Public Concern at Work
Suite 301
16 Baldwins Gardens
London EC1N 7RJ
Tel. 020 7404 6609
Submission from Public Concern at Work to the Review of the OECD
Principles of Corporate Governance
6 February 2004
Summary
This submission looks at the scope of the suggested provision for whistleblowing stakeholders
(notably employees) contained in part E of the Third Principle (3E) of the draft revised OECD
Principles of Corporate Governance:
Stakeholders, including individual employees, should be able to freely communicate their concerns
about illegal or unethical practices to the company board and their rights should not be
compromised for doing this.
Public Concern at Work welcomes this recognition in the revised draft Principles of the key role that
employees can play in delivering effective corporate governance. However, we are concerned that
this provision is substantially more limited than the existing whistleblower provision in the OECD
Guidelines on Multinational Enterprises which also recommends protection for employees who blow
the whistle to regulators and law enforcement agencies. Apart from objecting to this limitation in
principle, we can see no reason for it when the Guidelines for MNEs and a number of OECD
members have introduced or proposed protection for whistleblowers who make disclosures to
regulators. For these reasons, we recommend that 3E be amended in order to maintain the OECD’s
commitment to good practice, its welcome steps in promoting whistleblower protection and also to
reflect legal developments in member states in the area of corporate governance.
In order to explain our position, we set out below a brief background to the work of Public Concern
at Work (PCaW).
Public Concern at Work
PCaW is an independent public interest charity, popularly known as the whistleblowing charity,
based in the United Kingdom. We have four main activities:
a. Providing free confidential legal advice to people who are unsure whether or how to raise a
concern about wrongdoing in the workplace;
b. Training and supporting organisations on whistleblowing and accountability;
c.
Educating the public that there are safe alternatives to silence; and
d. Informing public policy in areas of governance and regulation.
Further information about our work and approach can be found here.
In 1997 the UK Government’s White Paper on Governance described PCaW as ‘the leading
organisation in this field’. Now ten years old, PCaW has provided professional services and
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consultancy to numerous major employers in the private and public sectors. Our confidential
helpline has handled over 4,000 whistleblowing concerns. We assisted in formulating, consulting on
and promoting the Bill which became the Public Interest Disclosure Act 1998 (PIDA). For our work
on PIDA, Lord Nolan commended us in Parliament ‘for so skilfully achieving the essential but
delicate balance between the public interest and the interests of employers’.
Internationally, PCaW has advised on whistleblowing - practice and law - in a number of OECD
countries and elsewhere. As to our work in South Africa and Japan both have taken to the UK’s
legislative approach. We were also special advisers to the European Commission and the OECD on
whistleblowing and drafted the OECD’s LMP report on this issue as part of the review of the AntiBribery Convention (the paper can be found through www.olis.oecd.org, or more conveniently here.
We also acted as special advisers to the Global Forum II in its preparations for a UN Convention.
We are currently co-producing a book on comparative law and practice on whistleblowing around
the world.
The OECD and Whistleblowing
We commend the OECD for recognising the role of whistleblowing in the OECD Principles of
Corporate Governance. However, we are concerned that 3E does not appear to allow or condone
an employee concerned about illegality or danger to raise their concerns with the appropriate
authorities (i.e. regulators, inspectorates, or law enforcement agencies). Clearly encouraging
internal disclosures is key to ensuring good corporate governance. In our view, protecting
whistleblowers who make responsible disclosures to the appropriate authorities is a vital means to
encourage employers to create a culture which is open to hear and address employee concerns
about illegality and wrongdoing. Additionally, where a particular employer is not committed to good
governance, such a provision provides a safe and effective means for employees to alert the
authorities before any major scandal erupts. The good sense of this approach is recognised in the
OECD Guidelines for Multinational Enterprises:
II General Policies
Enterprises should take fully into account established policies in the countries in which they operate,
and consider the views of other stakeholders. In this regard, enterprises should:
9) Refrain from discriminatory or disciplinary action against employees who make bona fide reports
to management or, as appropriate, to the competent authorities, on practices that contravene the
law, the Guidelines or the enterprise’s policies. 1
The Regional Corporate Governance Roundtables, that informed the revision of the Principles, also
recognised the value of the information whistleblowers can provide to regulatory authorities and law
enforcement agencies:
Employees are usually the first ones to know about transactions and practices that violate the legal
rights of shareholders and other stakeholders. “Whistleblowers” who reveal these abusive activities
can be a critical sources of information and are in many cases essential in bringing the appropriate
civil and criminal action. 2
The Roundtables not only emphasised the need for a level of protection for whistleblowers that is at
least equal to that provided by the Guidelines for Multinational Enterprises, but indicated that
greater protection would be welcome.
The Roundtables emphasised that countries should take action to protect whistleblowers, shielding
them from liability, and in turn penalising employers who retaliate. In some jurisdictions, relevant
authorities should also consider steps to protect the personal safety of whistleblowers. 3
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If the amendment we propose is accepted, then it can only help ensure that these views are fairly
reflected in the revised Principles.
Legislation in OECD Member States
Several OECD member states protect whistleblowers who raise concerns with the appropriate
authorities and we give the following examples.
In the United Kingdom, PIDA specifically protects disclosures regarding wrongdoing to appropriate
regulatory authorities 4. UK regulators have welcomed this as a means of facilitating their functions
and, whilst encouraging employees to make disclosures to their employers in the first instance,
have made it clear that employees can raise concerns directly with them. As noted in the OECD’s
Survey of Corporate Governance Developments in OECD Countries, the UK’s Financial Services
Authority:
... has established a telephone line and email address for employees to call the regulator about
possible wrongdoing which has not been resolved internally. 5
In addition, UK regulators have recognised that promoting whistleblowing can encourage good
governance amongst those they regulate, thus allowing them to adopt a risk based approach to
their audit and inspection work.
In the United States, the Sarbanes-Oxley Act 2002 has made it a criminal offence, punishable by a
fine and/or up to ten years in prison, to take any action harmful to a person who provides truthful
information about a federal offence to a law enforcement officer 6. It further prohibits companies,
their officers and agents from retaliating against an employee who provides information to:
a. a federal regulatory or law enforcement agency;
b. a member of Congress or a Congressional committee; or
c.
their employer.
Civil remedies including reinstatement, back pay and compensatory damages are also available to
an employee who succeeds in showing a violation of these provisions in the Act7.
Japan has also recently published a draft law that will, we understand, protect employees who raise
concerns about danger or illegality with their employer or the appropriate authorities in a way that is
similar to the UK legislation.
Recommendation
We recommend that 3E of the OECD Principles of Corporate Governance be amended to
recommend protection for external disclosures to regulatory authorities. While our particular remit is
the role of whistleblowing employees, we see no reason why any other stakeholder should be
penalised for communicating their concerns about illegal or unethical practices to the authorities.
We hope this submission gives you sufficient information to understand our position and to accept
this recommendation. We are happy to discuss this submission and the role of whistleblowing in
corporate governance with you should you consider this helpful.
Finally, we thank you for agreeing to accept this submission before Monday 9 February at 16.00
hours and advise you that we are content for it to be published or reproduced freely.
Yours sincerely,
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Guy Dehn
1. OECD, The OECD Guidelines for Multinational Enterprises, pg. 19, 2000.
2. OECD, Experiences from the Regional Corporate Governance Roundtables, para. 246, pg.
62, 2004.
3. Ibid., para. 247, pg. 62.
4. Employment Rights Act, s.43F.
5. OECD, Survey of Corporate Governance Developments in OECD Countries, para. 80, pg.
51, 2003.
6. Corporate and Criminal Fraud Accountability Act of 2002 (Sarbanes-Oxley Act), Public Law
Number 107-204, s.1107.
7. Ibid., s.806.