Protected Disclosures update

Julie Haggie
Chief Executive Officer
Transparency International New Zealand

Protected Disclosures (Protection of Whistleblowers) Bill 2020

It has been a long wait, but we finally have The Protected Disclosures (Protection of Whistleblowers) Bill, which if passed will amend the 2010 Act. 

Submissions are now being accepted on the Bill, with the closing date of 12 August 2020. The State Services Commission (SSC) Disclosure statement and the Regulatory Impact Statement, are also available.

With the government stimulus package to aid recovery from the COVID-19 pandemic totalling billions of dollars, there is an urgent need for effective protective disclosure law. Business loans have been promptly distributed on a high-trust basis by the Inland Revenue Department, to achieve effective outcomes from this stimulus. Prudent stewardship requires oversight now, to ensure the loans are used appropriately. Whistleblowers whose activities are protected, can provide an effective tether on organisations who might choose to exploit the good intentions of the stimulus package for personal gains. 

Key elements

The Bill goes part way to addressing the issues that submitters, including TINZ, raised in their submissions in late 2018. There are still gaps, with a promise from Minister Hipkins in his February Cabinet paper that some of these, including improved monitoring of whistleblowing occurrences and outcomes, will will be addressed in the next phase.

The current Act is not working functionally.  The Regulatory Impact statement notes that very few disclosures are being made to ‘appropriate authorities’, and some authorities are not keeping good records on disclosures.  The Act is very difficult to navigate and to understand, with confusion for both those who want to speak up and those who receive a disclosure.

The Bill aims to encourage more people to step forward, and to ensure that the process is clearer for protection of individuals who speak up. There will be more options for who whistleblowers can report to, and fewer requirements about why they should report.

The legislation will press for organisations to improve their culture relating to whistleblowing, through providing accessible and responsive policies and procedures. The scope of this necessary cultural change has been extended to any organisation in the public or private sector, where the suspected wrongdoing relates to misuse of public funds or resources.

Confidentiality protections for whistleblowers are also clarified.

Application of the act

A current example of the important role that whistleblowers play and possible interpretation of the Act, involves Emirates Team NZ. It recently tried to block publication of a draft audit of the financial statements of America’s Cup Event Ltd, the entity that has already received $29 million of public funding. A comment by Emirates Team NZ on Twitter is that “Whistleblower Protected Disclosures Act doesn’t apply in this situation”. This comment is assumed to relate to information provided by a whistleblower, which has led to MBIE’s investigation.  

Protected disclosure research findings

The “Whistling While They Work” research project covering Australia and New Zealand shows that:

  • Ethical culture, and the ethical leadership of an organisation, have far more impact on the treatment of whistleblowers than rules and regulations. 
  • Tips through confidential reporting means are the most important sources for bringing wrongdoing to light within any organisation (also supported by other research)
  • The majority of those who speak up suffer adverse effects of reporting – most commonly stress and emotional strain, even when the reporting experience is positive (and even when the amounts saved by customers and/or tax payers are large).
  • People are more likely to speak up when they have trust in the processes and see there is organisational support for whistleblowing, i.e when they feel safe to report without censure.
  • Risk assessments for individual disclosers and the organisations involved, are more likely to lead to better outcomes for both.

So the best use of legislative power would be to facilitate increasing ethical behaviour by organisations including protection and risk assessment. It is good to see that this has been built into the act for public sector organisations and any place where public sector funding or resources are used. 

Extending protected disclosure to the private sector

There is no change in the legal protection for people who want to speak up in the private sector. They already have legal protection when reporting on some matters. These offences include: risks to the maintenance of law, unlawful corrupt or irregular use of public funds or resources, serious risks to public health, public safety or the environment.

But the Bill does not provide legal pressure on private and NGO organisations to undertake the behavioural change identified as necessary in the SSC regulatory statement (“enabling a culture change within (public and private) organisations in terms of encouraging, supporting and protecting disclosers”), except when the reported wrongdoing applies to the use of public funds and resources.

Australia requires whistleblower policies

As a comparison, in Australia all public companies (large proprietary companies and proprietary companies that are trustees of registrable superannuation entities) have been required to have a whistleblower policy available to officers and employees since the start of this year. Such policies must include who, how, specific legal protection, investigation procedures, fair treatment, and clear accessibility to this information.

Whistleblowers in the Australian private sector can also disclose on matters where there is an ‘improper state of affairs or circumstances’. This sort of reporting can indicate a systemic issue that the relevant regulator should know about to properly perform its functions. It may also relate to business behaviour and practices that may cause consumer harm. This is not covered in the New Zealand bill.

Conclusion

It is not clear why the New Zealand government isn’t taking this opportunity to encourage a stronger protective disclosure approach within the private sector.

For the effectiveness of the Protective Disclosures Bill as it currently stands before Parliament, the proof will be in the pudding. It has taken 20 years to get this change through. It will be important to have more rigorous monitoring of numbers of whistleblowing events and outcomes, to check if the new legislation actually works to encourage more people to speak up.

Transparency International New Zealand, PO Box 10123, The Terrace Wellington, 6143 New Zealand admin@transparency.org.nz. Copyright © Transparency International New Zealand 2009 - 2019.
Website design and marketing from effectiveemarketing.com