Confidentiality: The Key Factor in Empowering Whistleblowers

Jordan Thomas -

 

As we previously discussed, the SEC reported a number of important achievements regarding its Whistleblower Program in fiscal 2015, including a record number of whistleblower tips as more and more individuals come forward with information about potential misconduct. This is an encouraging development, but it also reminds us of the importance of understanding the factors that motivate or prevent people from speaking up.

Witnesses to misconduct often remain silent. The Ethics and Compliance Initiative’s 2013 National Business Ethics Survey of the U.S. workforce revealed that 45 percent of individuals surveyed did not report misconduct because they did not trust their report would remain confidential. As we have previously noted, whistleblowers face real and significant personal and professional risks. In fact, the ECI survey also revealed that more than one in five respondents who reported misconduct said they suffered from retribution as a result.

A recent experiment reported in the American Accounting Association's journal Behavioral Research in Accounting, examined this fear of retaliation. The researchers posited that when companies enact policies that describe “explicit whistleblower protections” from retaliation, whistleblowers are actually discouraged by the “salience of retaliatory threats.” In other words, hearing detailed information about the various forms of retaliation from which they were protected, made individuals feel increasingly afraid of retribution and less likely to report misconduct.

The experiment reveals a central issue in our work to deter corporate wrongdoing: fear of retaliation is the greatest single impediment to the reporting of misconduct. The authors of the experiment and report do not suggest that corporations omit statements regarding protections, but the results indicate the importance of recognizing and assuaging the powerful fear of retaliation when designing any compliance or whistleblower program.

In crafting the SEC Whistleblower Program, the Commission placed profound emphasis on confidentiality, understanding the fundamental importance of protecting whistleblowers from retaliatory consequences. In addition to protecting whistleblowers who come forward, maintaining confidentiality creates an atmosphere that encourages safe reporting. In fact, the record number of tips the SEC received last year seems to indicate a growing confidence in the protections and incentives offered by the Whistleblower Program. If we are to architect true change in the landscape of corporate ethics, we must begin by empowering and protecting those who wish to speak up. To read more about considerations for potential SEC whistleblowers, see here.