How SME’s incorporate a whistleblower system

Everyone around the world is currently talking about the case of the former DAX company Wirecard AG. It stands for unimaginable economic misconduct by top management, coupled with incredible criminal energy. Among the countless questions asking how it could come so far, one question increasingly comes to the fore: Would this have been avoidable with a functional compliance system and above all an anonymous whistleblower system (hotline)?

Authors: Astrid Meyer-Krumenacker, Lawyer and Management Consultant; Imre Szerdahelyi, Communication and Marketing Expert

Implementation of EU directive into applicable national law by end of 2021

There are repeatedly cases of criminal activities by management and employees in companies, e.g. tax evasion, corruption or even fraud. With the help of a compliance management system numerous companies have already controlled compliance with rules, laws and voluntary codes. An ideal early warning system for grievances in companies is the so-called whistleblower system. Using a whistleblower hotline both employees and business partners have the opportunity to – anonymously – report misconduct or other problems from the business operation.

The management has the opportunity to actively address and tackle misconduct and problems before, for example, external law enforcement authorities are made aware of such. What many small and medium-sized companies (SMEs) seem to be unaware of: In 2019 the European Union adopted the directive on the “protection of individuals who report infringements of Union law (EU Whistleblower Directive)”, which must be implemented into applicable national law by the end of 2021. For SMEs with more than 250 employees this means incorporating a whistleblower system by the end of 2021, whereas SMEs with 50 to 250 employees have until the end of 2023 to integrate such a system.

Whistleblower system to protect reputation internally and externally

Let us be clear about one thing: A whistleblower system polarises within the workforce. Many employees worry, for example, that it is misused for monitoring by management or colleagues are shamed, snitched on, perhaps even informed on for low reasons.
For many even “anonymous reporting” is suspicious per se. However, if this option is not available, we would probably have very few reports.

Without a doubt the necessary pending introduction of an anonymous whistleblower system presents SMEs with great challenges, particularly as many companies have to struggle with the consequences of the corona crisis beyond 2020. Against this backdrop, smart, active and regular communication is imperative during the introduction phase. Communication that will help that a whistleblower system is accepted and recognised as protecting the company’s reputation both internally and externally. Communication that is conducted responsibly by the management.

Communication by management: smart, active, regular

For the successful introduction of a whistleblower system with the overall objective of protecting the company’s reputation internally and externally, the management should consider the following tips:

  • The responsibility lies solely with the management

The introduction of the whistleblower system is based on an EU directive. Stating this solely as a reason for “necessary or even forced introduction” already misses the point at the outset. As a manager you are solely responsible for compliance with the law and order in your company and in the cooperation with business partners. Not only the Wirecard AG case, on which journalists provided key information, shows: A positive, hard-earned reputation built up over years can be ruined in no time by a single wrongdoing of a manager or employee.

  • It is about clarification, understanding and trust

In the course of the introduction you must shape a change process successfully both internally and externally with your communication. As it is necessary to change attitudes and behaviours of employees and business partners or turn them into positives, they must be fully informed and understanding and trust must be established. For example, that neither monitoring nor whistleblowing is the objective of the introduction of a whistleblower system. The type and quality of notifications which the company expects from the anonymous whistleblowers must also be communicated precisely, as well as the messages that are not requested.

  • Build a strong team of disseminators to achieve acceptance

The whistleblower system cannot be introduced without the approval of the works council. It is imperative to include the works council in the communication and the project team for the introduction from the start. Representatives from the legal and HR departments, IT, as well as the communications department, should also be members of this project team. Attach the utmost importance to data protection during the introduction of a reporting system, regardless of whether it is personal, analogue or digital. Win over your managers so that they assist in promoting a higher acceptance among the workforce.

  • Communicate and be present

The communication in the course of the introduction of the whistleblower system is and remains the responsibility of the management. Explain objectives, tasks and processes in person. Assist employees by including all essential details and key messages so that they are able to use these for communication with their business partners. Be close to your staff, ask yourself their questions and take their needs and reservations seriously. Ensure smart, active and regular communication.

Summary

The whistleblower system is mandatory for small and medium-sized enterprises from 2021. The Wirecard AG case shows how important a functioning anonymous whistleblower hotline is for the company’s reputation. The successful implementation is the responsibility of the management. Management is fully responsible for establishing acceptance, understanding and trust among the workforce and business partners. Smart, active and regular communication is a winning value contribution here.

About the authors

  • Astrid Meyer-Krumenacker, Lawyer and Management Consultant (www.amk-law.de):

As a self-employed lawyer and management consultant, Astrid Meyer-Krumenacker assists international small and medium-sized companies (SMEs) from diverse sectors and orientations with the development and implementation of practical compliance management systems. She has dedicated many years to the topic of legally compliant management of companies, in line with the motto: compliance not at any cost, but as much as necessary and as little as possible! In this way she creates lean and customised compliance concepts at reasonable costs and conducts employee training courses on various legal and compliance issues.

  • Imre Szerdahelyi, Communication and Marketing Expert:

With his marketing and communications consultancy “Enabling Chief Winning Officers”, Imre Szerdahelyi strengthens managers, start-ups, as well as small and medium-sized companies (SMEs). He shares his experience and knowledge from over 3,000 projects for global market and technology leaders with customers. He helps customers to manage projects and challenges better, more efficiently and successfully with strategies, concepts and measures from marketing, corporate communication and brand management, this means creating values and gaining the appreciation of staff, customers and relevant target groups.

My skills for your success (selection):

  • 25 years of experience in marketing, coporate communication, brand management and investor relations
  • Over 1,000 projects for enhancing corporate identity internally and externally
  • Implementation of compliance management systems at global market and technology leaders, e.g. using internal communication campaigns

You have questions about my offer or a specific requirement? I am happy to help you and look forward to hearing from you.