Strong governance is essential when promoting a company to potential investors, and a rise in whistleblowing alerting the public to poor corporate practices could be seen as damaging.
The reporting of malpractices, however, is an important step in improving governance, and this is key to those looking to endorse their businesses - particularly in the fast-growing ethical investment sector.
The high-profile list of celebrities now speaking up against the toxic culture in Hollywood - where for decades predatory sexual behaviour, gender discrimination and bullying were commonplace - has underlined, and perhaps even led, to a surge in corporate whistleblowing.
While revelations about malpractice in business are highlighting the ordeals suffered by individuals, such as unfairness in pay, instances of corporate bullying and sexual harassment, the reputational damage to the company can have some grim knock-on effects to shareholders.
"While the reputations of many celebrities now lie in tatters, the stability of some household-name companies has been put in jeopardy by the actions of their senior managers," says John Wilson, chief executive of Expolink, which works with companies to provide a secure and - if necessary - anonymous platform for employees to report incidents of malpractice.
Abuses of power
Ever since a boss first employed a worker abuses of power, privilege or position have been prevalent. Many just get noticed by the next manager up the chain and are dealt with calmly and privately and then forgotten.
But some are so pervasive and deeply ingrained that it needs someone on the inside to speak up.
Usually this someone is a person who's been affected by certain abuses, seen someone affected, or is acting on their own set of scruples or personal conscience.
Wilson (left) says: "The recent revelations from Hollywood show that issues such as bullying and harassment, if allowed to continue become endemic and can completely damage a company's reputation.
"There's no area where it’s good for a company to turn a blind eye - the truth will out. And the services we provide can be seen as an early warning system."
Let's remind ourselves of a couple of examples where corporate malpractice became so deeply ingrained that shareholder value was annihilated, despite the brave actions of whistleblowers.
The year of the whistleblower
Sherron Watkins, vice president of corporate development at oil trader Enron, and Cynthia Cooper, internal audit vice president at WorldCom both blew the whistle on accounting scandals at their places of employment in 2001.
Both were the biggest such scandals seen at their time in US corporate history and resulted in the largest bankruptcies seen when they collapsed.
Watkins alerted Enron chief executive Kenneth Lay to accounting irregularities in financial reports in August 2001, but by the time her revelations reached the authorities the company was already doomed.
Enron's collapse resulted in the loss of 20,000 jobs, while creditors lost about $23bn in outstanding debt and guaranteed loans. Shareholders, meanwhile lost nearly $11bn as the share price fell from over $90 in August 2000 to 12 cents in January 2001.
Fund managers and banks including Citi, Barclays and State Street were among the top 10 most exposed to the losses, while the fraudulent involvement of top audit firm Arthur Andersen saw its demise along with Enron.
Former employees were awarded compensation for lost pension assets and some investors were also awarded settlements in court class actions. It was, however, at $65.5bn in asset losses, the biggest bankruptcy in US corporate history until WorldCom a year later.
Telecoms group WorldCom collapsed in 2002 after an accounts reporting fraud to the tune of $3.8bn was discovered by a team led by Cooper.
Cooper's team revealed that between mid-1999 and early-2002 WorldCom's chief executive had overseen fraudulent accounting methods to boost its earnings on paper and thus maintain the company's share price, which had been rapidly falling.
By the time WorldCom went bankrupt later in 2002, it had lost $103.9bn in assets.
"Most fraud is not detected by internal or external audit or company controls, it's exposed by people making anonymous tip-offs," says Wilson at Expolink. "If people are allowed to talk about them sooner, the issues can be dealt with before they become a crisis."
The cases of Enron and WorldCom exposed three concerns - important to both the whistleblower and investors:
- If the corporate culture at top management levels is corrupt, then the actions of whistleblowers will go unheeded: most likely the result for the whistleblower will be termination of employment and perhaps an unsavoury employment record to go with it
- If employees believe it is likely they will be fired for blowing the whistle on malpractices, they are more likely to keep their silence
- Some companies could likely be saved from bankruptcy or severe reputational damage if whistleblowers were encouraged to speak out earlier within a transparent framework for such procedures
Indeed, Time Magazine celebrated the whistleblower in 2002, naming Watkins, Cooper and FBI special agent Coleen Rowley as its joint Persons of the Year.
"In a year when our trust in American institutions was tested, Sherron Watkins, Coleen Rowley and Cynthia Cooper found the strength to stand for what's right," Time's editorial commented.
A strange case can be used to highlight such concerns as those noted in the section above.
In 2016, Barclays board members received anonymous letters concerning allegations of a personal nature against a senior manager while at a previous employer. The letters questioned the appropriateness of his appointment at Barclays.
Chief executive Jes Staley considered the letters "an unfair attack", according to chairman John McFarland, and Staley instructed the bank's security team to unmask the author - in contravention of UK laws set up to protect the anonymity of whistleblowers.
An ironic twist - that the attempt by Staley to reveal the source of the letters was leaked by a whistleblower - doesn't detract from the fact that whistleblowers with potentially beneficial information are likely to be discouraged by Staley's persistence.
The UK regulator, the Financial Conduct Authority has repeatedly delayed publishing a report in to Staley’s hounding of the whistleblower, which could see him forced out of his job – though Staley currently says he will refuse to go. Barclays says it is currently unable to quantify the effect of the scandal on its results.
Snitches and narks
Another significant problem - other than fear of dismissal - that prevents people from speaking out is the negative image of being the informant: other colourful pejoratives such as tell-tale, snitch, stool pigeon and nark are further disincentives to the whistleblower.
Such references have undoubtedly contributed to would-be whistleblowers keeping their silence in the past. But the stigma appears to be fading, and certainly, with the introduction into policy at many corporations of anonymous reporting is having a positive impact.
Data compiled by Expolink into whistleblowing through its SpeakingUp channel last year shows a rising trend. Among its clients the overall incidence rate of reporting was 2.5 per 1,000 employees - up from 2.1 per 1,000 in the previous year.
The fact that there were more reports doesn’t necessarily mean governance is getting worse, but it does indicate employees are more comfortable reporting issues of malpractice.
Expolink also found that growth in corporate in-house "speak up" projects were beginning to have a more positive impact.
"Creating opportunities for discussion, increasing training and awareness, and bringing transparency to the process can all have a positive effect," says Wilson.
Conversely, he explains, unethical behaviours at senior level can quickly become seen as acceptable, creating an unhealthy culture where speaking up is effectively outlawed.
He adds: "There's still quite a hill to climb in terms of attitude. It's as important that managers listen as it is that people speak up."
As the rise in ethical investing is underlining, good governance is as much about corporate culture as it is about the successful management of a business.
So-called ESG funds that focus on ecological, social and governance issues are swiftly gaining momentum and investors in them are not prepared to back a corporate culture where discrimination, harassment and bullying are rife - let alone fraud and corruption.
And it's becoming clear that those companies that are willing to listen to their employees' concerns tend to be better managed and more profitable businesses.
"If you've got a culture where people can feel comfortable with speaking up when things are going wrong, they'll be prepared to challenge their companies in other ways too. You're paying your people to think," says Wilson.
"The fact is, that on a day-to-day basis there's a lot of whistleblowing going on: people are raising concerns and the issues are being addressed and companies are better for it."
That can only be good news for investors. Long-live the whistleblower.