Incentives to embrace whistleblowing

In this article the issue of incentivising employees to report wrongdoings in the workplace will be discussed. Whistleblowing still carries a negative image, making it difficult to incentivise both organisations and employees to embrace the practice despite the widely available academic research and countless reports enumerating its benefits. 

Why employees hesitate

Employees can be particularly hesitant to report misconduct due to the high personal costs associated. Many fear retaliation, industry blacklisting and damage to their relationships with colleagues. This is of particular concern where anonymous reporting channels are not an option, or where there is a negative culture surrounding whistleblowing. The belief that anonymous reporting options lead to more frivolous complaints is unfounded, yet persits. This prevents companies from proactively managing their risk, and decreases the likelihood that employees will feel safe to report wrongdoings witnessed.

What can be done to bridge this gap

An obvious incentive to encourage employees to report misconduct are bonuses. This is common practice in the US under the Dodd-Frank Act, and can be done according to the size of the fine associated with the breach. This can be particularly beneficial in environments where confidentiality is difficult to achieve and employees fear retaliation. Despite fears of increased false reports, the risk of such do not outweigh the costs, not to mention that effective whistleblowing systems should include mechanisms aimed at assessing the validity of reports. However, while the idea of a payout for whistleblowing can seem appealing, it will not prevent those coming forward from retaliation, industry blacklisting and other negative consequences.

From the organisational point of view, there is also an incentive to reconceptualize and embrace whistleblowing as an asset rather than detriment. Increased self-monitoring helps to avoid negative public attention and sanctions by authorities. Where organisations are able to uncover misconduct themselves and thus report to the relevant regulatory bodies, sanctions tend to be milder. In addition, whistleblowing can also act as a preventive measure by broadcasting zero-tolerance for corruption. Thus, eliminating corruption rather than whistleblowing, should be considered a first-order priority.

To sum up, employees can be incentivised to report misconduct through bonuses, but also a company culture where reporting misconduct is encouraged rather than feared. This is an important step for organisations who wish to optimise their risk management strategy and get ahead of problems early. Ensuring your organisation has an effective whistleblowing solution, including confidentiality assurances and the option to report anonymously can go a long way in ensuring employees will feel safe to speak up.

Further reading:

Teichmann F & Falker MC (2021) ‘Public procurement and corruption during Covid-19: self-monitoring and whistleblowing incentives after Srebrena Malina.’ SEER. 24. 181-206. 10.5771/1435-2869-2021-2-181.