Hong Kong: Best practice approaches to whistleblowing

Cynthia Chung
Deacons, Hong Kong
cynthia.chung@deacons.com

Although all companies have different goals and aspirations, they do have something in common: no company wants to be implicated in any fraud, bad press, and ultimately, any kind of loss.

This this is why whistleblowing has become such a watchword in corporate governance: the implementation and use of an effective firm-wide whistleblowing policy and culture would be the indisputable key in upholding a company’s ethical standards and ensuring good corporate governance, as employees are almost always the first to spot irregularities given their access to first-hand information at work. A strong culture of whistleblowing effectively creates protection for a company to identify all types of potential threats, some of which, such as cybersecurity risks, may not necessarily involve misconduct from employees at all, but could still ultimately give rise to costly consequences. Having a general whistleblowing policy and culture therefore goes beyond compliance, and towards minimising the risks of wrongdoing and unnecessarily prolonged issues, which could ultimately protect a company against hefty fines and irreparable reputational damage.

What can an employer do to protect whistleblowers and encourage whistleblowing? The general principle is that the less protection there is for the whistleblower, the less likely there will be whistleblowing.

Looking at the protection offered by the law in Hong Kong, we see that unlike many other jurisdictions which also play an important role in international finance and trade, there is no single piece of legislation which offers whistleblowers comprehensive protection. Instead, there are only piecemeal provisions in various ordinances which provide such protection, but only to specific whistleblowers who report on specific offences. For example:

• an employer is banned from terminating an employee’s employment due to the employee giving evidence in proceedings or an enquiry for the enforcement of the Employment Ordinance, or in any proceedings or enquiry relating to safety at work;
• under Hong Kong’s discrimination ordinances, it is unlawful for a person (discriminator) to discriminate against another person (person victimised) on the ground that the person victimised has brought proceedings against the discriminator or given evidence or information in connection with proceedings brought by others against the discriminator;
• a whistleblower who makes a disclosure of suspected proceeds of drug trafficking, money laundering or crimes to an authorised officer under the Drug Trafficking (Recovery of Proceeds) Ordinance (DTRPO), Organized and Serious Crimes Ordinance (OSCO), or United Nations (Anti-Terrorism Measures) Ordinance, will not be regarded as in breach of any restriction against disclosure of information imposed by contract or by any enactment, rule of conduct or other provision, or render the whistleblower liable in damages for any loss arising out of the disclosure. Moreover, under the DTRPO and the OSCO, witnesses in any civil or criminal proceedings are not required to reveal the identity of the person making the disclosure;
• under the Prevention of Bribery Ordinance, the name and address of an informer have to be kept confidential and any documents that may lead to disclosure of the informer’s identity have to be redacted prior to disclosure in civil or criminal proceedings;
• under the Securities and Futures Ordinance, a whistleblower will be protected against any civil liability whether arising in contract, tort, defamation, equity or otherwise for reporting any financial irregularities or non-compliance with any financial resources rules which occurred in the company; and
• an employer is banned from terminating or threatening to terminate an employee’s employment, discriminating in any way, intimidating or harassing, or causing any injury, loss or damage to an employee who provides material to the Competition Commission, or gives or agrees to give evidence in any proceedings brought by the Commission.

The common law does not provide much protection to whistleblowers either, except in certain circumstances, for example, where the employee may have a defence against a claim for confidentiality if such disclosure is in the public interest.

The effectiveness of such a piecemeal approach in protecting whistleblowers is questionable, as the whistleblowing culture in Hong Kong remains not as prevalent as jurisdictions with a comprehensive whistleblower protection legislation, such as in the UK.

Against this backdrop of uncertainty in law about the extent of coverage of persons protected, the reporting channel, the scope of disclosure that would be protected, and what would constitute unlawful retaliatory actions, companies which want to promote whistleblowing must proactively implement an appropriate policy, although they are not legally required to do so. Such action could effectively prevent wrongdoings from escalating into a corporate catastrophe, and demonstrate to employees that they are committed to solving problems and listening to their concerns.

As a general rule, a good whistleblowing policy should be clear and easy to understand. Where a company has many local employees who may not be entirely proficient in English, it would be essential for the policy also to be available in Chinese. The policy should address points such as:

• the sort of concerns which should be reported;
• how the reporting should be made. This could include hotlines, which could be internal or the company could establish a hotline with an external legal advisor, andalternative reporting lines in case the whistleblower is uncomfortable to approach one of the persons listed as the report handler;
• how the company would handle the report. For example, appropriately, consistently, and fairly, and that the whistleblower’s identity will be kept in strict confidence to the extent reasonably necessary; and
• assurances to employees (ie, potential whistleblowers) that victimisation and any other form of retaliatory action is unacceptable.

Equally as important as maintaining and enforcing a good whistleblowing policy is to ensure regular and effective employee communication and training. This is to ensure a high level of awareness among staff regarding whistleblowing and the protections offered by the company, so that employees fully understand their rights and obligations if they make a whistleblowing report. Examples of some of the best practices which an employer could adopt in this regard include:

• specifically referencing to the existence of the whistleblowing policy when on new employee induction, and regularly at internal team meetings;
• ensuring the policy is readily accessible on the company’s intranet and at the company’s premises; and
• conducting regular training so that on the one hand employees know of their rights and how to make whistleblowing reports, and on the other, managers and those entrusted with handling reports know how to conduct them (eg, how to protect the identity of the informant and the information provided).

To conclude, although the statutory framework for whistleblower protection may not be the most adequate, it is in a company’s best interests to develop and continually review its own whistleblower protection policy as part of its efforts in corporate governance, and to promote awareness. The more robust such an internal check-and-balance is, the less likely the company will meet with a corporate catastrophe.