Rep. Michael Grimm's (R-NY) whistleblower bill—which incinerates the whistleblower protections included in the financial reform act, Dodd-Frank—appeals to businesses that worry employees will go straight outside the company to report wrongdoing. But a new study shows that those fears are largely unfounded. Will Rep. Grimm and the U.S. Chamber of Commerce actually listen?
The report by the Ethics Resource Center, “Inside the Mind of a Whistleblower,” shows that only two percent of employees would report wrongdoing solely outside the company without going to their employer. Additionally, very few employees (about one in 20) said they were motivated to report outside the company by a monetary reward. Other factors, like the seriousness of the crime, carry far more weight in a would-be whistleblower’s decision.
The Ethics Resource Center surveyed 4,700 working employees in mid-September 2011 for the study, according to The Wall Street Journal.
This report blasts giant holes through the underlying argument behind Rep. Grimm’s Whistleblower Improvement Act of 2011 (H.R. 2483), which requires a whistleblower to first report information relating to misconduct internally before going to a regulatory agency like the Securities and Exchange Commission (SEC).
The argument that is being made for the bill, according to a press release on Rep. Grimm’s website, is that “Dodd-Frank undermines [internal compliance programs] by incentivizing whistleblowers to go directly to the SEC.”
Oh but wait, according to the study, whistleblowers do prioritize reporting internally—84 percent of whistleblowers who reported externally only did so after trying to report internally first. And it’s not as if the SEC is trying to change that fact: the whistleblower program is designed so that a whistleblower is eligible for an award if he or she reports internally.
So what H.R. 2483 does instead, is protect unethical companies by giving them ample time to avoid law enforcement and intimidate a whistleblower—something that the bill essentially legalizes. It’s not surprising that in unethical companies, a whistleblower must be legally forced to report internally.
As the Ethics Resource Center puts it, “Employees are more likely to go outside the company to report if the overall culture or the ethics of their top managers or supervisors is perceived to be weak.”
Another argument for this bill is that the payout given to whistleblowers under Dodd-Frank (a minimum award amount of 10 percent for tips in cases worth $1 million or more) will “cause an influx of frivolous claims from those seeking financial gain.” But according to the report, monetary reward is the factor least likely to motivate reporting wrongdoing.
And it’s simply short-sighted to dismiss the majority of new whistleblower tips as frivolous: these tips have been shown to be the single most important source for fraud detection. The SEC reportedly received 334 financial whistleblower tips between August 12 and September 30, 2011, and if this bill passes, we’ll never know what kinds of savings these tips could have led to (just look up Harry Markopolos.)
As the Chamber of Commerce and big corporations continue their “shoe-leather lobbying campaign” to strip whistleblower protections from the Dodd-Frank Act, let’s keep the findings of this report in mind. There nothing about the Whistleblower Improvement Act that “improves” rights for whistleblowers. It just makes things easier for companies who are breaking the law.
Dana Liebelson is POGO's Beth Daley Impact Fellow
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