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07. 14. 2020

Authors: Mgr. Michal Nulíček, LL.M., Mgr. Bohuslav Lichnovský, LL.M., FIP, and Mgr. Anna Cervanová, LL.M.

Why is a whistleblowing system necessary and how can it help you save your good reputation, organization, investments, and even your freedom?

It is common especially in larger organizations that the interests of ordinary workers, management and the owners are different. Often even diametrically opposed. For instance, an ordinary worker might be motivated to make his job easier, or even to make money “on the side.” The management could set up a scheme for the payment of bonuses or the functioning of an organization in such a way that they make profit over the short term, or they might benefit from closing shops that are unprofitable for the organization as a whole. This is not very widely discussed, but is in fact a sad reality to which we should not turn a blind eye. As you know from our previous post, such management cost the company Wirecard (and therefore its investors) billions of euros, the organization as a whole is facing an investigation on suspicion of money laundering, and some management executives have been arrested on suspicion of fraud and other criminal offences. How can this be avoided?

One of the ways is to establish an internal reporting system, thanks to which the management and owners of an organization can quickly learn about activities that are illegal or harming the organization. Such conduct could then be nipped in the bud and not dealt with at the stage when the state authorities have already started a formal investigation, or when the entire case is already in the media. A timely solution can save not only the organization and its assets, but also the good reputation of the organization and its employees. A functional reporting system can also exempt the organization from criminal liability for the conduct of its employees or the members of its statutory bodies. The system is also a positive sign to potential investors that their nest egg will not turn into a write off from one day to the next. And last but not least, it will soon be mandatory for some organizations to introduce such a reporting system.

So is it enough just to download model reporting instructions from the Internet and hang them on the notice board? Unfortunately not. In order for the system to work, in the first place employees must know about it, and they must know how to use it. Also, there must be clearly established rules for dealing with reports so that employees can rest assured their report will be properly investigated. And finally, it is necessary to build up an organization culture in which workers are not deterred from reporting and on the contrary are encouraged to report important well-founded information. Of course, any negative sanctions against workers that submit reports in good faith are unacceptable.

So how should one go about setting up such an internal system correctly and what should be avoided? We will tell you this in just a few days.

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