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Editorial: Use greater protections in revised law to find, rectify corporate fraud

  • May 7, 2020
  • , The Japan News , 2:11 p.m.
  • English Press

Corporate fraud, which has become a social problem, shows no sign of significant decline. Companies must adopt a stance of accepting whistle-blowing and rectifying fraudulent behavior on their own.

 

The government submitted to the ongoing Diet session a bill to revise the Whistleblower Protection Law to provide further protection for people who report wrongdoing.

 

The law came into force in 2006 in the wake of a series of scandals, including the mislabeling of meat at Snow Brand Foods Co. and the cover-up of auto defects at Mitsubishi Motors Corp. It prohibits companies from taking action harmful to employees, including demoting them or reducing their pay, because of whistle-blowing activities.

 

After the law went into force, numerous acts of wrongdoing were exposed by whistleblowers, such as the false labeling of where food was produced and doctored expiration dates for consumption. It is certain that the law has been effective to some degree.

 

However, notable concern was voiced in a nationwide survey of workers conducted by the Consumer Affairs Agency, with respondents making such comments as: “People risk being subjected to harassment from supervisors or colleagues once it’s known they made a report,” or “Even if we file reports, we’re worried about whether the company can handle them properly.”

 

It is difficult to say that an environment has been established in which employees can blow the whistle on illicit behavior without any fears.

 

Under the revisions, therefore, companies that have more than 300 employees will be required to establish contact points and systems for investigation. In addition, if they don’t follow recommendations, their names will be made public. It also imposes confidentiality requirements on the people in charge of investigations, to not leak any information that might help identify informers.

 

It will also expand the scope of whistleblowers to be protected to not just active employees, but also to executive officers and retirees.

 

Executives sometimes have more opportunities to be aware of illicit behavior at an organization than the employees. There will be cases in which they can reveal corporate fraud that they heard about or witnessed only after retirement.

 

It is hoped these systems will be made to work and lead to the discovery of scandals.

 

However, the introduction of administrative measures or penalties for companies that treat whistleblowers unfairly was shelved.

 

It is not easy to determine whether treatment was inappropriate, due to the various factors involved in personnel matters. The risk of distorting personnel policy at a company through one-size-fits-all administrative measures and other actions cannot be denied.

 

However, there are many cases in which whistleblowers fight a legal battle, claiming they were treated in ways they did not like by personnel departments.

 

Whether the revisions can fully prevent retaliation against whistleblowers remains open to debate.

 

A system to protect whistleblowers has called on local governments to establish contact points where they accept consultations from staff members and residents. But only half of municipalities nationwide have done so.

 

It is significant to enable them to receive advice at nearby public offices. Local governments should improve the system while making an effort to disseminate information about it.

 

— The original Japanese article appeared in The Yomiuri Shimbun on May 6, 2020.

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