When whistleblowing goes public: Lessons for Australian boards

Whistleblower disclosures raised by SRG’s former Chief Legal Officer, and former General Manager of Group Secretariat and Corporate Legal, ultimately resulted in the commencement of high-profile Federal Court proceedings, a well-publicised settlement and ASIC inquiries into the company’s handling of whistleblower complaints and related governance and disclosure issues. After an external investigation found there was no substance to the allegations, new evidence emerged that saw the termination of the CEO’s employment for misleading the board about an undisclosed relationship.

The matter highlights the damage that can be caused when an internal whistleblower matter goes public. This emphasises the importance of an effective whistleblower program, with appropriate board oversight and accountability, trusted by staff. Ensuring there is a culture where whistleblowers feel safe to speak up, complaints are robustly investigated and remedial action taken to address any identified concerns, is critical to supporting good governance and risk management. How whistleblowers are managed through these processes is crucial. In the SRG matter, senior officers, including the CEO and chair of the board, were named as individual respondents in the legal proceedings commenced by the whistleblowers. This demonstrates the real risk officers may be exposed to personal liability and involvement in legal processes, including giving evidence about their decision-making, knowledge or involvement.

In a number of recent cases, the entirety of the board has been called to give evidence about the reasons for decisions made that impact whistleblowers. While none of these matters have resulted in successful outcomes for the whistleblowers, the evidence given by directors has been scrutinised by the court, with their credibility closely examined.

Director responsibility

Ramifications can extend beyond civil proceedings. ASIC has the ability to compel individuals, including directors and senior executives, to attend examinations as part of any investigation regarding the treatment of whistleblowers and governance concerns. While boards would not ordinarily be expected to have oversight of developments occurring in individual matters, they should have a handle on the effectiveness of the whistleblower program as a whole. They should also be apprised of any material issues arising out of the whistleblower program.

Directors may be required to consider whether statements to the market are needed, which can be fraught with risk. The balancing exercise is delicate. Companies must satisfy continuous disclosure obligations while preserving whistleblower confidentiality, preventing victimisation and ensuring statements to the market are not misleading. Missteps can trigger regulatory interest and further litigation risk.

The lesson is clear. Boards are ultimately responsible for the whistleblowing program, and ASIC expects director oversight and senior executive accountability to be embedded within it. Effective programs are core to good governance, risk management, and preventing a whistleblower disclosure spiralling into a public relations nightmare.

_Disclaimer

_{Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.}