Internal Investigations, Whistleblowing and External Monitoring: Comparative Experiences, Economic Insights, Findings from Corporate Practice

Hopt Klaus J. ()
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Hopt Klaus J.: Prof. Dr. Dr. Dr. h.c. mult. Klaus J. Hopt, Max Planck Institute for Comparative and International Private Law, HamburgGermany

European Company and Financial Law Review, 2021, vol. 18, issue 6, 863-898

Abstract: Internal investigations, whistleblowing and external monitoring are three information and enforcement channels that belong to corporate compliance. They are a task of the management and/or the board of directors. The board is legally bound to see that the compliance obligations are met, but it has broad entrepreneurial discretion (business judgment) in terms of deciding how this should be done. These standards have established themselves in large companies in a typical sequence of a stages and steps: (1) Indication of an incident: plausibility assessment, preparation, possible ad hoc measures, investigation; (2) Legal assessment of the interim result based on the facts at hand, data analysis and interviews; (3) Result and reporting: measures, tracking, follow-up and identification of lessons learned. In the case of listed companies, the establishment of a whistleblower organization is considered to be a part of good corporate governance and may now also legally be part of the organizational compliance obligation that is already required for them. The EU Whistleblower Directive of 7 October 2019 only concerns disclosures about violations of European legal provisions, it is not yet sure whether the Member States will introduce a whistleblower system for national legal provisions too. In the case of external monitoring, a distinction must be made between monitors that are used by the supervisory authority itself, usually through an administrative act, for example in accordance with banking law, and those installed by the company itself, albeit often in an international context and under pressure from a foreign supervisory authority. There is broad and detailed body of comparative legal experiences from the USA, the United Kingdom and Switzerland on internal investigations, whistleblowing and external monitoring, which can also be relevant in other countries for legislation, case law and scholarship. Empirical studies on all three information and enforcement channels are available, but they seem to be scarce. Conversely there are now many important findings and experience from national and international corporate law practice that are particularly relevant for external monitoring, which is still less well known in many countries. These findings not only offer suggestions but in some cases already represent good corporate governance standards. In parts and over the long term they can form legal obligations for the corporate board.

Date: 2021
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DOI: 10.1515/ecfr-2021-0036

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