The dramatic announcement of arrests of key former and serving Saudi officials on corruption charges has brought into stark reality the cancerous issue of corruption, whether at the Sate or corporate level as often the two are linked.
Whatever size of the company, management cannot be in total control over fraudulent activities carried out by employees and the issue becomes more serious if mega value projects are involved. Given human nature, greed and temptation, there is always a risk that some employees might be tempted to break the rues.
This is where an internal check and balance has to be in place to ensure that such activities are reported without fear of retribution. Effective whistleblowing is now considered central to strong governance, but is not easy to achieve.
Serious incident investigations of actual fraudulent activities usually show that many people knew of malpractice, inappropriate behaviors, weak policies, poor execution or downright criminal acts, but were afraid to speak out, did not know how to raise the issues, were not listened to, or were deliberately ignored or silenced. Those who did dare to speak out often suffered adverse consequences.
There is a limit on how many time an honest employee can raise a red flag and then become discouraged if no action is taken. Whistleblowers will typically raise an issue only once, or sometimes twice, while most organizations do not listen, understand and act until the third approach.
The most frustrating aspect for such honest whistleblowers is that most receive no feedback on what has been done about the concern they raised. To encourage more to come out and report irregularities, following recent scandals, regulators have now set up whistleblowing arrangements, including senior whistleblowing champions but to be really effective the right corporate climate has to be in place to allow for people to speak out, and to treating whistleblowers with sensitivity and respect as well as to reacting positively and constructively to the reports received.
Public support and thanking of whistleblowers should become an integral part of corporate governance but it is not the norm, given the stigma of “putting out ones dirty laundry” in publicDr. Mohamed Ramady
While in some countries like the US, the Federal Government has set up a specific whistleblower line to encourage those who believe that federal funds or projects are being misappropriated, often the chairman and/or the chief executive of private or public listed companies have taken a strong personal interest.
Public support and thanking of whistleblowers should become an integral part of corporate governance but it is not the norm, given the stigma of “putting out ones dirty laundry” in public.
Most companies do have internal procedures to encourage whistleblowing if verifiable suspicions are aroused but most often these tend to be mere box ticking and highly legalistic approaches designed to protect themselves in employment disputes, and guaranteed to inhibit effective whistleblowing and obstruct productive investigations and remedies.
There are organizations where there is a policy and process that looks good on paper, but where no one working there knows about the policy or where to report concerns; where the first questions are “Does this fit the legal definition of whistleblowing?”; “Does the employment status of the individual entitle them to whistleblowing protection?” or “Is it a grievance?”.
The result of this ambiguity can be negative. Employees, contractors and advisers will keep quiet if they are not confident that they will be listened to and that something will be done about their concern – and that it is safe to speak out. Investigation of the issue raised and protection of the whistleblower need to be separate. There should be an individual clearly accountable solely for protecting the whistleblower.
Vigilance and procedures
Given mega multi-billion dollar projects now in progress or being contemplated in various Gulf countries, there has to be increased vigilance and procedures set up to ensure that whistleblowers can report irregularities , and above all , be protected and rewarded. National Oil companies have to be particularly protected.
All National Oil Companies have set up anonymous third party whistleblower lines and in Saudi Arabia, the National Anti-Corruption Commission (Nazaha) has been set up and has followed up on employee tip offs as well as its own investigations, as Crown Prince Mohammed bin Salman has made the fight against corruption and its elimination a high priority for his Vision 2030 implementation and cost reduction.
The recent Saudi anti- corruption drive and arrests of household names demonstrates this resolve at the highest level. One of Nazaha’s recent successes was in January 2017 when it accused some officials and employees at the Saudi Electricity Company (SEC) in the Kingdom’s Eastern Province of misusing public funds.
The Kingdom’s anti-corruption body said it found irregularities in eight contracts worth more than SR80 million, which were intended to purchase licenses to implement an electronic program to unify the company’s systems. The SEC, like Petrobras, has since set up a more robust internal whistleblower mechanism.
Having robust whistleblowing arrangements, where people at all levels feel safe and confident in raising concerns formally and informally, provide an additional safeguard – one that benefits individuals, organizations, their boards and society at large.
Dr. Mohamed Ramady is an energy economist and geo political expert on the GCC and former Professor at King Fahd University of Petroleum and Minerals, Dhahran, Saudi Arabia. His latest book is on ‘Saudi Aramco 2030: Post IPO challenges’.