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Whistleblowing Policy: An Analysis of Disclosure Level among Malaysian Listed Companies.


The Corporate Governance Blueprint, launched by the Securities Commission Malaysia (SC) in 2011, aspires Malaysian to become the leading business and investment destination among investors. To achieve this Malaysia aims to be distinguished by the quality of its governance. Good governance engenders trust and infuses confidence among investors. Nevertheless, such efforts may go down to drain if issues of fraud and corruption in Malaysia are still at large. According to PwC's latest Global Economic Crime Survey 2016, more companies in Malaysia are involved in bribery and corruption. The survey found that 30 per cent out of 80 Malaysian companies have experienced bribery and corruption in their daily operations, compared to just 19 per cent in 2014. PwC Malaysia's respondents represented 17 industries including government/state-owned enterprises, financial services, energy, utilities and mining and manufacturing. The survey stated that Malaysia now has the second highest reported level of corruption (30 per cent) relative to its three largest trading partners: China (46 per cent), Japan (24 per cent) and Singapore (17 per cent).

The growing concern on these types of corporate fraud and malpractices has sparked the Malaysian government to encourage whistleblowing practices. Whistleblowing is crucial as it can prevent organizations from suffering substantial losses (Near and Miceli, 2016). Studies acknowledged that organizations prefer to see whistleblowing protection through internal channels (Culiberg and Mihelic, 2016; Gao and Brink, 2017) so that wrongdoings can be corrected and prevented in the future and the misconducts in the organizations are not publicized. As such, internal whistleblowing gives an organization the opportunity to deal quickly with a concern without the pressure of external publicity. Unfortunately, legislations in Malaysia do not impose a mandatory requirement for organizations to have an internal whistleblowing channel. Furthermore, Lee and Fargher (2013) stated that there has been relatively little research examining the benefits from the use of whistleblowing channel. Studies acknowledged there are disparities in internal whistleblowing policies across companies (Lee and Fargher, 2013). As such, the purposes of the study are to examine the level of disclosure of whistleblowing policy disclosures among Malaysian listed companies. This is to gain a better understanding on the contents and components of whistleblowing policies currently being reported by these Malaysian companies.

Literature Review

The state of whistleblowing legislations and disclosure requirements in Malaysia

Among the procedures to detect fraud incidence within organization are through the legislation of whistleblowing provisions. In Malaysia, the protection on a whistleblower is covered under the provisions of the Malaysian Anti-Corruption Commission Act 2009, Capital Markets and Services Act 2010, Witness Protection Act 2008 as well as the Whistleblowing Protection Act 2010 (Rachagan and Kuppusamy, 2017). These acts though in some extent provide protections to the would-be whistleblower, they have some loopholes such as, a whistle-blower is only protected when he or she fits into certain condition as stipulated by the acts (The Star, 2012).

Furthermore, these acts do not mandate company to implement their own whistleblowing policy. Para 3.2 of the Malaysian Code of Corporate Governance 2017 (MCCG 2017) guidelines issued by Bursa Malaysia emphasizes the importance of whistleblowing policy in Malaysian public listed companies in which it is to encourage employees to raise any concern on fraud or dysfunctional behavior within their organization (Securities Commision of Malaysia, 2017). A standard guideline for whistleblowing disclosure however, is not available for Malaysian companies. Consequently, many public listed companies do not provide disclosure of their whistleblowing policy and for those who make such disclosures, their disclosure contents vary. Such variation of disclosure may be influenced by the firm attributes that are yet to be explored. Inconsistency of disclosure reflects inconsistency of adopting whistleblowing policy in the companies. As such, adequate disclosure of whistleblowing policy may warrant its effective implementation in the organization.

Nevertheless, the MCCG 2017 has emphasized on the needs for listed companies to employ whistleblowing policy. The Guideline stated that whistleblowing policy is an anti-fraud programmed in which the firms take an initiative to implement a system to protect the whistleblower. The guideline highlighted that there should be corporate culture to accept bad news and that the company should encourage its employees to report any forms of discrepancies. Boards of directors have been requested to formalize the ethical code of conduct, one of which is to improve communication and feedback in order to facilitate whistleblowing (Securities Commision of Malaysia, 2017). The duties of the board to implement internal system to facilitate whistleblowing are documented in the MCCG 2017 whereby in Para 3.2 of the guideline stated that "the board establishes, reviews and together with the management implements policies and procedures on whistleblowing" (Securities Commision of Malaysia, 2017, p. 20)

The Minority Shareholders Watchdog Group (MSWG) reported that, more companies have disclosed details of their whistleblowing policy, which increased from 13% in 2014 to 22% in 2015 (Minority Shareholder Watchdog Group, 2015). In addition, number of companies that have detail procedures in dealing with employees' complaint have also increased from 230 in 2014 to 299 companies in 2015. The MSWG findings however indicated that, the implementation of whistleblowing policy by Malaysian listed firms is still at low level. Based on MSWG's report, for the three years (2013, 2014 and 2015), the number of companies who have procedures to deal with employees' complaint and procedures to protect the employees from retaliation had increased. However, they are considered low as the involvement do not even reached 50% of Malaysian listed companies. The report suggests that there are many companies who have not putting the whistleblowing agenda as their main concern. Additionally, there is lack of understanding on how much is the detail of the whistleblowing policy and detail procedures referred to in the MSWG report, as the level of the disclosure were not discussed. The methods of determining the scope of the disclosure were also not provided.

The needs for effective internal whistleblowing policy

Meng and Fook (2011) stated four benefits for having whistleblowing policy in company. First, the policy encourages activity on whistleblowing that helps to prevent fraud within the company at early stage. Secondly, the implementation of the policy may build confidence among the investor as it provides signal to the investor that company are committed in handling fraud and ensure effective corporate governance system. Thirdly, the whistleblowers feel secure that they are protected under the term of the policy, thus do not impede their intention to whistle-blow. Fourthly, the whistleblowing policy signifies the importance of protecting the public interest as any fraud or misconduct is detected at early stage.

Empirical studies showed that companies that provide ethical codes give favorable effects in handling fraud. Companies that have ethical codes in place showed an increased in the number of wrongdoing reports from employees (Barnett, Cochran, and Taylor, 1993), experienced fewer cases of wrongdoing (Somers and Somers, 2001) and employees in companies that adopted ethical codes were perceived as more ethical than those companies without such codes (Adams, Tashchian, Shore, and Adams, 2001). This may suggest that companies that implement a quality whistleblowing policy affect the ethical and reporting behavior among their employees. Nevertheless, to assure an effective implementation of the system is to make it transparent to the employees. The company must disclose detail procedure of the whistleblowing policy to assure that the whistleblower rights are protected and the report is channeled to the right person for immediate action.

Several studies argued that the adoption of ethical codes does not assure its effectiveness if they are merely being regarded as a symbolic side of ethics management where the policies may not actually put into practice (Hassink, De Vries, and Bollen, 2007; Lee and Fargher, 2013; Weaver, Trevino, and Cochran, 1999). In Malaysia context, Rachagan and Kuppusamy (2017) argued that culturing whistleblowing in Malaysia may be difficult due to the following reasons: a) shareholding in Malaysia is highly concentrated to family ownership and state ownership; b) Malaysia has tough corporate law and regulation but enforcement by the regulatory authorities is low. Low enforcement was partly due to high corruption reported in Malaysia reaching 25% in contrast to Hong Kong and Singapore with low or almost none; and c) Malaysian culture who are abound to the attitude of not to confront other people, who belief to maintain harmony, and minority group have little power to influence the majority powerful group. In order to combat fraud in organization and to overcome the unique Malaysian culture as mentioned above, it is important that the board of directors need to demonstrate the high importance of whistleblowing process through sufficient level of disclosures in their annual reports, websites or any form of media. The only way to show that their organization support whistleblowing is they are being transparent on how the process is deal with.

A look into Standards Australia (2003) whistleblowing checklist

The Australian Standard on whistleblowing policy, known as Corporate governance - Whistleblower protection programs for entities (AS 8004-2003), is a standard for the implementation and handling of whistleblowing schemes by private sector organizations which was developed and published by Standards Australia. The objective of this Standard is to provide essential elements for establishing, implementing and managing an effective whistleblower scheme within an entity and provides guidance when using these elements. In general, the Standard outlines the standards for whistleblower protection in Australia. It is a clearly developed standard that provide a recommended checklist of sound whistleblowing disclosures.
Table 1: Suggested checklist on whistleblowing disclosure by Standards
Australia (2003)

Description of items disclosed

1.   A statement of the entity's commitment to culture of high
     corporate compliance and ethical
2.   Commitment to regularly review the policy
3.   Provision of training
4.   Scope applies to employees (including contractors and consultants)
5.   Scope applies to non-employees (customers, general public)
6.   Guidelines on reportable issues
7.   Guidelines on who to report to
8.   Guidelines on how to report
9.   A statement that report will be treated as confidential
10.  A statement that different individuals will receive and
     investigate the report
11.  A statement on how the report will be handled
12.  A statement on whether whistle-blower will be notified on
     commencement of investigation
13.  A statement on whether whistle-blower will be notified on
     whistle-blowing progress
14.  A guarantee that whistle-blowers will receive feedback
15.  Appointment of a welfare/whistle-blowing protection officer
16.  No retaliation by company, if report made in good faith
17.  A statement that protection is given
18.  Description of the specific protection given from and the actions
     that will be taken
a.   Definition of term
b.   List out different forms of misconduct
c.   Who is handling the matter
d.   Action subsequent to report (upon investigation)

A study by Lee and Fargher (2013) used this disclosure checklist as provided by Standards Australia (2003) to identify for every item of the checklist, how much have the Australian listed firms incorporated and disclosed in their whistleblowing policy. Apart from examining the level of disclosure checklist, their study also examined the effects of firm attributes and corporate governance mechanisms of these Australian listed firms. They found that the higher the proportion of external directors in audit committee, existence of concentrated shareholders and the presence of organizational support in whistleblowing were associated with higher level of whistleblowing disclosure.

Research Methodology

Sample companies

The study is part of a bigger project and for the time being examined top 50 Malaysian listed companies measured by market capitalization. It is a cross sectional analysis involving companies ending their financial year ends in 2017.

Data collection method

This study used content analysis approach to identify the disclosure level of whistleblowing policies among Malaysian firms. Disclosures are sourced from the corporate websites of the companies and their corporate governance statements in their annual reports. Disclosure of the whistleblowing policies will be assessed based on checklist recommended by Standards Australia (2003), consistent with the study of Lee and Fargher (2013). As mentioned earlier, this a clearly developed standard that provide a recommended checklist of sound whistleblowing disclosures. On the contrary, there is no standardized checklist of whistleblowing disclosures provided for Malaysian companies. The checklist will apply to each company to determine the extent of their whistleblowing disclosures level. Company that has greater extent of disclosure indicates that it has sound whistleblowing system in place. Table 1 described earlier presents the suggested checklist as per the Standards Australia (2003). For each disclosure item, the existence of the disclosure will be coded '1' if present and '0' otherwise. The primary measure of disclosure score is the count of items disclosed.

Findings and Discussion

Frequencies of items disclosed in whistleblowing policies among Malaysian listed firms are provided in Table 2. The table disclosed that although the current sample is limited to top 50 listed companies in Malaysia, they do not provide comprehensive disclosure in the whistleblowing policies. Despite adequate disclosure (more than 50%) being provided by these firms in 10 out of overall 22 items, 12 other disclosure items were found to fall below 50% on adequate disclosure components (refer the shaded color).

Table 3 presented the number of items indicated and disclosed by each company in their whistleblowing policies. It calculated the number of items out of the total 22 as suggested by Standards Australia (2003). The median of disclosure level is 10. From the total of 50 top companies, 29 have lower disclosure level (lower than 10 median). This result conforms to MWSG findings that the implementation of whistleblowing policy in Malaysian listed firms is at a lower level. The highest amount of disclosure is from Bursa Malaysia Berhad with 21 items out of the total 22. This is not surprising as Bursa Malaysia is the regulatory agency for listed companies which could indicate that they are portraying good examples to others.


As Malaysia is striving toward achieving higher standard of corporate governance practices, disclosing sound whistleblowing policy should be viewed as a tool to further enhance corporate governance in Malaysian corporations. Higher level of disclosure will increase employee's confidence, understand their rights and feel secured. The outsiders will view the organization as an entity that are transparent and have proper procedure in place and hence less worry of concealed fraud. It means that, organizations need to build up a culture to encourage their employees to report any forms of corporate wrongdoing. The whistleblowing policy must be in place before it can be disclosed. A mandatory or comprehensive checklist specifically tailored for Malaysian companies could encourage and act as a guidance for companies to strengthen their whistleblowing policy. As such, the findings of this study that reflected low level of whistleblowing disclosure could indicated that implementing such requirement is indeed necessary.

Furthermore, future study should also be conducted to examine the effects of disclosure level of whistleblowing policy with the firms' corporate governance attributes. This is consistent with the studies by Lee and Fargher (2013) and Agnihotri and Bhattacharya (2015). It was argued that corporate governance mechanisms promote higher level of disclosure. To our knowledge, no study of similar scope has been carried out on Malaysian listed firms. Nevertheless, previous studies that investigated corporate governance structure and their firms attributes could be utilize in future studies to examine the impact they may have on the whistleblowing disclosure of the Malaysian company.


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Syahrul Ahmar Ahmad (*)

Faculty of Accountancy, Universiti Teknologi MARA Johor, Malaysia


Rahimah Mohamed Yunos

Faculty of Accountancy, Universiti Teknologi MARA Johor, Malaysia

Juyati Mohd Amin

Faculty of Accountancy, Universiti Teknologi MARA Johor, Malaysia

(*) Corresponding Author
Table 1. List of Empirical Variables.

Section    Variables

Section A  Demography profile

Section B  Resources availability
           * Employees' Skills and
           * Financial Management
           * Financial Support
           * Technology Support

Section C  Cash management

Section D  Financial sustainability

Section    Measures

Section A  Types of services, fully prepare and maintain
           accounting transactions in accounting records, the
           person who handles the accounting records
Section B  Basic skills, ability, experience
           Training received, wide exposure, continuous

           Business fund, allocation of fund, financial support
           from government.
           Computer assistance, software, knowledge using
           computerized accounting systems and sufficient
           technology support.
Section C  Bank account, cash shortage, surplus, cash budget
           and separation duties
Section D  Profitability, liquidity, budget, expenditure, stock
           turnover, number of customer, cash flow.

Table 2: Validity and Reliability for Construct

Constructs                Items    Loadings     AVE

Cash management           CFP1     0.622        0.503
practices                 CFP2     0.368
                          CFP3     0.475
                          CFP4     0.663
                          CFP5     0.615
                          CFP6     0.750
                          CFP7     0.720
                          CFP8     0.682
                          CFP9     0.688
                          CFP10    0.023
                          CFP11    0.430
Financial sustainability  F1       0.699        0.505
                          F2       0.731
                          F3       0.764
                          F4       0.830
                          F5       0.652
                          F6       0.645
                          F7       0.618
Employees' accounting     SA1      0.719        0.571
skills and ability        SA2      0.770
                          SA3      0.821
                          SA4      0.710
Financial management      TS1      0.871        0.704
trainings                 TS2      0.839
                          TS3      0.784
                          TS4      0.860
Financial support         FS1      0.770        0.527

                          FS2      0.658
                          FS3      0.662
                          FS4 TE1  0.805
Technological Support                           0.799
                          TE2      0.933
                          TE3      0.882
                          TE4      0.883

Constructs                Cronbach's  Composite
                          Alpha       Reliability

Cash management           0.82        0.866

Financial sustainability  0.818       0.866

Employees' accounting     0.749       0.841
skills and ability

Financial management      0.86        0.905

Financial support         0.698       0.815

Technological Support     0.916       0.94

Table 3: Discriminant Validity

Constructs  CFP    Fin.Sus  SA     TS     FS     TE

CFP         0.709
Fin. Sus    0.490  0.711
SA          0.408  0.503    0.756
TS          0.443  0.285    0.140  0.839
FS          0.433  0.500    0.384  0.371  0.726
TE          0.312  0.266    0.182  0.404  0.409  0.894

Where: CFP is cash management practices, Fin. Sus. is financial
sustainability, SA is employees' accounting skills and ability, FS is
financial support, TS is financial management trainings, and TE is
technological support.

Table 4: Structural Estimates (Hypotheses Testing)

    Hypotheses      Beta   Standard Error 0.075

H1  SA -> CFP       0.212
H2  TS -> CFP       0.303  0.055
H3  FS -> CFP       0.276  0.092
H4  TE -> CFP       0.078  0.062
H5  CFP -> Fin.Sus  0.112  0.104
H6  SA -> Fin.Sus   0.139  0.056
H7  TS -> Fin.Sus   0.133  0.060
H8  FS -> Fin.Sus   0.280  0.082
H9  TE -> Fin.Sus   0.221  0.064

    T Statistics 2.831  Decision

H1                      Supported
H2  5.489               Supported
H3  2.987               Supported
H4  1.267               Not Supported
H5  1.076               Not Supported
H6  2.457               Supported
H7  2.211               Supported
H8  3.411               Supported
H9  3.430               Supported

Table 2: Frequency of items disclosed in whistleblowing policies

Disclosure items                                   Frequency of
                                                   items reported
                                                   No.             %

1. A statement of the entity's commitment to
culture of high corporate                                   44     88
compliance and ethical behavior
2. Commitment to regularly review the policy                 7     14
3. Provision of training                                     3      6
4. Scope applies to employees (including
contractors and consultants)                                45     90
5. Scope applies to non-employees
(customers, general public)                                 38     76
6. Guidelines on reportable issues                          43     86
7. Guidelines on who to report to                           40     80
8. Guidelines on how to report                              41     82
9. A statement that report will be
treated as confidential                                     35     70
10. A statement that different
individuals will receive and investigate the                11     22
11. A statement on how the report will be handled           14     28
12. A statement on whether
whistle-blower will be notified on                           7     14
commencement of investigation
13. A statement on whether whistle-blower
will be notified on whistle-                                 6     12
blowing progress
14. A guarantee that whistle-blowers
will receive feedback                                        9     18

15. Appointment of a welfare/whistle-blowing
protection officer                                           0      0
16. No retaliation by company, if report
made in good faith                                          28     56
17. A statement that protection is given                    31     62
18. Description of the specific protection
given from and the actions that                              7     14
will be taken
a. Definition of term                                        7     14
b. List out different forms of misconduct                   32     64
c. Who is handling the matter                               15     30
d. Action subsequent to report                               7     14

Table 3: Frequency of items disclosed in whistleblowing policies across
the companies

No  Companies      Total   Dis-     No  Companies      Total   Disclo-
                   Items   closure                     Items   sure
                   Dis-    Level                       Dis-    Level
                   closed                              closed

1   AEON CO.       12      H        26  MAGNUM          3      L
2   AEON CREDIT    9       L        27  MAH SING        3      L
3   AFFIN BANK     9       L        28  MALAKOFF       17      H
4   ALLIANCE BANK  7       L        29  MRCB           18      H
5   BERJAYA        0       L        30  MMC            10      L
6   BIMB HOLDINGS  16      H        31  MSM             9      L
7   BINTULU PORT   10      L        32  MY E.G.        13      H
8   BOUSTEAD       7       L        33  ORIENTAL       10      L
9   BOUSTEAD       7       L        34  PADINI         12      H
10  BUMI ARMADA    7       L        35  PAVILION REIT   0      L
11  BURSA          21      H        36  POS MALAYSIA   10      L
12  CAHYA MATA     13      H        37  SAPURA         12      H
13  CARLSBERG      4       L        38  SCIENTEX        0      L
14  DRB-HICOM      9       L        39  SERBA DINAMIK   0      L
15  DUTCH LADY     17      H        40  SHANGRI-LA     12      H
16  ECO WORLD      12      H        41  SUNWAY REIT    13      H
17  FGV            8       L        42  SYKT TAKAFUL    9      L

18  GAS MALAYSIA   3       L        43  TIME DOTCOM     4      L
19  HEINEKEN       18      H        44  UEM SUNRISE    14      H
20  HONG LEONG     10      L        45  UNITED PLANT   11      H
21  IGB REIT       7       L        46  UOA DEV         2      L
22  IJM            13      H        47  V.S. INDUSTRY  11      H
23  KOSSAN         9       L        48  VITROX         11      H
24  KPJ            11      H        49  YINSON         14      H
25  LPI            8       L        50  YTL POWER       5      L
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Author:Ahmad, Syahrul Ahmar; Yunos, Rahimah Mohamed; Amin, Juyati Mohd
Publication:Global Business and Management Research: An International Journal
Geographic Code:8AUST
Date:Apr 1, 2018
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