Rewards for whistleblowers who do the ‘right thing’ but no bounty bonanza 

Lauren Witherdin, Director, Forensic
Gary Gill, Partner in Charge, Forensic
Gary Gill, Partner, Forensic

A milestone was reached on Wednesday with the Parliamentary Joint Committee Inquiry into Whistleblower Protection recommending a number of improved safeguards.

For years Australia has lagged behind in the protection of whistleblowers at the expense of those who do the right thing. The inadequacy of current legislation has cost the economy and failed to incentivise individuals to hold corporations and government departments accountable for wrongdoings.

The Inquiry’s recommendations, likely to be introduced next year, will bring Australia’s legislation up to speed with other developed countries.

So what are the big changes?

The most significant change is the introduction of a reward system which will see whistleblowers receive a percentage of the penalties imposed on the employer. This is big step in the right direction that will help whistleblowers come forward and motivate organisations to improve their internal mechanisms for dealing with whistleblowing.

Importantly, the inquiry did not recommend the introduction of a US Dodd-Frank style reward system that has a broad scope to provide uncapped rewards to whistleblowers. Instead, the recommended reward system would have a cap on the size of the reward available and strict criteria to be considered in determining the payment.

These criteria include an assessment of the degree to which the information provided led to the imposition of the penalty, the timeliness with which the whistleblower came forward and whether there was appropriate and accessible internal mechanisms that could have been used without reprisal. These criteria must be carefully drafted into new legislation if the government is to keep the more efficient internal reporting mechanisms as whistleblowers’ first port of call.

In addition to maintaining the strength of internal whistleblowing mechanisms, new legislation must also balance against the creation of the more litigious culture that is associated with the introduction of rewards.

To help maintain this balance, the Inquiry has recommended additional criteria be considered in determining any reward payment, including whether information was disclosed to the media without first informing law enforcement, whether the whistleblower was compensated for adverse action taken against them by their employer and whether they were involved in the conduct for which the penalty was imposed. The final criteria is of particular importance because a financial reward for whistleblowing would effectively be a proceed of crime if the whistleblower were involved in criminal conduct.

Whilst these considerations complicate the reward system, they are not prohibitive to its introduction. They will likely create a reward mechanism that is optimal to others like the US system.

The recent government and regulatory focus on examining whistleblowing protections in Australia has in itself been beneficial for the integrity of the economy. Since the commencement of the Parliamentary Inquiry, we have seen more whistleblowers coming forward to use KPMG’s anonymous whistleblower hotline service, FairCall, and greater focus on whistleblower programs at corporates across Australia.

It is it clear that we can do more to deter wrongdoing and more to protect the whistleblowers who come forward to stop it. The recommendations of the Parliamentary Joint Committee are an important step forward, but must be combined with a greater focus on internal processes for handling disclosures correctly and protecting the whistleblowers who bring them to attention.

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