Read the CISI's verdict and readers' comments on the ethical dilemma in the Q2 2017 edition of The Review
Read 'Grey matters ethical dilemma: Marginally evasive' from the Q2 2017 print edition of The ReviewThis dilemma, originally published in the Q2 print edition of The Review, was the top read in the online Review. Perhaps not surprising as in several recent surveys on public attitudes to corporate behaviour, ‘paying their fair share of tax’ has been respondents’ top concern. There were many well-considered comments, for which we thank you. A selection of these are shown here, along with the results from the survey and the CISI verdict.
In this dilemma, the company has already taken an action and so the question asked of readers is to determine what Jonathan should do when he becomes aware of the actions of his employer, but only after the event.
Options offered and results from survey
- Contact the BBC to tip them off about his bank continuing to offer aggressive tax planning to clients and undertaking similarly questionable schemes for its own benefit. (2%)
- Contact H_, the bank’s counsel, to confirm whether he had the conversation with R_, and whether the content of the note is accurate. (4%)
- Contact the bank’s Speak Up line to report his concerns about the bank providing tax solutions that appear to be unacceptable and about his treatment by R_ when he tried to discuss his concerns with her. (68%)
- Seek to discuss his concerns with the senior independent director. (26%)
The CISI verdictWhile it may be tempting to contact the BBC (option A), this is not an appropriate choice, as those who have attended a CISI Speak Up presentation will be aware.
Contacting the media is very much a last-resort action. There is no evidence that this point has yet been reached.
Contacting the bank’s counsel (B) is only slightly more popular and, in terms of the CISI’s recommendations, this may be considered under the heading of ‘do not become a prosecutor’.
Because contacting the whistleblowing line is offered as an option (C), most respondents chose it as the most appropriate action but, given the nature of the concern, this might be characterised as a ‘protest vote’. However, if the line properly records and reports on calls made, then the firm’s whistleblowing champion might communicate this dissatisfaction to the executive in an effective manner, if he or she thinks it appropriate. Whether that influences matters in the future is a moot point.
Option D is the second most popular course of action and that which we would recommend. The advantage of this over (C) is that it provides Jonathan with the opportunity to share his views directly with someone of influence, rather than through the filter of the whistleblowing line.
Some reader comments
"It was his treatment that should be a red flag (ie, is anything being swept under the rug), rather than the transaction itself, which seems to be within the firm's risk appetite."
"Using the whistleblowing process will provide Jonathan with employment protection in the circumstances and an investigation will be carried out by those of sufficient authority to get the answers and resolve the matter."
"Having escalated internally as much as he is able, the Speak Up line is the most appropriate route to raise concerns. It would be wrong and doubtless contrary to internal conduct rules to disclose confidential information to third party media. There seems little to be gained in verifying the accuracy of the note with counsel as that does not take things any further forward. Raising with the senior independent director may be an alternative route but Jonathan is concerned about his own career prospects - moreover, the Speak Up line is (or should be) independently managed, so better ensures appropriate escalation."
"Option A takes the matter away from an independent internal review at too early a stage to be a justified solution for a senior employee and should only be considered a last resort. Option B is outside his direct authority and if confirmed offers no particular comfort. The Speak Up line is likely to be assessed by people that have limited or no authority to act and he is unlikely to be a party to any discussions. Assuming the matter troubles his conscience, D provides a direct line to independent and senior management, whose job it is to have input into matter of conduct. It is not without risks, but is also a defensive line of questioning that should not get him sacked."
"Does Jonathan want to work for an organisation that works in this way? Whatever he does it is likely to get back to senior management and life may become difficult, although that is no excuse for doing the right thing. My suggestion is that he seeks to discuss his concerns with the senior independent director in the first instance. If this gets him the rebuff he has had already, to try the BBC but accept it may be the end of his career. If he does nothing and the firm’s actions are discovered later, there could be huge reputational damage. While contacting the bank’s council may look attractive, far better this is done by someone at an appropriate level. One would hope an independent director would do his duty to protect the bank financially and reputationally, but there have been numerous cases of banks sailing too close to the wind too often and being caught out eventually. Ultimately it is the shareholders who will pay and as a shareholder I would want actions like this stopped."
"I am assuming that the Speak up line is a whistleblower line. Whether his career is in jeopardy or not he must see this through. His manager will not listen so it should be investigated by another. A senior independent director may not have the expertise to investigate while the whistleblower line will be able to call on appropriate skilled individuals to consider the situation."
"This particular dilemma is absolutely timely, given the current revelations concerning Jes Staley and his attempts to identify a whistleblower. The statement from the Barclays' board was that Mr Staley had "honestly, but mistakenly, believed that it was permissible to identify the author of the letter and has accepted his explanation that he was trying to protect a colleague who had experienced personal difficulties in the past from what he believed to be an unfair attack, and has accepted his apology". This is wrong – a clear case of abuse of authority, and a far more serious matter. In the CISI dilemma, Jonathan must consider option C as a minimum course of action. Option A is also needed, as there is already a "trail of concern" as R__ has already been alerted as to the ‘whistleblowing’ potential of this matter."
"An aggressive tax scheme with significant legal, tax and reputation issues would need to have been approved at board level and, or received clearance/approval from the firm's head of legal and head of finance, as well as the firm's reputation committee (as indicated here). Jonathan may wish to verify that the note, or at least its contents, were divulged to these parties before a decision was made by them. If not, he should divulge the contents to these people immediately. If the key decision-makers were aware of counsel's legal/ tax advice but accepted the risks involved in the transaction, Jonathan may still raise any continuing concerns, if any, internally to the senior independent director and/or use the internal whistleblowing procedures, such as the bank's Speak Up line, to report his concerns. This should be undertaken before whistleblowing externally to the FCA and certainly before going to the press. The press should only ever be advised once all other avenues have been exhausted and/or when exposing unlawful acts known to senior management which are not being remediated and disclosed to relevant competent authorities."
"I say 'C' but in the FT there is an article that the CEO of Barclays tried to uncover the identity of a whistleblower and was having his pay cut for doing so. Therefore I can understand if people feel intimidated but hopefully because of the actions taken against the CEO it gives comfort that whistleblowers will be protected."
"Jonathan is legitimately perturbed. It is just such inventive, often borderline schemes which have largely diminished governance standards & led to a serious trust deficit. Ideally, pursue C and D simultaneously. My thanks to your team for opening up such relevant, sensitive lines of discussion."
"In the world of 'Grey matters' Jonathan should, initially at least, call the Speak Up line. In the rather more complex real world his options are to do nothing or contact an external party (BBC) and stand by for the storm that it potentially may bring. The Lux-PwC aggressive tax scheme disclosures and subsequent court cases and the Barclays whistleblower witch hunt sanction at the highest level (CEO!) is prima facia evidence that the financial world remains highly averse to having its business activities exposed to the hygiene of public scrutiny."
"In addition I would send an email to his line manager copying in H, detailing the conversations that he has had with them both and their replies ..."
"I've answered this way on the assumption that in a larger organisation the Speak Up is the firm's implementation of whistleblowing obligations and that, if operated correctly, ought to have a non-executive director involved, together with a very senior executive director, if not the CEO. One would hope that the former would challenge the latter. If my assumption is correct, then the outcome is effectively the same as answer D. Therefore, if Speak Up is just a glib internal scheme put in place by HR with little executive 'buy-in' then my answer would be D."
"It would be a lot easier if tax revenue was spent responsibly. Is there an argument that tax avoidance is ethical, given the way in which governments waste taxpayers money and the questionable legitimacy of the current administration?"
"Firms offering tax avoidance schemes are required to have specific schemes vetted through HMRC. It is not known from the case notes offered whether this has been done. This should form part of Jonathan's discussion with the senior independent director – to check this has been done, fully, and that the relevant ‘approval’ has been received from HMRC."
"I opt for C as H, the bank's counsel might not take the call or respond to an email from Jonathan in B as he would be unknown to H as the opinion was given in confidence. If Jonathan receives a response that he considers is acceptable he should pursue Option D but advise the Speak Up Line before doing so. The approach to the senior independent director would be on the basis that offering aggressive tax planning to clients and undertaking questionable schemes is causing reputational damage to the bank."
"In fact C & D are very similar but I have a preference for going straight to board level without getting too many other people involved by using the Speak Up line. At least he will have discharged his duty bringing the matter to the attention of an independent director who will hopefully take the matter forward. If the matter is not resolved to his satisfaction he may want to consider if he wants to continue working at this bank."
"Whether the reputational risk of this sort of business is acceptable to the bank is a policy decision for the bank's senior management and ultimately the Board. Whatever Jonathan's own feelings on the matter, he should not try to impose his own value judgment on those who carry the responsibility for the decision. He should certainly not unnecessarily damage his employer by going public to the BBC. But his own level of seniority and technical knowledge put him a position where he should seek to ensure that facts and associated risks have been properly presented at the most senior appropriate decision-making level within the bank. In this case that is the Board so the senior independent director is an appropriate channel, if unusual. However, it is also appropriate for him first to confirm (by contacting H) that he has a correct understanding of the legal advice which has been given."