Dr. Thomas Altenbach interviewed on whistleblowing and whistleblower protection
What is a whistleblower system?
In 2019, you founded the company LegalTegrity in Frankfurt together with Maraja Fistanic and Pia Michel, offering a digital whistleblower system for small and medium-sized enterprises. Can you explain to us: what is a whistleblower system and what is its purpose?
Dr Thomas Altenbach: Whistleblower schemes Allow employees to anonymously report if they have observed a breach of laws or regulations within the company. These reports can be made in writing or by telephone. The individual decides whether they wish to remain anonymous.
What does that mean in concrete terms? In many industries, there are strict quality requirements and violations of these can have far-reaching consequences: think, for example, of the food, chemical, or medical technology sectors. Even the slightest deviation can be fatal. But also in other industries, misconduct can lead to large claims for damages, product recalls, or scandals. In the automotive industry, the Dieselgate certainly one of the best-known violations.
However, it's not just about „large-scale“ violations. Other breaches of the law can certainly occur more frequently, such as price-fixing agreements, inappropriate gifts and invitations, or even violations of internal compliance rules. A whistleblower system serves to identify such misconduct at an early stage and to take countermeasures before negative consequences arise: namely, economic damage and damage to the company's reputation.
Benefits of a whistleblowing system - more than "just" whistleblower protection
Why should I introduce a whistleblower system in my company?
Dr Thomas Altenbach: You should introduce a whistleblowing system in your company if you want to reduce the risk of unintentional negligence or deliberate misconduct jeopardising your good reputation and trustworthiness. You have built up this market reputation and customer trust over years, or even decades. Yet, a single scandal can be enough to threaten the very existence of a company, especially in the case of medium-sized businesses. Relying on the assumption that it will "always happen to someone else" means closing your eyes to a real danger – that feels like playing Russian roulette!
I have been responsible for managing whistleblower systems in several companies and can tell you from experience that in my career there have been a few tips where the company was glad to learn about the legal violations through the internal reporting channel. Going through the press would have been a disaster.
In the meantime, besides its function as an early warning system, there is another compelling reason why you should introduce a whistleblowing system in your company. The Whistleblower Directive obliges all companies with 50 or more employees and public authorities to offer corresponding reporting channels.
I keep hearing that this is a tiresome duty. Based on my experience, I see things differently: this need for action is a great opportunity for companies and authorities. Irregularities can be discovered early and, in many successful companies, a whistleblowing system makes an important contribution to prevention.
Because the reality is: most people hesitate to point out grievances or misconduct by colleagues or superiors because they fear personal consequences and potentially risk their own livelihoods. Whistleblowing is a highly emotional issue. This makes whistleblower protection all the more important: with the help of whistleblowing systems, companies give a voice to their honest and loyal employees. This is particularly true when consistently anonymous communication between whistleblowers\* and recipients\* is made possible.
The negative connotation of whistleblowing
They say the world loves betrayal, but not the traitor. The same applies to whistleblowers. We're all fascinated by the courage of an Edward Snowden or a Julian Assange. Nevertheless, whistleblowing has a rather negative connotation here. Why is that?
Dr. Thomas Altenbach: Snowden and Assange have revealed state secrets to the public. In itself, this is to be rejected, even if it was of great interest to society that these were disclosed. Given our history, betrayal is particularly negatively charged in Germany. Children are reprimanded for „telling tales“ and learn early on that this is not done. Naturally, no one likes to be told on themselves.
The result of the negative connotation is doubt on the part of both employees and the company towards reporting itself. However, this association with „whistleblowing“ is, in my opinion, incorrect: with internal company reporting systems, companies can prevent confidential information from reaching the public. They can directly address and rectify the reported problem. The EU directive grants protection to the reporter – also called a „whistleblower“ – who first uses the internal channels provided by the company. If your company has a reporting system but does not react within the specified deadlines, the reporter can – without penalty – turn to the authorities or the public. The same applies if your company does not provide a reporting channel: in that case, when reporting to the authorities or the press, a reference to confidentiality or trade secrets will not apply either.
The directive therefore goes a step further than merely obliging the establishment of a reporting channel: it prescribes deadlines for your company within which you must confirm receipt of the report to the whistleblower and transmit information about measures taken and investigation results.
Whistleblowing as an Act of Loyalty
Are whistleblowers a risk to my company?
Dr. Thomas Altenbach: Companies expect trusting collaboration and loyalty from their employees. If one understands "whistleblowing" as loyalty to the company, the supervisor, or colleagues, what does that mean?
The question is best answered by putting yourself in the shoes of a doctor who discovers that illegal euthanasia is being performed at their clinic, perhaps even by their boss. Or in those of a civil servant who notices that public procurement law is being massively violated in their department and that colleagues are receiving kickbacks for it. Or in those of an employee who observes that expired food is being repackaged and relabelled.
You may have worked very well with your colleague, often gone for lunch together, and even met up after work for a glass of wine. You know their family, their circumstances, that their children are in training or that a parent needs looking after.
You know that reporting the serious legal violation could lead to a warning, dismissal, or perhaps even criminal consequences for your boss or colleagues. You consider how your other colleagues will react if it becomes known that you have reported the behaviour. Would they still want to work with you, or would you be shunned by them? How would you behave?
Most employees choose to remain silent. The fear of consequences leads them to value loyalty to colleagues and superiors more than loyalty to their company. However, if your company has a whistleblowing system that allows for anonymous reporting and protects the whistleblower's identity, the personal risk for that person decreases. The barrier to making a report is reduced. Loyalty to the company, the associated protection of the company, and therefore the long-term safeguarding of one's own job, can once again take precedence – without risk.
The EU Directive on the protection of whistleblowers
The EU Whistleblower Directive is intended to protect individuals who report breaches of EU law. This includes employees, former employees, self-employed individuals, volunteers, trainees, shareholders, members of management bodies, and even third parties connected to the reporting person. The directive aims to safeguard these individuals from retaliation for reporting such breaches, thereby encouraging transparency and upholding the rule of law within the EU.
Dr. Thomas Altenbach: The EU Whistleblower Directive aims to protect medium-sized businesses and whistleblowers equally.
Both the European Parliament and the EU Commission wanted to make the positive experiences of large companies with whistleblower systems available to medium-sized companies in order to prevent public scandals. Whistleblowers are to be protected from any negative consequences, such as bullying, harassment, warnings, and even dismissal. However, whistleblower protection has even more advantages: it automatically extends to the company or authority as well Shield.It is estimated that German companies lose five percent of their revenue each year due to economic crime. This can quickly add up to a six-figure sum for a medium-sized company, while for large companies the amount climbs into the millions.
I recall a case involving a former client where significant working time violations came to light. It concerned a site that was several hundred kilometres away from the head office. Consequently, nobody at head office realised that employees at that site were being forced to work excessively long hours without appropriate rest breaks. When this was discovered during an inspection by the trade supervisory office, the company had to pay a six-figure fine. The damage could possibly have been entirely prevented through an anonymous whistleblower system.
Handling whistleblowers
Dr. Altenbach, you are a legal professional and were involved in expanding compliance systems within the legal departments of major players Deutsche Bank and Daimler AG. This was at times when both corporations were under public scrutiny due to scandals. How did you experience the handling of whistleblowers there?
Dr. Thomas Altenbach: This was handled differently. At Daimler, the tips were expressly welcomed; at Deutsche Bank, this was not encouraged in the same way. Initially, it was merely a matter of fulfilling duties. Compared to the number of employees, there were perhaps a fifth of the reports as at Daimler AG. However, at Daimler, I also experienced a CFO publicly accusing a whistleblower of soiling their own nest. The executive board reacted very wisely at the time and dismissed the CFO, not the whistleblower. This was also communicated on the intranet and sent a clear signal to employees.
There he came with the American monitor Louis Freeh, a former FBI director under Bill Clinton and George W. Bush, brought a different culture to the corporation. Basically, from then on, employees could give tips without immediately fearing negative consequences. However, as a lawyer leading investigations against senior executives, you also had few friends there anymore.
The German Whistleblower Protection Act
Why is the directive being introduced at all now? What impact does the translation into the national Whistleblower Protection Act have?
Dr. Thomas Altenbach: The EU directive was adopted to ensure, for example, wide-ranging money laundering prevention or to guarantee food and product safety across Europe. The legislator also intended to ensure public health, environmental protection and nuclear safety.
Since December 2021, whistleblowers have been able to rely on secure reporting systems for the disclosure of information, both within companies and to authorities. Furthermore, they are to be effectively protected from dismissal, harassment, or other forms of retaliation. 1
The deadline for transposing the directive into national law already expired in December 2021. Hardly any EU member state managed to transpose it into national law on time. Due to a lot of back and forth, the transposition was also delayed in Germany by 1.5 years. As of 02 July 2023, the German Whistleblower Protection Act now in force. As of this cut-off date, companies with 250 or more employees are obliged to set up a legally compliant whistleblowing system. Companies with 50 to 249 employees had an extended implementation deadline until 17 December 2023.
Whistleblowing systems in companies
In summary: Why do whistleblower systems within companies make sense – even independently of the directive?
Dr. Thomas Altenbach: The Protection of whistleblowers In the EU, this has only been regulated inconsistently to date. Most EU countries grant only partial protection in specific economic sectors or for certain categories of workers.2
The introduction of an anonymised whistleblower system enables this protection for all employees of a company, regardless of their status, length of service, or sector. The same also applies to the business partners* of a company or authority. Whistleblower systems will ensure in future that no one will suffer personal or professional disadvantages if they provide a justified report of one or more violations within a company, a partner company, or an authority. This will avert personal damage to whistleblowers as well as economic and reputational damage to the affected company.
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(* The masculine form used in this article refers to all individuals, regardless of gender.)
1. https://ec.europa.eu/germany/news/whistleblower20191216_en
2. ibid.
