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Whistle blowing and remedial action

01 April 2010 Julie Methven, The Compliance Institute of South Africa

Effective compliance is not just about implementing and monitoring compliance policies and procedures; it’s also important to take remedial action where necessary.

Whistle blowing policies and remedial action procedures are directly related. Instances of inappropriate behaviour or wrongdoing can be costly to an organisation, not to mention the severe risk of reputational damage.

Whistle blowing policies are intended to encourage ethical behaviour and should form part of an organisation’s ethical policies such as its code of conduct, conflicts of interest, compliance, anti-money laundering and anti-fraud policies. But without remedial action and disciplinary procedures these policies are simply window dressing and are ineffective.

The Protected Disclosures Act protects individuals from being harassed, victimised or dismissed for blowing the whistle on criminal or other irregular conduct in the workplace.

Whistle blowing policies

According to the Generally Accepted Compliance Practice framework developed by the Compliance Institute of South Africa, whistle blowing policies should include the following as a minimum:

− How the policy should be applied, specifying that any employee or contractor can raise concerns about inappropriate or unethical behaviour or breaches of the organisation’s policies;
− The types of concerns that should be reported;
− To whom concerns should be reported, how and the detail required in reports;
− That good faith is required in lodging the report;
− The procedures the organisation will follow in reviewing the report and taking remedial action
− How the whistle-blower is protected; and
− Disciplinary procedures and implementing remedial action based on Schedule 8 to the Labour Relations Act Code of Good Practice regarding dismissal.

Dismissal

In terms of Section 8 to the Labour Relations Act Code of Good Practice, the courts have endorsed the concept of corrective action and progressive discipline. The Schedule states that generally it is inappropriate to dismiss an employee on the grounds of his or her first offense, except if the misconduct was so serious that continued employment would be intolerable.

It is essential that due process be followed otherwise any remedial action may be ineffectual. Processes must include explanations by management to the offending party of what specific behaviour was considered inappropriate or unethical.

Remedial action should be progressive, with each phase being more formal than the preceding phase and should be in terms of a formal policy on disciplinary procedures. Ultimately, if the behaviour is not rectified or the offending party repeats the undesirable actions to the extent that continued employment becomes intolerable, management must be able to terminate the individual’s employment.

Embedded in the culture

Management must be capable of recognising when remedial action is necessary, both in terms of instances of whistle blowing and in the normal course of business. In order to adopt and implement appropriate policies and processes, management must understand the legislation governing remedial action and whistle-blowing.

Remedial action, except in the most severe cases, should be viewed as part of the culture of an organisation which encourages the development of skills, experience and knowledge and ethical behaviour including integrity and honesty in all its dealings.

Quick Polls

QUESTION

Do you believe the short term industry should be changed to that of an accountable institution?

ANSWER

Yes, it will assist in tracking criminal trends within the insurance industry, thereby assisting regulators in their fight against fraud
No, it will be costly and onerous
Its just another regulatory hurdle the industry will have to tackle
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