Why do employees blow the whistle?

James Holzrichter believed he was doing the right thing when as an eager young analyst and systems auditor in the 1980s for an American aerospace and defense technology company, he innocently brought some problems of material acquisition and management to his supervisor.

Ultimately, Holzrichter discovered anomalies that led to a “qui tam” suit (under the U.S. False Claims Act) against his company for alleged fraud of overcharging the government and selling it defective equipment, and a 17½-year ordeal in which he’d lose his job, his health and his house. And someone attempted to harm him, his son and daughter. Yet, he didn’t quit. (See Vindication at a high price, Fraud Magazine, July/August 2015.)

Severity and gravity of situations

Holzrichter reported anomalies because his father’s advice, “When is it ever wrong to do the right thing?” was programmed into his life. According to researchers at Boston College and Northwestern University who’ve been studying whistleblowing since the 1980s, would-be whistleblowers base their decisions to report problems on two things: the severity and gravity of the situations. (See The psychology of whistleblowing, by James Dungan, Adam Waytz and Liane Young, Current Opinion in Psychology, Volume 6, December 2015.)

If an employee stumbles upon grave misconduct and wrongdoing — problems that can demolish a system — they’re more than likely not to blow the whistle. And if the would-be whistleblower isn’t sure about the validity of what they’ve uncovered, they’re unlikely to tell authorities because their career could be destroyed if they’re proven wrong. Whistleblowers might spend years investigating a case before they report it.

A whistleblower never wants to be wrong or proven wrong. That’s why even though 45 percent of workers might notice wrongdoing, only 65 percent of them are likely to report what they saw, according to a 2011 National Business Ethics Survey, Retaliation: When Whistleblowers Become Victims. They’ll likely brush it off as anomalies or chalk it up to human error. According to the Ethics & Compliance Initiative, nearly none receive widespread media coverage. (See Retaliation against Whistle-Blowers: No Good Deed Goes Unpunished, by Michael McMillan, CFA, Enterprising Investor, Oct. 24, 2012.)

A whistleblower is counted as one only if they’re employed by the organization that they’re reporting on and can suffer the consequences of their actions from that organization. An outsider, independent person or committee that uncovers wrongdoing often isn’t considered a whistleblower.

Psychology behind whistleblowing

According to the British Psychological Society, employees can determine if they might fit the profile of a whistleblower if they answer positively to most of these questions:

• Are you highly educated?
• Do you show good performance in your work?
• Do you think something can be done about the problem?
• Is your organization seemingly responsive to complaints?
• Is the problem not widely known?
• Are you a dominant but not always the most agreeable in character?

(See Why do some people choose to blow the whistle, by Craig Lewis and Laurence Cawley, BBC News, March 24, 2015.)

Whistleblowers commonly talk about how employees and managers in their organizations bully them after they’ve reported problems. Contrary to what some might think, if a whistleblower is a favored employee, then the blowback is far greater.

Ethics versus loyalty

As Holzrichter discovered, the stakes are quite high for a would-be whistleblower. They need to understand that they’ll pay a price for blowing the whistle on their boss or peers. However, if they decide not to blow the whistle they need to live with that decision, which could have even more negative implications for their psyche.

In “The psychology of whistleblowing” article in Current Opinion in Psychology, the researchers outline a concept they call, “the whistleblower’s dilemma: the fairness-loyalty tradeoff.” The authors write that “moral foundations theory” identifies five basic moral values: harm, fairness, loyalty, authority and purity, which employees consider when they’re faced with deciding whether a behavior is right or wrong. They say that “fairness and loyalty are brought into direct conflict by situations that allow for the possibility of whistleblowing."

They tested the hypothesis “that when norms for fairness dominate norms for loyalty, whistleblowing will increase, whereas when norms for loyalty dominate norms for fairness, whistleblowing will decrease.”

In a controlled study, the subjects were asked to rank how likely they were to blow the whistle on various targets, including strangers, close friends, family members and acquaintances for degrees of wrongdoing ranging from stealing $1 out of a restaurant tip jar to killing a store clerk.

The results of subsequent studies showed that those who endorsed fairness over loyalty reported greater willingness to be whistleblowers. In fact, whistleblowers were seen to generally speak, write and describe incidents from a fairness point of view rather than the loyalty point of view. Whistleblowers, the researchers found, consistently had an ethical viewpoint, rather than a loyalty point of view.

Factors influencing whistleblowing

Personal

Specific personal factors can identify a whistleblower, the researchers report in the Current Opinion in Psychology article. According to data collected and analyzed, a correlation exists between a certain type of worker and their propensity to blow the whistle, especially if they’re the “fairness” sort of person. While correlation doesn’t always equal causation, this is an interesting look into the type of person who’d place fairness above loyalty to a company and the people that are in it. The idea here is that clearly a high sense of loyalty can deter and hinder whistleblowing, but it doesn’t necessarily mean that a loyal person won’t blow the whistle. The researchers say that the few employee demographic factors that correlate with higher rates of whistleblowing include:

• Increased tenure of employment at the company.
• Increased pay.
• Increased education.
• Being male.

Situational

According to the Current Opinion in Psychology article, strong predictors of whether an employee will become a whistleblower include: 1) organizational support and encouragement for whistleblowing, 2) adequate dissemination of knowledge of ways to report unethical behavior plus protection from retaliation. Some organizations include these whistleblower protections and employee encouragement in their written official policies.

Another situational point is the time factor. According to the article, “people are more likely to voice disapproval of others’ behavior when that behavior becomes unethical abruptly rather than slowly over time.” However, the more an employee feels an act of whistleblowing is immediate and noticeable, the more difficult the reporting of the wrongdoing will be.

In a study conducted on university students, when an experimenter asked them if they’d raise ethical questions about inhumane research on humans most of them said they would. (See To defy of not to defy: An experimental study of the dynamics of disobedience and whistle-blowing, by Piero Bocchiaro, Philip G. Zimbardo and Paul A. M. Lange, Social Influence, Volume 7, 2012, Issue 1.)

The majority, 77 percent, complied with the experimenter’s unethical request. The minority was split between those refusing — 14 percent — and those reporting the misconduct to higher authorities — 9 percent. (However, when the experimenter asked an independent sample to predict their behavior, they gave the opposite reaction. Only 4 percent believed they’d obey the authority.)

It’s not easy for people to blow the whistle against authority figures, especially when dealing within a group. Group loyalty is a strong feeling.

Cultural factors

Geographic cultures can affect an employee’s decision to blow the whistle. For example, according to the Current Opinion in Psychology article, those in Asian cultures — including Japan, China and Taiwan — view whistleblowing less favorably than those in the U.S. This could be because collectivist cultures, often in the East, fiercely value loyalty to their authority figures. Western cultures are more individualistic.

The researchers say that the amount of collectivism in a culture is positively related to that culture’s propensity for bribery “and the perception that collectives, rather than individuals, are responsible for personal conduct.” Loyalty increases the inclination to overlook unethical acts.

Legislation enabling whistleblowers

In some countries, whistleblowers are afforded the full protection of the law. However, in in other countries, they might be subject to persecution — an obvious deterrent.

U.S. whistleblowers can be protected under provisions of the Sarbanes-Oxley Act of 2002 (SOX), the Whistleblower Protection Act (WPA), the Dodd-Frank Wall Street Reform Act of 2010, the False Claims Act (via a “qui tam” suit) plus other statutes.

Section 806 of SOX creates civil liability for companies that retaliate against whistleblower employees of publicly traded companies and employees of private contractors and subcontractors of publicly traded companies.

Dodd-Frank includes the whistleblower provisions that those who voluntarily supply original information to the Securities and Exchange Commission that leads to a successful enforcement of the Securities Exchange Act or the Foreign Corrupt Practices Act will be entitled to a portion of the penalty ordered to be paid by the violator.

WPA prevents a federal agency from taking any adverse “personnel action” against a civil servant who’s reported wrongdoing by the agency.

(See the online ACFE Fraud Examiners Manual, Law/The Law Related to Fraud/U.S. Federal Whistleblower Statutes.)

A civil qui tam suit is one in which a private individual sues on behalf of the government to recover damages for criminal or fraudulent actions committed against the government. Most qui tam actions seek to recover damages and statutory penalties for false claims made to the government by government contractors such as defense contractors and health care providers. (“Qui tam” is an abbreviation of the Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” meaning "[he] who sues in this matter for the king as well as for himself.”)

(See the online ACFE Fraud Examiners Manual, Law/The Law Related to Fraud/Qui Tam Suits and the Civil False Claims Act.)

In the U.S., statutes in most states protect private whistleblowers from retaliation.

The U.K. Public Interest Disclosure Act 1998 assists in legally protecting whistle-blowers from their employers when they reasonably believe that malpractices have occurred.

In the EU, not all countries have full-blown whistleblower protection acts. However, courts have used customized versions of the 1995 EU Data Protection Directive. France, for example, uses data protection authority for potential breaches of individual liberties, invasion of personal privacy and wrongful data management, which in turn provided protection to whistleblowers.

Germany has no whistleblowing-related law, but its courts system works to prevent discrimination by employers. Consider the case of the Berlin retirement home that dismissed one of its geriatric nurses, Brigitte Heinisch, a after she made public the ill treatment of elderly patients A labor court later awarded her compensation. (See What are the latest developments ion whistleblowing in the workplace in Germany? by Jannis Breitschwerdt, June 20, 2016, Global Workplace Insider.)

A 2014 report on whistleblower protection in some of the world’s richest countries found that Germany ranks alongside Argentina, Brazil, India, Indonesia, Italy, Mexico, Russia, Saudi Arabia and Turkey “as one of the countries that does the least to ensure that whistleblowers can speak out without fear of retribution.” The report was co-authored by researchers from Australian NGO Blueprint for Free Speech, Transparency International Australia, Griffith University and Melbourne University. (See Germany’s whistleblower protection among the worst in the G20, says new report, Courage, Sept. 22, 2014.)

Australia has state laws protecting whistleblowers that apply only to the public sector, such as the Queensland Public Interest Disclosure Act, 2010; the New South Wales Protected Disclosures Act, 1994; and the Victoria Whistleblowers Protection Act, 2001.

Under Australia’s Crimes Act of 1914, it’s a criminal offense for anyone to reveal Commonwealth information. Any violation is punishable with two years imprisonment. Because federal law takes precedence over state law, the country’s Public Interest Disclosure Act was enacted in 2013 to bring the state laws under a common legal framework. Australian whistleblowers who make disclosures about matters of national security and immigration aren’t protected under the act. And whistleblowers in the private sector have little protection. At best, the Corporations Act, 2001 and the Australian Securities and Investments Commission Act, 2001 offer protection for those who make disclosures pertaining to violations of these laws.

Singapore has no law to protect whistleblowers. It does have the Prevention of Corruption Act, which offers anonymity to whistleblowers under Section 36, but a judge can revoke this if they feel justice can’t be done while the identity of the whistleblower remains anonymous. And the act offers no immunity from prosecution if the whistleblower participated in the illegal/corrupt activity that they report.

A would-be whistleblower must not only know their local and federal laws but understand their enforcement via court systems. When they’re considering reporting possible wrongdoing, they should immediately consult a lawyer who specializes in whistleblower law. Time is of the essence. The whistleblower and counsel must determine: 1) the type and seriousness of the suspected misconduct, 2) if the possible violations are against state or federal laws and/or against a third party based outside the U.S. and 3) if sufficient contacts exist in the location of the alleged incidents or violator’s residence to file a lawsuit.

Thanks to whistleblowers regardless of their motivations

We can’t generalize why a whistleblower decides to report possible unethical or illegal events. Each has unique legal, cultural and personal factors that affect their decision. But we know they will pay a price. They’ll probably lose their job. They might have to endure harassments, ill health and family disruptions. They might never find justice and closure.

The path to justice is uneven. Half the battles are lost during the uphill climb of legal assessment. Others are lost because of society’s pressures and loss of livelihood. More are lost in court because of lack of evidence. Only a handful remain to see the light of the day. But because of courageous whistleblowers stepping out of the crowd we see many frauds vanquished and wrongs righted. And for that, we’re grateful.

Disclaimer: The views and opinions expressed in this article are those of the author and don’t reflect the opinion, views or policy of the Abu Dhabi government or its business entities or its affiliates.

Robin Singh, CFE, is the compliance and ethics lead officer at an Abu Dhabi Government entity (healthcare sector). Contact him at robin@whitecollar.org, whitecollar.org and LinkedIn.com/in/whitecollarinvestigator.