Should Companies Offer Incentives to Internal Whistleblowers?

Carrot and stick strategy is a legitimate tool in compliance

Posted by Dawn Lomer in Code of Conduct, Ethics & Compliance, Human Resources, Whistleblower on October 18th, 2013

Studies show that employees report wrongdoing internally because they believe something will be done about it. According to the Ethics Resource Center’s 2011 National Business Ethics Survey (NBES), the feeling that an employee can have an impact is an incentive to report. Of those in the survey who observed misconduct, 72 per cent of employees who agreed their companies reward ethical conduct reported it; but far fewer employees (57 per cent) who do not see ethics rewarded choose to report.

But, study participants were not necessarily referring to financial rewards. Across almost all demographic groups, only about one in 20 individuals said that they would be motivated by a monetary reward.

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Incentivizing Ethics

So while it’s helpful to know that whistleblowers are not, for the most part, motivated by money, it’s also clear that some sort of reward could send a message that it’s important to the company that they report misconduct internally. Those few who are truly motivated by money may be inclined to report externally anyway, and no company can match the whistleblower reward potential that external reporting can reap.

The rewards that companies can offer have more to do with showing appreciation than actual financial benefit. “Companies can establish incentives to encourage people to come forward internally through a positive evaluation,” says Lisa Noller, litigation partner with Foley and Lardner LLP. “Or, some companies have been providing monetary incentives such as a gift card or a day off,” she adds.

“More importantly, companies can foster a culture of compliance and openness so that potential whistleblowers see that the company responds to their needs and concerns and takes them seriously,” says Noller. For many whistleblowers, being appreciated and valued is a reward itself.

Demonstrating Commitment

But before expecting any employee to come forward, employers should have in place mechanisms for anonymous reporting, and an anti-retaliation policy, says Noller. She also cites a culture of compliance as a powerful incentive to potential whistleblowers to come forward.

“At a minimum, whistleblowers (and non-whistleblowers as well) need to see that when somebody comes forward and questions a corporate decision, that the company took the complaint seriously and responded promptly. The companies who have the most success responding to internal complaints and avoiding False Claims Act and other actions, are the ones who work with the whistleblower to determine everything that he or she knows. They then report back to the whistleblower and let him know they are interested in his concerns and are working to address them,” says Noller.

Tone from the Top

A company can broadcast a lot about its culture through its compliance program. “If you don’t have a compliance program, employees see its absence and think the company is not interested in doing the right thing,” says Noller. A weak compliance program sends the same message.

Along with a robust compliance program, there should be a strong commitment to enforce it. “There really needs to be a positive tone from the top,” says Noller. “A company can have a great compliance program on paper, but if management and the highest officers and board members aren’t behind it and aren’t involved in communicating it to employees and enforcing it, then they really aren’t going to be able to foster a culture of compliance.”

Dawn Lomer
Dawn Lomer

Managing Editor

Dawn Lomer is the managing editor at i-Sight Software and a Certified Fraud Examiner (CFE). She writes about topics related to workplace investigations, ethics and compliance, data security and e-discovery, and hosts i-Sight webinars.

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