From an office overlooking the Thames from the south side of London Bridge, a team of four people working for corporate security specialist Control Risks (CR) is at this moment waiting for calls from employees of CR’s client companies who want to blow the whistle.

Staff members who know or suspect frauds or other forms of malpractice are being perpetrated within their companies can make contact at any time round the clock seven days a week.

Once CR’s staff have eliminated ‘time wasters’, serious-sounding concerns are passed on to employers, though their names and identities will be kept secret. If their employers decide to take action, CR can investigate the matter, says Toby Latta, who heads the investigative division.

CR, which started this service five years ago and now intends to launch an expansion drive, charges anything from a few thousand pounds to six figures a year, depending on the size of the company. It is one of several specialist firms offering similar services in the growing field of corporate whistleblowing.

The idea is that whistle-blowers will feel more confident about voicing their concerns to an unconnected third party — and it might stop them from, in despair, taking their stories to the press. And it is the employers themselves who pay for it.

If present trends continue, some fear that whistleblowing could sprout like compliance and become another parasitic growth on business. Whether there will be degree courses, and diplomas in whistle-blowing, as already with compliance, remains to be seen, but the momentum is building.

A brave new world

For most people trying to run businesses in these competitive times, a whistle-blower on the premises is precisely what they do not need. Airing problems publicly or in the press, which should be addressed internally, and giving comfort and possibly valuable information to the other side is never desirable. But that has not prevented a whole industry growing up to cater for whistle-blowing and how to respond to it.

Recent changes in the law affecting corporate governance and practices on both sides of the Atlantic, notably the Sarbanes-Oxley Act in the USA and Britain’s 1998 Public Interest Disclosure Act, have put pressure on companies to adopt a positive attitude to whistle-blowing — even if they do not go as far as German motor group BMW and offer bonuses to whistle-blowers with valid concerns. Whistle-blowing via internal hotlines to non-executive directors or other designated figures or through out-sourced independent routes is part of this brave new world.

See also: 3 things you need to know about whistleblowing – Whistleblowing can be terrifying if you don’t know your rights. Here we explain what you need to know about statutory protection

However, the problem for company directors is that whistleblowers come in all shapes and sizes and not all have the interests of their companies at heart. They range from genuinely concerned members of staff who feel intimidated about confronting an assertive boss to disappointed and resentful employees out to damage the business or put up to do so by rival companies.

Whistleblowers as heroes

Recent scandals, such as Enron in the USA, which was destroyed partly because its directors repeatedly ignored whistle-blowers, and at the European Commission, whose chief accountant Marta Andreasen was suspended and faces disciplinary proceedings for refusing to sign off its flawed 2001 accounts, have cast whistleblowers in an heroic light.

The Trades Union Congress has contributed to this mood with a recent report on the fate of employees who have reported safety flaws in their offices or factories. It claims that between 1999 and 2004, 1,500 employees were dismissed in Britain for raising safety concerns with their bosses.

Many advisers contend whistleblowing plays a useful role in notifying directors of important problems and the need for damage limitation. ‘We want to encourage whistle-blowers,’ says Andy Durant, head of fraud investigation at accountant BDO Stoy Hayward, adding, ‘we get a lot of work on the back of it.’

BDO both advises companies on how to deal with whistle-blowing and investigates the claims they make. ‘I have never investigated a whistle-blowing case which has been malicious or without a grain of truth,’ insists Durant, who argues that out of any ten allegations, ‘four will be wholly right, four will be partly right and two will be largely wrong’.

He says whistle-blowers are often too scared of the wrath of their line managers to voice their concerns. ‘Directors must be made aware of this,’ he maintains. ‘But some are more interested in identifying the whistle-blower than tackling the issues raised.’

That certainly applied to another consultant firm’s client, an investment banking group, whose analysts leaked the bias they were obliged to insert in favour of the bank’s corporate finance clients. However, another whistle-blower in a food group, who correctly claimed his company had shipped contaminated food to Shanghai, was found to be wrong in alleging it had done so knowingly.

Villains of the peace

But there is another side to the coin. Justin King of investigation group GCI International, which includes whistle-blowing in its media planning service for clients, says ‘malicious attacks by whistle-blowers have become a key feature.

‘Whistle-blowing can destroy value for a company’s stakeholders. We have encountered plans to wreck companies by whistle-blowing, sometimes where people have been bribed by other companies.’

He cites one recent case where GCI was working for a financial services client facing a hostile takeover bid from a rival. GCI discovered a bug in one of the directors’ telephone system, which could pick up both phone conversations and ordinary ‘ambient’ talk in the office.

‘A combination of investigation and surveillance’ revealed that a head office employee had collected ‘a certain amount of evidence which, taken out of context, pointed to dishonest practices by his employer in battling off the bid’, explains King. The employee’s intention was to pass this information either to the press or the hostile bidder.

The whistleblower had been identified, but, as so often in such cases, the aggrieved employer deemed it imprudent to seek redress in law. ‘Due to the sensitivity of the situation, the matter was dealt with internally,’ adds King.

Some whistle-blowers make honest mistakes. The head of one West End-based security consultancy recalls a tragedy at a banking group, where an executive was convinced IT contracts were going to friends and circulated anonymous documents about it, only to learn the IT manager had been hired precisely because of his close sector contacts.

The bank called in one of the leading investigation firms to identify the misguided whistle-blower. He then killed himself.

Putting a system in place

Patrick Grayson of the gpw investigations group, which looks into whistle-blowers’ allegations passed to it by client companies, stresses that directors must balance their companies’ right to expect confidentiality from their staff with the need for a ‘safety valve’ for employees who genuinely fear ethical and/or legal breaches are being committed.

The elimination of the ‘middle management’ tier over the past few decades has often left concerned employees with no-one to go to below board level, which can be a deterrent to airing and resolving issues in-house. It is also, he argues, a question of leadership; being accessible to staff and briefing them about what goes on: ‘if low-paid employees see you taking sheikhs to Annabel’s night after night and do not know their jobs depend on clinching an Arab deal, they may suspect something is wrong.’

Following the Sarbanes-Oxley model, many companies have set up US-style anonymous whistle-blowing hotlines, either internally or using an outside agency. Nominating a director, usually a non-executive, to hear whistle-blowers’ concerns is also recommended.

For cases where whistleblowing is purely destructive and malicious, the law can be an option, but the publicity involved could be almost as bad as the original whistle-blowing. That is where the private groups come in, if you are willing to pay their fees.