Freshfields whistleblowing survey 2023: Are whistleblowers turning away from internal reporting?

The impact of an employee blowing the whistle externally can be significant. Not only can it spin the narrative out of an organisation’s control, it can also often attract the attention of regulators, investors and the media. In addition, it can seriously erode workforce confidence in how their employer deals with whistleblowing reports if they believe that a colleague has been pushed to report externally.

The Freshfields Whistleblowing Survey 2023 suggests a new trend that might be of concern for organisations - that employees are increasingly choosing to raise concerns externally. Our survey showed that, while there has been an increase in the proportion of employees involved in whistleblowing (up 11% since 2020 to 43%), there has been a decrease in those who would raise concerns to their line manager. This suggests that employees are instead, or also, turning to other channels to raise concerns. 

Whistleblowing hotlines

Our survey asked respondents who they would primarily go to, to report wrongdoing within their organisation, with almost 8% selecting “an external organisation”. Now, if “external organisation” was understood by respondents to include a third party whistleblowing hotline provided by their employer, this does not suggest a lack of faith in internal reporting. In recent years, it has become the ‘norm’ for organisations to host whistleblowing hotlines with third party providers as an important component of their whistleblowing and general compliance framework.

One advantage of a third-party whistleblowing hotline is that it can be made available to contractors or suppliers. As noted in our blog (here), a company may decide, as a matter of best practice, to provide hotline access to these stakeholders as well, particularly if the organisation is operating in ‘high-risk’ industries. This might also be a requirement in certain jurisdictions - under the EU Whistleblowing Directive, organisations with an EU presence are required to broaden the reach of reporting channels to non-employees. We expect to see the use of third-party hotlines developing even further.

As with other aspects of their whistleblowing framework, it is essential for organisations to promote awareness of the hotline as part of creating a supportive speak-up culture. If details of the hotline, or the company’s wider whistleblowing policy, are not widely known (for example, they are only available on an infrequently accessed company intranet page), this will limit how useful they can be in creating a strong whistleblowing framework. Our survey suggested that this was a common problem, and there has been little improvement on this front since 2020, with a quarter of survey respondents noting a lack of internal publicity, even though their workplace had put in place a whistleblowing procedure.

Reporting to authorities 

Almost a quarter of respondents to our survey said they would report to a regulator or other authorities in the first instance (with this figure roughly static since 2020). 

In the UK, the main regulatory authorities have long encouraged whistleblowing, including through direct reporting to them. The Financial Conduct Authority, Serious Fraud Office, National Crime Agency, Information Commissioner’s Office, HM Revenue and Customs and Competition and Markets Authority all have reporting lines for whistleblowers. Each of these authorities is a “prescribed person” for the purposes of UK whistleblowing legislation, which means that if an employee reports a concern to them this can potentially qualify for whistleblower protection in the same way as if they made a report direct to their employer.

In a recent survey, the FCA found that, the most popular reason for reporting to the FCA was “I made an internal complaint which was ignored”. This is reflected in our survey: the most popular option chosen by respondents, if their complaint wasn’t handled properly initially, was to report directly to the authorities. 

There is ongoing debate about whether and to what extent UK authorities should follow the US example of providing financial rewards to whistleblowers. Most UK authorities, with the exception of relatively small payments from the CMA and HMRC, do not do so (and currently do not have statutory power to do so). By contrast, in the US, regulators can and do use financial incentives: for example, the Securities and Exchange Commission can reward a whistleblower with 10% to 30% of any penalty exceeding $1 million. UK regulators have, however, publicly acknowledged the need to provide greater support and encouragement for whistleblowing, and are considering a range of measures, which might include (greater) incentivisation. The CMA, for example, announced this year that it would increase the amount it would pay to whistleblowers for providing information on cartel activity from £100,000 to £250,000, which may further encourage external reporting. 

Social media 

One of the external reporting channels which has seen a material growth in popularity since our last survey in 2020 is reporting through social media. Over the past three years, the number of respondents whose first choice for whistleblowing would be social media has doubled to 8%. This trend was even more pronounced where an employee felt that their initial report had not been dealt with properly by their employer. This was particularly the case in the US where 15% would now post online if their initial report had not been dealt with adequately (up from just 3% in 2020).

An increasing use of social media is not a great surprise given its pervasive role in modern society and, to an extent, it is simply reflective of the changing age of the working population. Among the 16-34 year age group, 13% of survey respondents now said they would report directly to social media (up from 6% in 2020). This compares with only 1% of respondents aged 55+ years. The same pattern is seen when respondents were asked who they would reach out to if they felt their complaint was mishandled by an organisation. 12% of respondents aged 16-34 years old reported that they would turn to social media; in contrast, only 6% of those aged 45-54 years old would do the same. 

Our survey also suggests more generally that more work needs to be done by organisations to improve the confidence and awareness of the younger employee population in relation to whistleblowing. The highest proportion of respondents (21%) who felt that their organisation discouraged whistleblowing was those aged 16-24 years. Employees in this age group were also the most likely to encourage a colleague to tell the media if they witnessed wrongdoing in the company (10%), and to think that the “average employee” would expect a senior manager to retaliate against a whistleblower by either treating them less favourably or terminating their employment (approximately 50%).

For younger employees who are often more frequent users of social media within their personal lives, whistleblowing on a social media platform may present an attractive and accessible option compared to internal reporting channels, which may seem overly formal and intimidating. Organisations would be well advised to take notice of the risk that social media reporting will likely continue to grow as younger employees rise through the ranks of a company. With this, the risk of unfavourable publicity or criticism, of unwanted attention from investors and regulators and of potential litigation, also increases. It is vitally important to bring these employees into the conversation on the importance of whistleblowing - to make them aware of how essential it is that concerns are raised internally, to help them understand that reports are managed sensitively and that retaliation against whistleblowers will not be tolerated. 

External reporting as activism 

The reports of increased external whistleblowing may also point to it being increasingly used as a form of activism to improve corporate culture, and one that is not necessarily limited to the younger generations. This would mirror what we are also seeing in the litigation landscape where we have seen, in particular, an increase in actions linked to other ‘activist’ causes such as ESG and climate change. There have been recent cases of high-profile activist whistleblowers going to the media with information about corporate wrongdoing. One such case was a former accountant who blew the whistle in 2014 on the tax affairs of companies with operations in Luxembourg. The large number of internal documents he disclosed to the press arguably contributed to tax law reforms and the adoption of greater protection for whistleblowers in the EU. 

Conclusions

The results of our survey indicate that organisations need to do more to improve employees’ confidence and awareness of their whistleblowing procedures, particularly among their younger workforce. 

Whistleblowing awareness training can go a long way to achieving this. So too can regular updates from management which urge employees to speak up if they have concerns, signpost the whistleblowing procedure, and give anonymised examples of how the organisation deals with speak-up reports (including how the process worked from a whistleblower’s perspective). 

It is more important than ever for employers to take practical steps to encourage internal reporting.

We have discussed ‘top tips’ for organisations to improve their policies and procedures in a previous article (here). To access the full whistleblowing survey report, please click here. The Freshfields team would be very happy to discuss any of the themes in the report in more detail.