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Olympus whistleblower urges companies to set up independent hotlines

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Michael Woodford, the CEO who blew the whistle on the $1.7 billion Olympus fraud in 2011, has urged large corporations to introduce independent hotlines.

Woodford told HR magazine the current process of reporting criminal wrongdoing to executives was "meaningless" and instead should be overseen by a non-executive committee.

"If you're a junior manager or care worker and you don't trust your line of reporting then you should know who to turn to," Woodford said.

"It shouldn't be independent from the company as they should be dealing with it themselves. And you must not leave big corporations with no mechanism to report on themselves."

Improving transparency

Woodford said independent hotlines would improve corporate transparency, an important aspiration.

"We can change codes of conduct and legislation around this important issue. But the reason companies don't want this is because it's going to be more hassle and aggravation," he said.

"If these recommendations don't come in, people will simply not 'blow the whistle', and if they don't trust their management what do people do? Going to the media can be hugely problematic."

He said whistleblowing should not be confused with workplace grievances, and should be reserved for criminal activity only.

Non-exec control

Independent whistleblowing hotlines should be set up and controlled by non-executives of the board or the chair of the audit committee, the former Olympus chief added.

"Non-executive directors 20 years ago used to go for a nice lunch half a dozen times a year and read the papers during board meetings, not anymore. Now if you're a non-executive director you will be personally liable if you don't demonstrate scrutiny and oversight.

"If this happens it will be a really positive move and non-executives can help deliver a paradigm change in governance."

Woodford's call for independent hotlines comes a week before the Government is due to publish new guidelines and proposals on whistleblowing.

He was speaking to HR magazine ahead of a Cass Business School lecture on how he exposed a $1.7 billion fraud as CEO of Japanese optics manufacturer Olympus. The first Western CEO of a large Japanese company, he was forced out of the company and country after uncovering the fraud.