Freshfields Bruckhaus Deringer whistleblowing survey data indicates that there is still work to do to strengthen corporate culture around this major aspect of risk management.
The survey serves as a timely reminder for organisations with business activities in mainland China, to assess and enhance their internal whistleblowing policies.
Although it began back in 2006, it was the breaking of the Harvey Weinstein scandal in 2017 that truly propelled the #MeToo movement onto the global stage. The movement has had a profound impact on many facets of life. It has, at times, dominated the news and helped expose systemic issues within our society. It has also redirected employers’ and employees’ attention to what is, and is not, acceptable workplace behaviour.
In a continuation of the exercise which started in 2014, the ‘Freshfi elds whistleblowing survey 2020’ collected views from over 2,500 individuals across 13 industries and several regions, including 500 middle and senior managers in large companies in Hong Kong. 40% of the respondents stated that the #MeToo movement had educated them regarding acceptable standards of behaviour. It may seem surprising that the fi gure isn’t even higher, although one possible positive explanation is that people might have felt they were already aware of where the boundaries of acceptable behaviour lie.
COVID-19 has altered our working environment and, with it, workplace culture. Therefore, it also has the potential to infl uence attitudes towards whistleblowing. Organisations should consider reviewing and revising their current whistleblowing arrangements and their communication around whistleblowing, to refl ect the possibility of long-term remote working and its impact on attitudes and behaviour.
In mainland China, almost all workplaces have reopened, but many companies continue to offer agile working or a hybrid working approach to give staff greater flexibility in terms of where and how they work. The controls and escalation channels previously deployed in an office-based environment, where face-to-face interaction and supervision was a part of daily life, are less appropriate and perhaps less effective when translated into a home-based or socially distanced working environment.
If people are working less in the office, it is more challenging to spot issues as there is less engagement. The disconnect that employees feel with the workplace has increased, which means they are less likely to speak up about issues. Equally, remote working actually emboldens people to voice out issues, because colleagues and managers are not peering over their shoulders all the time.
What is happening in mainland China
Although the survey did not cover mainland China, trends the survey identified also reflect what is going on in the country. The #MeToo movement has made an impact in mainland China, further encouraging people there to speak up. Legislative developments and cultural shifts that empower speaking up and social media are also becoming good alternatives for whistleblowers. Furthermore, new legislation and guidance that will shed more light on what employers should do in terms of internal whistleblowing channels and whistleblower protection is also in the pipeline.
Mainland China does not currently have an overarching law on whistleblowing. However, under several sector or industry specific regulations, individuals are encouraged to report incidents of non-compliance with the law with respect to food and drug safety, product quality, antitrust, securities, labour, and employment. These regulations encourage individuals to report directly to the relevant authorities, rather than report under the whistleblowing procedures within their organisation.
However, these regulations have, to some extent, played a role in educating people about the importance of speaking up. Social media is also a powerful tool when communication with an employer or regulator does not yield a satisfactory response. Posts on social media platforms can go viral in minutes and draw public attention. Whistleblowers know that they can leverage this to pressure their organisation or the regulator to respond to the issue at stake.
In September 2019, the State Council issued 'Guiding Opinions on Strengthening and Standardising Inprocess and Ex-post Regulation' (‘the Guiding Opinions’), which required, for the first time ever, provincial governments and the ministries and commissions under the State Council to establish whistleblowing systems, and to reward and protect those who report serious violations of laws or major potential risks, with a view to enhancing public supervision. This was a bold move by the State Council, and signified strong support from China’s central government towards fostering a speaking up culture in the country.
Furthermore, the Civil Code of the People’s Republic of China (the Civil Code), which was promulgated in May 2020 and came into effect in 2021, requires organisations and enterprises to prevent workplace sexual harassment by taking certain measures, including carefully investigating complaints of sexual misconduct by staff. This no doubt empowers individuals to speak up about inappropriate behaviour, but it also indirectly gives employees the confidence to voice out other types of concerns.
While there is an increase in the number of staff using their companies’ internal whistleblowing channels, internal whistleblowing channels may not always be the first choice. There is also a parallel rise in the number of employees raising concerns directly with regulators and/or disclosing issues via traditional or social media channels. Enhanced financial rewards offered by regulators Regulators in mainland China have been incentivising whistleblowers with financial rewards. For instance, a whistleblower who reports on issues relating to product quality or food and drug safety may receive a reward of up to RMB500,000 from the relevant regulator. Local regulations further enhance the financial rewards for whistleblowers that are internal to the organisation or industry. In Shanghai, if the whistleblower is an insider of the drug, medical device, or cosmetics industry, the regulator will add up to 2% to the regular financial rewards for reporting on non-compliance; for an insider of a food and beverage company reporting on serious violations of food safety laws, the reward may be doubled. Therefore, it is no surprise that when individuals become aware of or suspect issues in their workplace, the relevant financial incentives, if any, will play a major role in determining whether they report on the issue internally or externally.
Employers lack clear reporting procedures
One reason for this may be that organisations in mainland China generally do not have clear internal whistleblowing policies or procedures, so staff may not have the confidence that their employer will carry out a proper investigation or that they would be sheltered from retaliation. Although multinational companies will sometimes apply global whistleblowing procedures to their mainland China operations, these are often underused because they have not been properly localised or popularised among the Chinese employees, meaning that individuals are either unaware that procedures exist, or they find it daunting to make use of procedures that were designed in another country or culture. Language barriers may also pose an issue.
New legislation and guidance to echo the Guiding Opinions and the Civil Code is expected to be launched shortly. This should shed more light on what companies are expected to do in terms of internal whistleblowing channels and whistleblower protection. Employers that want to encourage employees to report issues internally rather than going directly to regulators are advised to implement clear whistleblowing policies, setting out, among other things, the types of issues that can be reported under the procedures, how reports will be handled, whether anonymous reporting will be accepted and importantly, confidentiality and protection measures for staff.
Employers should also consider training staff on acceptable use of social media and the need to comply with relevant confidentiality obligations. Multinational companies looking to apply their global whistleblowing policies and procedures to their China operations should consider how best to localise these and bring them to the attention of their Chinese employees. There are risks associated with any whistleblowing system, particularly one that allows anonymous reporting, the main risk being that staff might abuse the system and make false reports. However, these risks are materially outweighed by the clear interest businesses have in ensuring that the right whistleblowing framework and culture are in place, to encourage employees to speak up without fear of repercussions.
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