You cannot rely on trust alone

Former Olympus Corp CEO Michael Woodford, who blew the whistle on a billion USD accounting fraud, calls the Maersk Group’s new user-friendly whistleblower system a common-sense approach worth publicising.

2015: A snapshot

  • In 2015, 298 cases were reported through the Maersk Group’s whistleblower system – none anywhere near the magnitude of the Olympus case.
  • 140 were fraud-related and handled by Group Internal Audit.
  • 51 were investigated as genuine whistleblower reports (excluding fraud). All were investigated following Group procedures, and if substantiated, appropriate remedial actions were taken. These included dismissal; reprimands; warnings and additional training; changes in operations, procedures and systems; and reports to regulators.
  • The Maersk Group saw an increase in IT security reports, including external complaints about fake emails from Maersk or fraudulent inquiries made through social media.

“It’s a sensible and straightforward protection for employees, the board and the company.”

At a recent Maersk Group gathering of in-house lawyers, former Olympus Corp CEO Michael Woodford commended the Group’s new whistleblower system for reporting possible wrongdoing. Woodford, one of the highest-ranked executives to blow the whistle on his own company, knows the value of such a system first-hand.

When he became the leader of Japanese medical device and camera maker Olympus in 2011, he never imagined the drama that would unfold in the coming weeks.

The first Western “salaryman” to rise through the company’s ranks to become CEO, Woodford caught wind of allegations of a USD 1.7 billion accounting fraud at the company. Olympus had paid almost USD 1 billion to buy three obscure companies – a mail-order face cream company, a microwave dish company and a recycling company. In addition, close to USD 700 million was paid in “advisory fees” on a merger, to a shadow company in the Cayman Islands.

When Woodford started asking questions of the top leadership, he encountered stonewalling.

“I knew there and then that there was something rotten at the top of this corporation of 45,000 people which I was responsible for,” he says.

 

Michael Woodford
“In a well-managed company, concerns will often be dealt with internally. But if you don’t trust your boss or your boss’s boss, if you don’t have a whistleblowing line, where do you go?” says Michael Woodford.

The Maersk Group invited Woodford to tell his story at the annual Lawyers Day to highlight the importance of having an anonymous, independent and reliable whistleblower system in place.

At the time, Woodford raised his concerns in a series of letters, including letters to the chairman of the board, the company’s auditors and the entire board of directors. After the board voted unanimously to oust him, Woodford took the story to the media.

“In a well-managed company, concerns will often be dealt with internally. But if you don’t trust your boss or your boss’s boss, if you don’t have a whistleblowing hotline, where do you go?” says Woodford, who chronicled his ordeal in Exposure: From President to Whistleblower at Olympus.

A safety net for the Group
The Maersk Group has had a whistleblower system in place since 2011. In March 2016, the Maersk Group launched a more user-friendly system that makes it easier for employees and external stakeholders to report suspected wrongdoing confidentially.

“You should be able to go to your manager or your HR partner if you suspect a breach of rules or Maersk’s internal policies. But when those channels are not working, the whistleblower system serves as a safety net for the Group,” says Cecilia Muller Torbrand, Group Senior Legal Counsel.

Not only does it help the Group learn about wrongdoing, she says, it provides an additional, anonymous reporting mechanism for employees regardless of their day-to-day situations.

“If wrongdoing is taking place, it’s much better to deal with it internally before it escalates,” says Woodford. “The best way to do that is to allow employees to report it anonymously, if necessary.” That means publicising and ensuring people are aware of the whistleblower hotline.

Maersk’s system is managed by Group Legal but hosted by an external vendor. All reported cases are screened by Group Legal and Group Internal Audit, a function independent of management, and assigned to the relevant units for further investigation.

That independence is key to a reliable whistleblower system, says Woodford, who reached a multi-million dollar settlement with Olympus over his dismissal. He is now a speaker and consultant on corporate governance, business in Japan and workplace cultures.

“To be effective, the system needs to be overseen by a non-executive director, or a function external to the organisation,” he says, pointing to an independence that was missing from the whistleblower system at Olympus.

Commenting on the need for a whistleblower system, Christian Kledal, Group General Counsel & Head of Group Legal, says:

“In Maersk, we trust our colleagues and employees around the world to comply with the law as well as internal rules and policies. Yet, we also acknowledge that we cannot rely on trust alone but need to establish checks and balances, including a reliable whistleblower hotline. That’s not in spite of being Values-driven with defined Group Policies and Rules, but rather precisely because of it.”