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Let’s talk money

Business ethics experts Jane Arnott on the place of incentivisation in whistleblowing…

Last week the US Securities and Exchange Commission awarded $114 million to a whistleblower.  

It was a decision that fired up the international ethics and compliance community. The payment set a new record. 

And so it should.

By unequivocally acknowledging the personal stake involved in exposing big money and gross misconduct, whistleblowers, in the US, find themselves vindicated.

In a very telling comment, Jane Norberg, head of the SEC’s Whistleblower Office stated,

“there is real hardship, both professional and personal that people endure. The money, I hope helps.”

By monetizing speak-up, not only are US regulators declaring a stronger war on bribery and corruption, they are signaling, to those considering becoming part of the speak-up stakes, that their experience will probably be bruising. Regardless, the finish-line winnings, along with the sense of doing the right thing, offer the potential to make it all worthwhile.

And this didn’t happen by chance. Payments for effective reporting came about thanks to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) which was passed in Congress and signed into law by President Barack Obama in 2010.

Financial recompense, which SEC refers to as an incentive, is only realised when original information is tabled. The information must be derived from the whistleblowers independent knowledge or analysis and cannot be known to the relevant government agency from any other source.

So the threshold is high but as last week’s news attests it is not unachievable. Importantly the case also drew attention to the abject failure of internal reporting lines.

Ms Norberg may have been gentle with her words, but they belie a withering contempt. In reflecting how the whistleblower first reported their concerns internally but had no success, she added that “people just get frustrated, they become quite disenchanted and that’s when they come to the SEC.”

This is unsurprising to Craig McFarlane, director of Report it Now, a privately owned New Zealand company which provides external reporting services to a number of sectors across the country. 

“International research highlights that external reporting lines increase the level of reporting by more than 50%,” says McFarlane. “When this is assessed against the preventable financial impact of everything from health and safety oversights to bribery and corruption offences, then you really have to ask why you wouldn’t support your employees by providing this option.”

At issue is the fact that internal processes that lack the choice of reporting externally, can lead to such a negative experience that the reporting simply stops. Nothing happens, or worse, senior personnel close in, join ranks and the disaffected employee leaves.

Given that one of the key reasons that employees don’t report misconduct is that they don’t believe (or trust) management to do anything about it external reporting lines are a risk managers or regulators  best friend.

Furthermore, money should stop being a dirty word.

Across the public sector, the NZ Police and their related agencies stand alone in providing a reward for information. Or, to be clear, the NZ Police better acknowledge the courage it takes to speak up. 

All things being equal, this tells us that reporting in relation to unsolved murders is important but the same or similar for white collar crime is not.

The discrepancy is curious.

We know that New Zealand is a village and we know that the careers of whistleblowers can be blighted beyond recognition. As a descriptor personal and professional hardship is too mellow.

Whistleblowers for all types of crime or misconduct can go through hell.

Money in western culture is how we typically reward greatness. It is how we instill commercial value and it enables lifestyle while underpinning advantage in terms of access to everything from assets, including home ownership, to a higher education.

As the sole motivation to speak up, money may bring some ratbags into the equation but in a formal sense, money clearly warrants a seat at the crimefighting and whistleblowing table. The trap of assuming all is right and can’t be bettered must be avoided.

In other words, whistleblowing is not a trap to set and forget. Processes and outcomes benefit from changing with the times. If we want to avoid the stench of unreported financial misconduct from turning toxic then better consideration of a bigger toolkit can only be positive. Perpetuating the myth that only unsolved murders warrant financial recompense is as flawed as believing that New Zealand is largely corruption free. 

Money talks and we know it.

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