Are Most Whistleblowers Just Rogue Employees Out For a Buck?

News Brief

By Cydney Posner

There was a lot of handwringing over the Dodd-Frank whistleblower provisions. Many companies feared that whistleblowing employees would steer clear of internal reporting mechanisms and instead claim fat paydays by reporting internal problems directly to the federal government. According to this article in Compliance Week, a recent ethics study found that that has not been the case. Instead, whistleblowers "almost always make some effort to report wrongdoing internally before going outside the company with their concerns." The study, "Inside the Mind of a Whistleblower," reports that, of 4,600 employees polled, only 2% report observed misconduct externally. Moreover, whistleblowers are not necessarily motivated by money: "'The least motivating reason for somebody to go outside their company to the government is the possibility of monetary rewards.' " In addition, the idea that a whistleblower is a "rogue and disloyal employee is inaccurate." Instead, whistleblowers "generally turn to the government or other outside sources where the violation is substantial and the company has been slow to respond, or because they fear people will be harmed by the misconduct they've observed."

According to the study, in 2011, 45% of U.S. employees said they had observed misconduct in the previous 12 months, and about two-thirds of those who observed wrongdoing reported it (BTW, the study's highest reporting rate ever). With regard to employees who report only internally through company channels, the study found that 56% of those reporting misconduct first approached "someone they know and trust inside the company, such as a direct supervisor." The study showed that 82% of initial reports of misconduct were directed either to the employee's immediate supervisor (56%) or to a more senior manager (26%). To minimize the likelihood that employees will escalate complaints outside the company, compliance officers need to make sure that managers are able to recognize a report of misconduct when faced with one and that they have a support system that enables them to follow up on reports adequately.

In addition, psychic rewards count: offering encouragement and letting employees know that their reports benefit the company can influence how employees think about the reporting process. Rewards can be as minimal as a handwritten note of thanks or recognition during the employee's performance review. The study found that 72% of workers who believed their companies rewarded ethical conduct reported observed wrongdoing internally, compared to 57% who did not believe ethical conduct was recognized. Similarly, of those who believed they were "influential" in their workplace, 76% reported observed misconduct, compared to 52% who did not. Employees were also more likely to report through internal mechanisms if they felt secure about their employment. Of those who did not fear retaliation for questioning the decisions of management, 74% reported, compared to 51% who feared retaliation. In addition, employees are three times more likely to report observed misconduct when the company has a hotline available, and are eight times more likely to report misconduct when the company effectively takes action against employees who commit wrongdoing.

The study found that only about 5% of employees would be motivated by a monetary reward to report outside the company: "Monetary incentives are more likely to motivate workers who have experienced recent financial disappointment. Thirteen percent of workers whose salaries had declined in the last two years said they would report wrongdoing to the government only if there was a chance for substantial financial reward."

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