This Just In...Whistleblowing is Good for Business

POGO’s 2007 "Baker’s Dozen” of Suggested Congressional Oversight Priorities includes a section calling for the increased protection from retaliation against whistleblowers.  In this section we write:

The U.S. Office of Special Counsel (OSC), the agency tasked with investigating whistleblower retaliation and disclosures is a failure. The OSC, which is up for reauthorization in 2007, has not lived up to its promise of being a safe haven for whistleblowers. According to its most recent annual report, less than 2.5% of whistleblowers seeking protection from retaliation are given any help at all.

Interestingly, a PricewaterhouseCooper report supports the argument that increased whistleblower protection is beneficial.  In the recently released 2007 Global Economic Crime Survey (pdf), a compelling argument is made that a corporate culture that promotes whistleblowing is actually good for business.

Their wide reaching study included, among other aspects, interviews with over 5,400 companies in 40 countries.  Their survey revealed that “fraud remains one of the most problematic issues for businesses worldwide, with no abatement no matter what a company’s country of operation, industry sector or size.”

The average financial loss, attributed to fraud, over two years per company interviewed, was in excess of 2 million dollars.  That figure does not even begin to take into account the corresponding collateral damage attributed to such aspects as reputational damage and company distractions, which have the potential to make $2 million in losses look like pocket change.

The fear of the aforementioned collateral damage, resulting from fraud being exposed, is often the rationale for intimidating whistleblowers.  However, this report finds that a corporation whose culture does not embrace whistleblowing is actually subject to much more damage due to fraud than a corporation that does embrace whistleblowing. 

Their research revealed that fraud occurred most often when the following two preconditions are present:

1. Perpetrators have deep-seated, personal reasons for engaging in criminal acts; they must have an incentive to commit fraud and be able to rationalise the fraud to themselves.

2. A company that is more likely to victimised by fraud not only lacks sufficient controls to detect fraudulent activity but also lacks ethics, values, programmes and systems that discourage fraud, i.e. a well-developed culture, including systems that encourage and protect employees who expose fraud. [Emphasis added]   

The report then goes on to say:

What can be particularly damaging are situations where employees are unsure about what to do when they become suspicious about the conduct of fellow employees or are themselves confronted with ethical dilemmas.  If a company does not provide clearly-defined channels of communication for its employees it may run the risk of sending the wrong message: that management does not want to hear about problems and/or ethical employees may either be ignored of find themselves the victims of management retaliation.

According to the report, these factors can lead to a “toxic corporate culture,” in which attitudes such as apathy and a disregard for rules, lead to increased instances of fraud.  This corresponding fraud is often exposed by anonymous tip-offs that make headlines and can destroy a company’s reputation.       

Fortunately for the corporate world, companies are starting to recognize the beneficial nature of whistleblowing.  In fact, the report states “...in virtually every region of the world whistle-blowing is playing a role in uncovering the activities of wrongdoers.  More and more companies are now promoting whistle-blowing policies as an integral part of their risk management programmes.”

Unfortunately, the U.S. government has yet to get the message and the American public is footing the bill.  The government is a far cry away from creating a culture that encourages and appreciates whistleblowing. It’s time for Congress to wake up and demonstrate that it both understands the importance of whistleblowing and is willing to take action to create an environment that encourages it.

-- Jake Wiens
   

Comments

[Melvin]

Axel,

Am most appreciative for your latest missive. And I hope things are well for you in Upper Slobovia.

With my most sincere gratitude and admiration,

Your faithful servant, I am

Melvin

[Axel]

Dear Mr. Weins, 10/22/2007
Dear Readers,

Please accept my appreciation and gratitude for your/(another) superb and excellent article from POGO. I was not going to write further comments as POGO has not completely posted two of my prior comments, although I do remain completely appreciative for POGO's continued support within their many tremendous efforts and hopefully for futher successful accomplishments.

Please note that my further impromptu response to you article is as follows; ' The only thing needed for evil to triumph is for good men to do nothing'. Please note that from (several?) another web site that it is reported that former US Attorney General Ramsey has written a 20 count indictment for review and consideration for impeachment of our entire US Executive Branch, Bush, Cheney, Gonzales and Rice. ( I am able to add several more major counts.) Please note that in my view WHISTLEBLOWING is at its highest with this requested indictment. Also, please note that in no way do I exhonerate our US Legislatures for their many years and/or decades of faliure, although in my view they are our last hope so time does not pass us by within our great Democracy (every day is an important day and good men/legislatures should not waste this valuable time as semmingly and/or reseaonably inaction and/or most llikey and/or unfortunately is and/or mabey appearing more of a conspiracy and/or act as that of good men doing nothing).

Please accept my continued support for your and POGO's, NWC's and GAP's superb and excellent continued painstaking efforts on behalf of all.

Also, please let us know as to the statis of S. 274 Whistleblower Protection Act that appears to have once again been subverted and/or stalled in our US Senate.

Thank you and all for your time and consideration.

Sincerely,
Axel