C3 Managing Ethics in a Complex World Howard Whitton 2011 ANNUAL CONFERENCE

C3 Managing Ethics in a Complex World

Howard Whitton

2011ANNU

AL

CONFERENCE

Whistleblower Protection – a brief history and likely future

Howard Whitton

Fellow,The ANZSOG National Institute for Governance

The University of Canberra

Principal, The Ethicos Group

Why Whistleblowing matters…

The primary purpose of WB Protection law is not the protection of whistleblowers…

It is to encourage the disclosure of organisational corruption and wrongdoing, ‘internally’, so you hear about it internally, and not via ‘4 Corners’ or the front page of The Age, or legal action.

‘Whistleblowing’

• Also known as:

• ‘Public Interest Disclosure’ – (of defined wrongdoing)

• ‘Principled Disclosure’ • ‘Denonciateur’ (of Corruption)• ‘Alarm-raiser’

Two different models…

• US/World Bank model– The lone individual, protected by right to ‘free speech’

• Commonwealth / UN model– Australia (1991 - ), UK (1998 - ), – Canada, New Zealand (2001 - )– UN agencies (2005 - )

– Professional duty, complying disclosure protected by specific law.

• Whistleblower: ‘bona fides’ (good faith) test –

– ‘Honest belief, held on reasonable grounds’

– ‘Strategic’ WB disclosures not protected

– Knowing false ‘disclosure’ not protected; offence

Australian/Commonwealth/UN model

• ‘Wrongdoing’ defined by law (as corruption etc)• Disclosure to a relevant authority protected• Disclosure to media generally not protected

– UN, NSW: preconditions for media disclosure

• Discloser’s identity confidential• WB not required to provide evidence / proof• Complying disclosure itself establishes protection

– Not Victoria: WB status to be determined by authority

• Whistleblower’s motivation, state of mind, purpose– Not a relevant consideration.

Australian state provisions (generally)

• Retaliation/reprisal against WB:– Defined broadly– Criminal offence; disciplinary offence– Civil tort (legal action for compensation)

• WB protection not lost if complying disclosure unproven, or unprovable.

• Complying disclosure not rewarded by $$

Commonwealth WB legislation – 2012?

• Minimal provisions in Cwth PS Act 1999– Only APS, only related to Code of Conduct

• Dreyfus Committee – Feb 2009– Recommended State model, central agency

• Govt response (in part) - Aug 2010– No indication of complying conditions,

protections, or sanctions

Cwth WBP / PID Bill 2012?

• Which model will be adopted by Govt?– See Whistling While They Work Report (2009)– National research; positive response; Qld model

• Powers of central co-ordinating agency?• Protections against reprisal?

– eg UK PCAW model: ‘Unsafe workplace’ / OH&S ?– Extension to the Private Sector (eg SA) ?

• $$ Rewards for WBs? - now a serious issue.

Purposes for CEOs…

The primary purpose of WB Protection law is not the protection of whistleblowers…

It is to encourage the disclosure of organisational corruption and wrongdoing, ‘internally’, so you hear about it internally, and not via ‘4 Corners’ or the front page of The Age, or legal action.

Ethical Leadership, pre-Enron: negotiable standards, optional application

Manager to top team - “This might be unethical…

- Is that a problem for anyone?”

From: Harvard Business Review 2005

Integrity and accountability, post-Enron… public scrutiny, enforceable standards.

•The Internet changes everything…- scandals remain on the www, forever; - reputational damage- ‘good news’ stories remain uninteresting.

•The rise of ‘the Fourth Arm of Government’ – - too much scrutiny? – too much ‘red tape’?

•The ‘Integrity System’: – ‘Corporate values’ eclipse the Code of Conduct– employees go to court, employers settle cases…– Confidentiality agreements encourage abuse - $xm?

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Towards an ‘Integrity System’ approach

• Ethics Codes are ‘The Rules of the Game’ – ‘Change the rules,

and you change the game... Defence Canada 1995)

• 1997 OECD Bribery Convention; Enron – Sarbanes Oxley

• US FCPA, UK Bribery Act (2011),

• 2003 UN Convention Against Corruption– Australia non-compliant…

• Aust. Criminal law: bribery an offence 1999.

• Australian Wheat Board; RBA & Securency scandals

NPA/Securency P/L: 14 arrests, 7 Guilty pleas, ‘more to come’…

.• All Codes of Ethics ( and Conduct) are based on three fundamental ethics principles –

• ‘Act responsibly’

• ‘Control Conflicts of Interest’• ‘Above all, do no (avoidable) harm’

• (‘primum non nocere’) (Hippocrates to Drucker)

Codes rarely tell you what you (really) need to know…( for example - how big is ‘huge’? )

Improving on existing approaches…

1 Abolish the organisation's Code of Conduct – (Yes!)

– re-express the Code as Practice Standards, and give to HRM to enforce via Disciplinary process…

2 Ensure the Leaders and managers think instead about how, in practice, to deliver against the ‘Core Values’ …

– ‘Core Values Statement’ by organisation = implicit quasi-contract with the public

.

• 3. Empower principled dissent - enable effective WBP

• 4. Train (and train, and train) for capacity… Competence, strategic

values-based reasoning, problem solving, justification

• 5. Think positive! - in addition to sanctions, get real about

incentives for obtaining performance

• 6. Monitor the organisational narrative, continuously

• 7. Manage the institutional response, continuously

.• 8. Set Integrity Framework and Standards

– Standard-setting is not a ‘bottom-up’ process

– Consultation does not lead to ‘ownership’

– No-one can undermine a Code as well as the Leadership can…

• 9. Take Integrity Framework and Standards seriously

– ‘Walking the talk’ is necessarily a top-down process

– ‘Hard-wire Values in processes’ (APSC SoS Report 2004 – Podger)

• 10. Insist on (and enable) ‘integrity competence’

– Develop Integrity System tools, effectiveness audits

– Contract for , enable, AND reward, integrity in performance

– Chester Barnard 1927, Robert Townsend 1972 - 2009

Some tools for ethically reliable decisionmaking…

1. Conflict of Interests

‘The Interests Triangle’

© Howard Whitton 2009

‘Conflict of Interests’ – the key to everything

• ‘A Conflict of Interest situation exists when –

• a person who has responsibilities (in a trust relationship) …

• has private-capacity interests which …• could affect the proper performance of

those responsibilities’.

• (Source: adapted from OECD 2004)


The ‘Professional trust’ relationship

•

• Professional’s Role / Duty

• Other’s (client’s, citizen’s) rights, and… … Interests

• *Professional has no private interests could in principle affect their performance of role-responsibilities, in breach of the professional trust relationship.

“Trust”


A Professional’s Conflict of Interests situation

• Conflicting interest(s)

•

Professional’s Role / Duty

• Other’s Rights, and… …Interests

• *Professional has a private interest which could (in principle) improperly affect their performance of duty in breach of the trust obligation to act in a personally disinterested way, (ie, solely in the other’s best interests), but has not yet done so. Trust may be at risk.

Trust ?


A Conflict of Interests becomes Corruption

• Professional’s Conflicting interest(s)

•


• Other’s Rights, and… … Interests

• *Professional’s private interests have improperly affected their performance of duty, in breach of the professional trust relationship.

Trust


Resolving a Conflict of Interests situation - Recusal

Alternative Decisionmaker… P’s Conflicting interest(s)•



• *Professional has a private interest which could in principle) improperly affect their performance of duty to act in a personally disinterested way, which cannot

reasonably be disposed of. • The duty or function is performed independently by another person, on a

temporary basis. Trust is maintained.

Trust √


Resolving a Conflict of Interests situation – Disposal of the conflicting interest

• P’s Conflicting interest(s)

•



• * Professional has a private interest which could (in principle) improperly affect their duty to act in a personally disinterested way, which can reasonably be disposed of.

• The interest is disposed of - liquidated, resigned, or placed in ‘Blind Trust’. Duty or function is performed transparently unaffected by private interest. Trust is maintained.

Trust √


A tool for 99%-reliable Decisionmaking…

2. Structured Reasoning about ‘Core Values’

‘The Big E’ - a tool for Values-based, strategic thinking about what ‘ought’ to be done –

• - in a particular case…

• - in a specific role.


‘The Big E’-Eight steps to ethical decisionmaking…


‘Organisational Culture’: Is the conduct consistent with culture and practice?

Lawfulness

Fairness

Integrity

Diligence

Economy & Efficiency

Policy

Community Values; CSRPersonal ethics/values


?Lawfulness

?Fairness

?Integrity

?Diligence

?Economy / Efficiency

?Policy

?Community Values; Personal ethics and values

?Organisational culture and practice


‘The Big E’-Eight steps to ethical decisionmaking…


Four types of knowledge an organisation has about Ethics standards and values

1. Uncodified /Diffused knowledge – ‘Common Sense’ – ‘the way we do things here…’

2. Uncodified / Undiffused knowledge– Personal values, ‘Core Values’, stories…

3. Codified / Undiffused knowledge -

Organisational policy (statement)4. Codified / Diffused knowledge –

Organisational practice- policy as implemented

per - Boisot, Max - Information and Organizations 1987-94


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1 - Absorption

StoriesMythsExemplarsValues‘Culture’…

(Slow change)

2 - Scanning / Problem-Solving

Experience (+ve & -ve)

Cognitive dissonance Cognitive consonance Anomalous matters…

(Ad hoc change)

3 - Policy -making

Codes – Ethics Conduct:

Rules;Policies;Standards;Processes;

Charters…‘Core Values’Quasi-Contracts

(Fast change)

4 - Diffusion

Leadership/Management/Training/Resources (Ad hoc change)

Codified, undiffused information

Uncodified, undiffused information

Codified, diffused information

Uncodified, diffused information

Strategic Management of Ethics Policy:

Ethical Leadership (in theory)


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1 - Absorption

StoriesMyths & LegendsExemplarsMisinformation…

Values

‘Culture’(Slow change)

2 - Scanning & Problem-Solving

Experience (+ve & -ve)

Cognitive dissonance Cognitive consonance Anomalous matters…

(Ad hoc change)

3 - Policy -making

Codes – Ethics Conduct:

Rules;Policies;Standards;Processes;

Charters…‘Core Values’Quasi-Contracts

(Fast change)

4 - Diffusion

Training, Resources, Leadership/Management (Ad hoc change)

Codified, undiffused information

Uncodified, undiffused information

Codified, diffused information

Uncodified, diffused information

Strategic Management of Ethics Policy:

‘Core Values’ in the practice of institutional integrity


Documents

C3 Managing Ethics in a Complex World Howard Whitton 2011 ANNUAL CONFERENCE