3 Reasons Why Whistleblowing is Important for Public and Private Companies

December 12, 2019

History is littered with accounts of whistleblowing from Julian Assange (Wikileaks), Mark Felt (Watergate) to Sherron Watkins (Enron). Although the majority of whistleblower cases do not result in the extreme outcomes and reaction as these examples, the role of whistleblowers is still very important as it can bring to light criminal activities which result in financial charges and changes in policies.

Before diving into why whistleblowing is import, let’s talk about what it is. Often whistleblowing is either viewed as a “tattle-tale” activity or as an action of bravery. Simply put, whistleblowing is uncovering information or activity that is deemed illegal or unethical. These acts of misconduct can range from minor issues to more severe forms of fraud. Regardless of their severity, raising concerns about these activities plays an important role in bringing people to justice and preventing further human and corporate disasters. Here are 3 reasons to help highlight the importance of whistleblowing:

1) The majority of fraud is captured through Whistleblowing

One of the most useful cases where whistleblowing has an impact is in corporate fraud and misconduct. Whistleblowing tips are the most common way in which important fraudulent activity is reported. Research by the Nations on Occupational Fraud and Abuse suggests that over 35% of cases are reported via tips. Furthermore, when companies have hotlines, more than half of these cases are uncovered through this channel.

These numbers highlight that employees should be encouraged to report wrong doing. Often whistleblowers are intimidated to come forward with information as they fear retaliation. In our experience, people are more likely to report misconduct if they are able to remain anonymous and there be protection from retaliation. 

Therefore, having safe channels for whistleblowers is one of the most effective aspects of an organization’s anti-fraud and loss prevention programs. For more information on an effective compliance program have a look here.

2) Whistleblowers are often close to the action and have the most important information

As highlighted above, most whistleblowers are employees (and often co-workers) within the organization. Due to the whistleblower being close to the crime, there is often pressure to remain silent backed by threats of violence or loss of employment. Having this “inside information” is vital to uncover misdemeanor and that is why it is just as important for organizations to have a program in place to create an environment where whistleblowers feel safe. Taking away these barriers increases the likelihood of uncovering corporate crimes and other wrongdoings.

3) Whistleblowing helps align people so the organization can pursue its vision and mission

Recent whistleblowing scandals such as Uber, Google and Tesla have highlighted how disruptive toxic work environments can be for organizations. Ultimately, the more whistles that are blown (and the early that happens) the less likely a firm will face large payouts and other fines later on. Over and above the negative press, fines and legal battles often demand a lot of a firms attention and sidetracks their progress. Secondly, there is the aspect of culture, where illegal or unethical behavior detracts from instilling a company’s values which is ultimately how the organization plans to pursue its vision and mission. Having whistleblowers bring to light behavior that is not beneficial for the company allows the respective actors to take actions to push the firm back on track.