“ Organizations bear the responsibility to foster an environment of transparency for their whistleblower programs to succeed. ”
In the years leading up to the eventual collapse of the cryptocurrency exchange FTX, insiders blew the whistle about the company’s severe governance and regulatory issues. The flouting of internal control requirements and commingling of client funds was so glaring that several witnesses felt compelled to say something.
That is precisely why whistleblowing laws and corporate whistleblowing programs exist. Had the whistleblowers’ concerns been approached with due attention and rigor, they would have unveiled massive corporate misconduct sooner, and some eventual losses could have been averted.
With several reported whistleblowing attempts before the fall, the FTX case is in fact an anomaly. In most cases of such corporate malfeasance, witnesses would rather keep their jobs, keep the peace and turn a blind eye.
That’s because whistleblowing is not easy. It is mostly a thankless task. Employees deciding to report when something seems amiss are taking a considerable risk. Instead of being praised and rewarded, they’re frequently ostracized and ridiculed. Often the companies that whistleblowers try to expose (and help) make their lives miserable.
Research by Francine Berman and Jennifer Lundquist, professors at the University of Massachusetts, Amherst, found that more whistleblowers tend to be women, who also face higher rates of reprisal than male whistleblowers. Women appear more willing than men to report wrongdoing when they can do so confidentially, thinking that is a way to avoid some of the backlash.
A Harvard Business Review study by behavioral scientist Nuala Walsh found that 82% of whistleblowers were harassed after making allegations against a company, and 60% lost their jobs. Other commonly observed consequences include getting blacklisted from future employment, facing social ostracism from coworkers, and undergoing severe psychological stress.
Whistleblowers speak up out of a sense of duty, loyalty and moral obligation. Rarely does a whistleblower put it all on the line hoping for a quick payoff. Indeed, even in cases where whistleblowers qualify for statutory monetary rewards, the process takes years, and the payouts come after much struggle and endurance.
Even more, it feels demeaning for a whistleblower’s legitimate concerns to be ignored or met with attempts to silence their voices in any way (including money). Whatever the monetary payoff, many whistleblowers experience loneliness and depression. The overall experience is often excruciating.
Harvard Business Review Press
Corporate culture makes a tremendous difference in how employees feel about their peers blowing the whistle or becoming a whistleblower themselves. To run a successful whistleblowing program, companies must foster an environment where transparency reigns supreme and retaliation is not tolerated.
Organizations bear the responsibility to foster an environment of transparency for their whistleblower programs to succeed. Fostering a transparent work environment is crucial. Transparency improves employee productivity, accountability, engagement, overall efficiency and customer service. To that end, organizations must actively encourage a “speak-up” culture. Employees thrive in environments where whistleblowers feel safe and protected — and the organization thrives too.
Kelly Richmond Pope is the Barry Jay Epstein Endowed Professor of Forensic Accounting at DePaul University in Chicago. She is the author of “Fool Me Once: Scams, Stories, and Secrets from the Trillion-Dollar Fraud Industry,” (Harvard Business Review Press, 2023)
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