High-profile financial frauds in recent years spurred authorities to implement or strengthen “whistle-blower” incentives, which offer tipsters financial rewards for blowing the lid on corporate fraud.Do Corporate Whistle-Blower Laws Actually Deter Fraud?
Whistle-Blowers Act out of a Sense of Morality
- September 16, 2019
- CBR - Behavioral Science
Say you witness a coworker subtly misleading a client, or rounding off sales numbers in her favor. Do you report it, or not?
Chicago Booth postdoctoral scholar James A. Dungan, Boston College’s Liane Young, and Northwestern’s Adam Waytz looked at what goes into the calculation people make when considering whether to report bad behavior. Moral concerns figure highly, they find, above employees’ feelings about their employers, fear of reprisal, and satisfaction with the recognition and rewards they receive at their job.
To understand the factors that predict the likelihood of whistle-blowing, the researchers analyzed data from more than 42,000 participants in the ongoing Merit Principles Survey, which has polled US government employees since 1979, and which covers whistle-blowing. Respondents answer questions about their past experiences with unethical behavior, the approaches they’d take in dealing with future unethical behavior, and their personal characteristics, including their concern for others and their feelings about their organizations.
Concern for others was the strongest predictor of whistle-blowing, the researchers find. This was true both of people who had already blown the whistle on bad behavior and of people who expected they might in the future.
Loyalty to an immediate community—or ingroup, in psychological terms—was also linked to whistle-blowing, but in an inverse way. “The greater people’s concern for loyalty, the less likely they were to blow the whistle,” write the researchers.
Organizational factors—such as people’s perceptions about their employer, their concern for their job, and their level of motivation or engagement—were largely unconnected to whether people spoke up. The only ones that appeared to matter were how fair people perceived their organization to be, as well as the extent to which the organization educated its employees about ways to expose bad behavior and the rights of whistle-blowers. The data suggest these two factors were linked to whether whistle-blowers opted to address the unethical behavior through internal or external avenues.
Because people filling out the survey knew it had to do with morality and ethics, Dungan, Young, and Waytz carried out a second experiment that polled 150 people from many professions who had been told only that they would be completing a workplace survey.
The results mirrored those of the first experiment, albeit with one additional finding: participants proved consistently poor at predicting the importance of the two key variables connected to whistle-blowing—concern for others and loyalty. Instead, they predicted that organizational factors would be much more important than they actually appear to be.
The study suggests that morality is a key driver for whistle-blowing. Companies—and regulators—wishing to encourage whistle-blowing may want to highlight the importance of personal ethics and moral courage, including the inherent tensions, rather than technical variables such as rewards for whistle-blowing, says Dungan.
“Much of the current advice within organizations focuses on structural changes—making people do the right thing by increasing the benefits of blowing whistles,” he says. “But by ignoring people’s moral concerns, their efforts may not be as effective as they could be. This mistake likely stems from seeing morality as black and white, rather than acknowledging the conflicting moral concerns that whistle-blowers must grapple with.”
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