CORPORATE CRIME OBSERVATORY

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Whistleblowers are legal or natural persons who report, disclose, or expose information about illegal, unethical, fraudulent, or dangerous activities, practices, or policies within an organization or institution, whether public or private. This information may be related to financial impropriety, public safety concerns, environmental violations, health hazards, discrimination, or any other misconduct that is harmful to the public or to the well-being of individuals. A whistleblower may make their disclosure internally to their employer, or externally to law enforcement, government agencies, or the media. The act of whistleblowing is protected by various laws, policies, and regulations, and whistleblowers are generally shielded from retaliation, including termination, demotion, harassment, or discrimination for their actions.

 
Whistleblower protection laws are essential for ensuring transparency and accountability in government and private sector organizations. Whistleblowers help prevent disasters, facilitate accountability, and uphold transparency in democratic institutions. They fight corruption, detect internal fraud, highlight regulatory divergence, and identify those who would act to damage organizations’ credibility through acts of illegality. As such, they may be understood as the "most effective stakeholders for reducing the occurrence of unethical behaviors in organizations" (Vadera et al., 2009).

Despite their importance, there is no universally agreed definition of the act of whistleblowing, or who may constitute a whistleblower, and legal protections often vary from country to country.
 
A best practice whistleblower law should protect whistleblowers who expose wrongdoing or illegality regardless of their employment status or position, establish clear report procedures, ensure confidentiality, provide strong protection against retaliation, establish effective enforcement mechanisms with a clear process for investigating complaints and imposing penalties for violations and remedies for retaliation victims, and require organizations to provide awareness and training programs to employees about whistleblower protections and the importance of reporting wrongdoing or illegal activities.
 
Globally, it is possible to identify several initiatives from international organizations and NGOs recommendations and standards for the protection of whistleblowers including, inter alia, the G20 High-Level Principles for the Effective Protection of Whistleblowers; the 2021 OECD Anti-Bribery Recommendation - Section XXII on Protection of Reporting Persons; Directive (EU) 2019/1937 on the protection of persons reporting on breaches of Union law; the Organization of American States' Inter-American Convention Against Corruption (e.g, Article III(1) and Article III(8)); the African Union Convention on Preventing and Combating Corruption (e.g, Article 5(5)); UNODC’s Resource Guide on Good Practices in the Protection of Reporting Persons and Anti-Corruption Toolkit; Council of Europe Recommendation CM/Rec(2014)7 on the Protection of Whistleblowers, Government Accountability Project’s International Best Practices for Whistleblower Policies, the EU Whistleblowing Monitor, The Tshwane Principles; ISO 37002 Guidance on Whistleblowing Management Systems; and Transparency International’s International Principles for Whistleblower Legislation.

A 2022 Government Accountability Project and International Bar Association joint report analyzes the different national frameworks for whistleblower protection and their level of compliance with the 20 best practices for whistleblower protection laws.

 
On 23 October 2019, the European Union adopted the Directive (EU) 2019/1937 on the protection of persons reporting on breaches of Union law (the Whistleblowing Directive). The Directive is a significant legislative achievement that provides a minimum level of legal protection and support to whistleblowers in all EU member states. Some of its top accomplishments include:

1. Creating a common EU-wide standard for whistleblower protection, which sets out clear rules and procedures for reporting and investigating breaches of EU law.

2. Providing comprehensive protection to whistleblowers against retaliation, including legal, financial, and social support, as well as measures to prevent and sanction any retaliation by employers or colleagues.

3. Establishing reporting channels and procedures that ensure confidentiality, anonymity, and the right to be informed and consulted throughout the reporting process.

4. Extending protection to a wide range of whistleblowers, including employees, self-employed individuals, volunteers, shareholders, and others who have access to information related to EU law breaches.

5. Promoting a culture of transparency, accountability, and integrity across the EU by encouraging and facilitating whistleblowing as a means of preventing and deterring wrongdoing, and by ensuring that whistleblowers are recognized and valued for their contributions to the public interest.
    

Despite the growing number of laws, regulations, and internal policies available for whistleblower protection, whistleblowers do so at considerable personal and professional risk and frequently suffer from various forms of retaliation including termination, loss of promotion, poor performance reviews, ostracization, bullying, harassment, assault, gaslighting, career blocklisting, reputational damage, retaliatory investigations, and retaliatory civil or criminal liability lawsuits.

The impact of retaliation can be harmful to one’s mental and physical health, and it can also damage personal relationships and cause isolation, long-term financial loss or harm, or long-term career and reputation ruination. In addition to being an immoral, anti-democratic, and potentially illegal practice, the activity of retaliation against whistleblowers exerts a chilling effect on would-be whistleblowers. The analysis conducted by experts from the Corporate Crime Observatory has confirmed that it is precisely this form of "socially inflicted deterrence" that represents one of the main motivations driving organizations and their unscrupulous members to react with retaliatory actions against reporting individuals (see e.g., Bourdon, 2020, video recording at 31:07).

While whistleblower laws attempt to prevent retaliatory conduct and provide remedies, such provisions are often ineffective and require costly and time-consuming legal actions, with successful parties often being awarded much less than they have lost years down the line.
 
Conversely, some forms of whistleblowing may be financially rewarding, whistleblower incentives programs, which are more established in the United States, provide an example of a successful model, although only a small percentage of whistleblowers succeed in getting financial rewards. The United States has several such laws in place. Whistleblower incentive laws are designed to encourage and reward individuals who report illegal or unethical activities within their organization or industry. These laws typically offer financial rewards and protections to whistleblowers who provide information that leads to successful enforcement actions or penalties against wrongdoers. For example, in the United States, the Securities and Exchange Commission (SEC) offers monetary awards of up to 30% of the penalties collected from companies found to have violated securities laws, to individuals who provide original information that leads to a successful enforcement action. Similarly, the Internal Revenue Service (IRS) offers rewards of up to 30% of the amount collected in cases of tax fraud or underpayment, and the False Claims Act provides for rewards of up to 30% of the recovery amount in cases of fraud against the government. These incentive programs have been successful in uncovering and prosecuting a wide range of illegal activities, and have helped to promote a culture of transparency and accountability in the corporate world.

Such provisions for providing financial rewards to whistleblowers (sometimes referred to as “relators”) help tip the scales between risk and reward by providing strong confidentiality protections and increasing the flow of disclosures to regulators. However, reward programs are not without controversy or opposition. Some may argue that whistleblowers should be motivated not by financial reward, but rather by a greater moral or civic imperative towards protecting the interests of society, and therefore financial gain dilutes any perceived moral duty. Others argue that providing financial incentives may result in vexatious, false, or inflated claims that could waste resources and cause reputational harm.

Whistleblower rewards programs can also encourage whistleblowers to report externally instead of reporting internally first (for example in the Digital Realty v. Somers case the U.S. Supreme Court ruled that internal disclosures are not protected which further incentivizes bypassing internal disclosures until Congress provides a legislative fix). Whistleblower experts have also expressed concern that such programs can worsen retaliation against whistleblowers by damaging the level of trust and loyalty. It is worth noting that only a small percentage of tips result in an investigation, and whistleblowers are not rewarded just for the disclosure, but rather, a disclosure that results in a successful enforcement action and recovery following a comprehensive investigation and penalties can be mitigated if the company has strong whistleblower policies and procedures in place.

Another clear benefit is that the legal practice of whistleblower law has progressed among large firms in the United States, which increases the ability of whistleblowers to get legal representation and increases their likelihood of success. Finally, the U.S. government and taxpayers have benefitted greatly from strong whistleblower reward laws because it provides a tool for uncovering and prosecuting fraud and other illegal activities that might otherwise go undetected and whistleblower tips have resulted in billions of dollars in recoveries for the government in cases involving healthcare fraud, securities fraud, tax fraud, and other crimes. These laws also help deter future wrongdoing by sending a stronger message to potential wrongdoers. Finally, incentivizing whistleblowers to come forward with information helped lead to companies strengthening their internal compliance programs and preventing future violations.

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We would like to thank most sincerely Samantha Feinstein, CCO Head of Area - Whistleblowing (Public Sector), and Stephen Holden, CCO Associate Editor, for their contribution to the development of the content on this page. For any proposals for integration or potential amendments, please contact the Corporate Crime Observatory.

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