Ask any board director or chief executive of a well-run company what they worry about most and the answer is invariably ‘what I don’t know is happening’. Given the many recent preventable surprises – the banking crisis, BP, Tepco, Tesco and, most recently, VW – this answer is unsurprising.

Which explains why leading companies are putting serious effort into implementing effective whistle-blowing systems. Is this a magic-bullet cure for corporate malfeasance? No. But, to my knowledge, none of the companies listed above had good-practice whistle-blowing systems, and this cost their investors dearly. 

Thus, investors should actively support the drive for better whistle-blowing systems at all companies. Investors should thank management that has acted, persuade management that isn’t yet convinced and get tough with those that are negative. 

These laggards are the minority. And they will be easier to deal with once new norms become established. Leading the way in the UK is Responsible 100 which, in partnership with Public Concern At Work (PCaW), is helping companies benchmark their whistle-blowing practices on a simple poor, okay, good or excellent scale. Working with the likes of AIB and L&G, they enable companies to compare performance over time and with peers.

Some things are agreed: there should be no harassment of whistle-blowers. Other things are disputed. Should staff be encouraged to raise concerns internally? This builds ownership of culture change. But what happens when management may not want to know – which is where whistle-blowing arguably has the biggest value? The option of an external body seems critical and is the norm in much of Europe. 

Encouragingly, attitudes to whistle-blowers – who often face career risk long afterwards – are changing. The public now understands that whistle-blowers provide a useful social function. According to the PCaW’s CEO: “While the perception of whistle-blowers in society is increasingly positive and when asked hypothetically our respondents thought they would do the right thing, we are seeing that more staff are unwilling to speak.” This is because in too many companies whistle-blowers are still viewed as the problem.

That is perverse, given that “in almost all cases of failure, the chief executive was a megalomaniac or a bully or both”. This comes from David Wright, the outgoing (and refreshingly outspoken) head of IOSCO, the global regulator for securities markets.

Wright is also critical of the ‘cultural’ explanation – the buzzword in regulatory, c-suite and governance circles today. Culture certainly can mean anything to anyone. And he advocates clarity about who was to blame: “weak boards, unnecessary risk taking, useless risk management and poor auditors”. 

Encouragingly, the Dutch regulator may be bridging these two positions by spearheading an initiative to actively evaluate board culture, with organisational psychologists leading this work. According to Wijnand Nuijst, a senior official at De Nederlandsche Bank, of the 54 detailed behaviour and culture assessments that it has done in a mix of banks, insurers, pension funds and trust offices, its has identified “fundamental risks” in 34. 

This is particularly worrying because, as Wright highlights, the asset management industry plays a key role in defining governance standards and clearly there is a case for the doctor to heal himself. 

So back to whistle-blowing. Yes, it’s not a panacea. But equally, it is a good way to help catch the biggest problems before they blow up and to act as a strong catalyst for culture change. This is why it is good to see one leading investor – LGIM – has whistle-blowing as one of 20 questions its analysts are asked to use when they see companies. It’s time all other investors did the same.

Dr Raj Thamotheram is CEO of Preventable Surprises and a visiting fellow at the Smith School, Oxford University