Rewards bring out the Dibber dobbers

Former ASIC chairman last year noted that Australia was “a bit of a paradise” for white collar criminals. Picture: Chris Pavlich

At primary school I recall children mocking each other with the ­epithet “dibber dobber”. “Dibber dobbers wear nappies” was occasionally thrown around the playground, less as an analytical or empirical point, more as an expression of disapproval. It turns out dibber dobber is an Australianism according to Green’s Dictionary of Slang, which defines the noun as a telltale or whistleblower.

There aren’t many examples of great Australian whistleblowers. In its 1000-page interim report, the banking royal commission referred to only three: one at Commonwealth Bank in 2010, and two at National Australia Bank in late 2015. For a report that unearthed volumes of cases of egregious behaviour across multiple firms, three isn’t many, given the big four banks plus AMP have a total of almost 160,000 staff.

Surely hundreds, if not thousands, of people knew about breaches, but Australia doesn’t have a culture of dobbing.

Whatever the prejudices of our convict forebears, we should try to shed our dislike of dobbers. For a start, the extraordinary legal costs of the royal commission, well north of a billion dollars, might have been avoided. Big business might enjoy higher levels of trust.

Labor has proposed giving workers a share of the proceeds for calling out illegal conduct. That’s a good idea, potentially saving taxpayers a fortune in regulatory costs and harvesting millions in fines.

Legislative protections for whistleblowers in the private sector are “out of date and inadequate”, concluded a parliament­ary committee in June 2014. They are “patchy, limited and far from international best practice”, said AJ Brown, a corporate governance expert at Griffith University.

Transparency International said in 2014 that Australia’s protections for public sector whistleblowers are among the best in the world, but for private sector workers they are among the worst: “The scope of wrongdoing covered is ill-defined, anonymous complaints are not protected, there are no requirements for internal company procedures, compensation rights are ill-defined, and there is no oversight agency responsible for whistleblower protection.”

The Coalition government has since then moved to improve protections, introducing a bill late last year that, to quote the government, would “for the first time ­create a single whistleblower protection regime to cover the corporate, financial and credit sectors, and create a new protection regime in tax law”.

Last year it gave the Australian Securities & Investments Commission $6.6 million so it could “better receive, assess, triage and address whistleblower disclosures about misconduct”. But it stopped short of introducing rewards. Who cares about protections if there are no rewards? The costs of dobbing can be high: loss of job, status, ­ostracism. No one would bother without a substantial incentive.

And the pace has been glacial, given former ASIC chairman Greg Medcraft noted the same year that Australia was “a bit of a paradise” for white collar criminals.

Whistleblowers are among the best type of corporate police: closest to the action, and cheap for the taxpayer.

As the economist Friedrich Hayek would have observed, information is dispersed. The people best positioned to identify wrongdoing are those closest to it.

Between 1996 and 2004, employees in the US unearthed as many cases of corporate fraud as regulators and auditors combined, according to a landmark University of Chicago study in 2010. “A strong monetary incentive to blow the whistle does motivate people with information to come forward,” it concluded.

It’s not that Americans are more heroic than Australians. The US rewards whistleblowers with a percentage of the fines ultimately levied - up to 30 per cent in some cases. It has form in his area. Congress under Abraham Lincoln passed the False Claims Act of 1863, “to encourage private individuals who are aware of fraud being perpetrated against the Government to bring such information forward”. Since 1986 the US government has recovered at least $35bn in fines and stolen funds under this act alone, according to Transparency International.

South Korea and Britain also reward corporate whistleblowers.

“Following the imposition of a penalty by a court or other body, the relevant agency would be able to give a reward to any relevant whistleblower, with the range of percentages determined during a detailed design phase in government, if elected,” Labor said in its proposal, released last weekend. It would also roll existing protections into a whistleblower act overseen by a new whistleblower protection authority, both of which were recommended by a parliamentary inquiry.

Big business should embrace Labor’s proposal. We often hear about the importance of huge bonuses in the corporate world to spur effort and innovation. Why not apply this principle more broadly, then, to improve enforcement of the law?

More effective whistleblowers would make resource-stretched regulators’ life easier. As ASIC chairman James Shipton has pointed out, the ACT has almost three times as many police officers as ASIC has enforcement staff, yet far less crime and complex legislation to deal with. Rewards wouldn’t be a panacea, though. US business is hardly a model of ethics. And there’s always a risk of fabricated accusations, albeit tempered by the likelihood that they could well end careers.

The principle also extends to regulators, which, whatever new powers they end up with as a result of the royal commission’s final report, will still have a powerful incentive not to rock the boat, as has always been the case. Their salaries will be the same regardless of whatever fines or sackings result from their actions.

The royal commission has recommended a raft of changes that would alter how financial institutions behave, including how they pay their staff and treat their customers.

Without big rewards for dibber dobbers, though, the changes will be harder to enforce.