senior executives abusing their powers and circumventing controls.

Apart from these statistics, there are many other compelling reasons for the reporting of criminal conduct:

  • There are legislative obligations on an organisation to report crime, such as the Prevention and Combating of Corrupt Activities Act of 2004.
  • The Protected Disclosures Act of 2000 states that every employer, as well as every employee, has a responsibility to disclose criminal conduct.
  • The King III report on corporate governance (although not constituting legislation) highlights that a whistle-blowing facility is a key corporate-governance responsibility because it forms part of a broader duty to act in a socially responsible way.
  • The rules and directives of many companies demand reporting of criminal conduct.
  • It is the ethical (right) thing to do.
  • The commercial sustainability of an organisation may depend on reporting of criminal conduct.
  • Crime affects the profitability of a company.

DOES NVEST’S REPORTING FACILITY ALLOW ME TO REPORT COMPLETELY ANONYMOUSLY SHOULD I WISH?

Yes, most definitely. You have the option of inserting your name and details or not. Should you opt to remain anonymous, there is no way for management of NVest to track the identity of the reporter through the company’s IT system.

WHO RECEIVES THE REPORT, ONCE SUBMITTED?

The system creates a report which gets sent by the system to the Chief Executive Officer as well as the Independent Non-Executive Directors (INED’s) of NVest. By including the INED’s, who are independent and external, on the recipient list, it is believed that action and objectivity will be ensured.

WHAT DOES THE LAW SAY AND WILL I BE PROTECTED?

Yes, the law offers strong protection to whistle- blowers!

The Companies Act 2008
Section 159 (Protection for whistle blowers; item 7) states – “A public company and state owned company must directly or indirectly:

  • a) Establish and maintain a system to receive disclosures (contemplated in this section) confidentially, and act on them; and
  • b) Routinely publicise the availability of that system to the categories of persons contemplated (in subsection 4).

The Protected Disclosures Act
The SA government has indicated its support for the concept of whistle blowing and acknowledged the need to offer legal protection to whistle blowers with the introduction of The Protected Disclosures Act, Act 26 of 2000 (“the Act”), aptly dubbed the Whistle Blowers Act. The Act makes provision for employees to report unlawful or irregular conduct by employers and fellow employees, while providing for the protection of employees who blow the whistle. The Act was enacted to protect whistle-blowers and to help combat corruption.

The Act makes provision for the following:

  • Employees to report unlawful or irregular conduct by employers and fellow employees;
  • Protection of employees who blow the whistle from “occupational detriment” by employers when making certain “protected disclosures”.

The objective of the Act is as follows:

  • To protect employees who blow the whistle;
  • To provide for remedies for whistle blowers against certain occupational detriment;
  • To provide procedures for whistle blowers to disclose information of improprieties in a responsible manner;
  • To create a culture facilitating the disclosure of information by employees relating to criminal and other irregular conduct in the workplace in a responsible manner; and
  • To promote the eradication of criminal and other irregular conduct in the public and private sectors.

The irregularities covered by the Protected Disclosures Act relate to the following:

  • Criminal offences;
  • Failure to comply with certain legal obligations;
  • Miscarriages of justice;
  • Endangering of the health or safety of individuals;
  • Damage to the environment;
  • Unfair discrimination; and
  • the deliberate cover up of any of these.

In terms of the Act, the “occupational detriment” from which the whistle blower is protected is:

  • Being subjected to any disciplinary action;
  • Being dismissed, suspended, demoted, harassed or intimidated;
  • Being transferred against his or her will;
  • Being refused transfer or promotion;
  • Being subjected to a term or condition of employment or retirement which is altered, or kept altered, to his or her disadvantage;
  • Being refused a reference, or being provided with an adverse reference, from his or her employer;
  • Being denied appointment to any employment, profession or office;
  • Being threatened with any of the actions mentioned above; or
  • Being otherwise adversely affected in respect of his or her employment, profession or office, including employment opportunities and work security.

The Act further indicates that the disclosure is protected if made to certain persons, namely:

  • Legal Advisor;
  • Employer;
  • Member of Cabinet/ Executive Council of Province, where relevant; where the employer is a Public Sector body;
  • To the public Protector;
  • Auditor-General; and
  • Any Person, prescribed in certain circumstances.

The Act does not apply to reporters who choose to remain anonymous, because the Act cannot protect a person who is faceless. The Act does also not protect employees who engage in malicious reporting. Further, the Act does not protect employees who abuse the provisions of the Act to conceal their own involvement in criminal activities and/or irregularities from criminal prosecution, disciplinary action or civil liability to third parties. Employees who knowingly provide false information or spread false rumours should be subject to disciplinary action. A person is malicious when ulterior motives motivate the person to make a false allegation with the intent unjustly to discredit or harm an individual or organisation

Case Law:
The "test" case for protected disclosures was Grieve v Denel (2003) 24 ILJ 551 (LC), in which the Labour Court gave context to section 3 of the PDA:

"No employee may be subjected to any occupational detriment by his or her employer on account, or partly on account, of having made a protected disclosure."

Dismissal in breach of the occupational detriment requirement under the PDA is deemed to be automatically unfair under s187 of the Labour Relations Act, No 66 of 1995 (LRA) and could result in a maximum of 24 months' compensation awarded to the employee. Other occupational detriments not resulting in dismissal are deemed unfair labour practices which could give rise to a maximum of 12 months' compensation.
The most cited case in terms of the PDA is the decision of Tshishonga v Minister of Justice & Constitutional Development 2007 4 BLLR 327 (LC), in which the Labour Court introduced a four-stage approach to ascertain whether or not the requirements of the PDA are met:
  • 1. Was there a disclosure?
  • 2. Was it a protected disclosure?
    The disclosure will be protected if it was in good faith, if it was subjectively believed to be substantially true and if there was no ulterior motive. In Van Alphen v Rheinmetall Denel Munition (Pty) Ltd (2013) 34 ILJ 3314 (LC), the Labour Court stated that protection requires an impropriety from the employer. Further, the company's protected disclosure procedure must be followed by the employee.
  • 3. Was the employee subject to an occupational detriment?
    There must be a causal link between the disclosure and the occupational detriment. In Independent Municipal & Allied Trade Union & another v City of Matlosana Local Municipality & another (2014) 35 ILJ 2459 (LC), the Labour Court gave practical pointers to determine if there is a link between the occupational detriment (in this case a disciplinary enquiry) and the disclosure namely:
    • i. the timing of the institution of the charges or the occupational detriment;
    • ii. the reasons given by the employer;
    • iii. the nature of the disclosure; and
    • iv. the person responsible for taking the decision to institute the charges.
  • 4. What remedies are available?
Since December 2013, there have been 15 reported cases involving protected disclosures. The increase in the number of disputes is attributed to employees becoming more aware of the protections afforded to them under the PDA.

Unaudited Interim Results for the Six Months Ended 31 August 2018 and Interim Dividend Declaration (Number 8)
Section 45(5) notice in terms of the companies act, 71 of 2008 (“companies act”)
Results of Annual General Meeting (“AGM”) and changes to the board of directors
NVest Financial Holdings Limited 2018 Annual Report

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