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  1. Topics & Tools
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  4. Whistleblowers: An Early Detection System
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Whistleblowers: An Early Detection System

Encouraging employees to speak up when they see wrongdoing can protect companies in the long run.

February 1, 2020 | Theresa Agovino

​Considering how they have exposed corporate and government corruption, improved safety standards for countless products, and unmasked myriad abusers of power, whistleblowers get a bad rap. They're often viewed as snitches or disloyal backstabbers.

As President Donald Trump and his allies fought his impeachment, they vilified the whistleblower who triggered it, leaking the identity of the individual they thought responsible. Similarly, employees who shine a spotlight on unethical or illegal dealings in corporations are frequently punished rather than rewarded.

How will the president's disparagement of the whistleblower from the world's biggest bully pulpit affect employees' willingness to report concerns about ethical and legal lapses?

The highly publicized attacks on an individual who alleged that Trump misused his office for political gain could be "setting back one of the important tools organizations have for discovering wrong-doing," says Kyle T. Welch, an assistant professor of accounting at the George Washington University School of Business, who has studied internal whistleblower reporting systems. "Most people want to report [problems], and most people want to see problems solved."

If the current political controversy prevents employees from speaking up, that's bad news for companies. When business leaders learn about potential problems early, they have an opportunity to fix them before they explode into major public debacles. Fear of retaliation often keeps whistleblowers from coming forward, and the risk of public disclosure of their identity adds to their anxiety.

The challenge for companies, Welch notes, is creating an environment that encourages individuals to step forward when they suspect illegal or unethical behavior. It's not enough to have compliance systems in place. Corporate leaders must promote their use and alleviate retaliation fears. They should also develop ways to let whistleblowers know what's happening to their report to assure them the issue is under investigation. It's a tricky endeavor because the probes often include sensitive and confidential information.

"You want to make it super-easy for people to report," says Gregory Keating, who chairs the whistleblower defense and labor, employment and benefits practice groups at the Boston-based law firm, Choate, Hall & Stewart. "You need investigation protocols. Think it through ahead of time. If a big problem arises, you need to know how to handle it." 

Why Employees Don't Speak Up

Minimize Risk

It's an investment worth making. Welch's research shows that companies with more internal whistleblower reports pay smaller fines and have fewer legal settlements than those with fewer complaints. Over a three-year period, an increase in the use of internal reporting systems is associated with 6.9 percent fewer pending lawsuits and 20.4 percent less in aggregate settlement amounts, according to a study Welch published last year with University of Utah professor Stephen Stubben, using 10 years of aggregate client data from NAVEX Global, a Lake Oswego, Ore.-based firm that provides ethics and compliance systems and monitors internal reports for thousands of companies.

Two years ago, a wave of whistleblower reports swept the country as thousands of women detailed how they were harassed, belittled and even assaulted in the workplace. Many high-profile men were fired after such allegations, including TV personalities Matt Lauer and Charlie Rose, as companies doubled-down on sexual harassment and diversity training. It's still difficult to judge the effects. The most common types of internal reports to hotlines and websites concern human resources, diversity and workplace respect, according to NAVEX.

While 59 percent of employees think a claim of sexual harassment would be fairly investigated and addressed, about 20 percent are uncertain or think it would be risky or pointless to file a claim, according to the 2019 Women in the Workplace study conducted by McKinsey & Co. and LeanIn.Org. Women are less likely to trust the reporting process than men—and women who have experienced any form of sexual harassment are particularly pessimistic. Some employees also fear a backlash for raising the issue: 38 percent of women and 24 percent of men who have been sexually harassed and kept it to themselves say they were worried that reporting could have negative consequences on their career. In addition, half of employees say that they don't know if top performers are held accountable for their actions.


Many individuals don't want to risk making a report if their companies won't take action. They fear they'll be denied promotions or even fired for reporting improper behavior. Some whistleblowers' lives have been ruined for trying to bring their colleagues' improper behavior to light. Karen Silkwood was killed in a suspicious car crash in 1974 while she was on her way to meet a New York Times reporter to discuss the unsafe conditions at the plutonium plant where she worked. Jeffrey Wigand, a former tobacco executive whose testimony led to a historic $246 billion tobacco industry settlement with 40 states, says he received death threats that necessitated his being protected by two bodyguards for almost a year while helping government attorneys make their case.

Bradley Birkenfeld spent three years in jail after exposing illegal banking practices at UBS after his own misdeeds came to light. He was, however, awarded $104 million from the IRS for alerting it to the scheme. The IRS, the Securities and Exchange Commission (SEC), U.S. Department of Justice, and the U.S. Commodities Futures Trading Commission give whistleblowers a portion of the fines they collect as a result of information. Whistleblowers who report to other agencies can also receive compensation, though the amounts are determined by other factors.

Not all whistleblowers suffer such devastating consequences for their actions or receive enormous payouts. Still, coming forward isn't easy.

"When my clients speak up, I sometimes see the employer respond by performing an investigation of my client and not the issue," says Jason Zuckerman, a partner at Zuckerman Law in Washington, D.C., who represents whistleblowers. "They look for ways to impugn my client's motive and credibility."

However, many business leaders as well as politicians see the benefit of encouraging and protecting those who bring inappropriate behavior to light. President Trump's actions aside, protecting truth tellers generally has enjoyed bipartisan support.

Congress last year passed, and Trump signed into law, The Taxpayer First Act, which enhances protections for whistleblowers who report tax issues to the IRS. Also, a bipartisan bill is pending in Congress that seeks to bolster protections for whistleblowers reporting under the Dodd-Frank Act, which covers corporate financial and securities laws. It was introduced after a 2018 U.S. Supreme Court ruling limited the law's protection to those individuals who first report their claims to the SEC instead of their employer, prompting concern that employees would be reluctant to report problems internally. 

Encourage Reporting

Creating an environment in which workers feel comfortable speaking out when they see wrongdoing isn't easy. Companies with reputations for having high ethics agree that consistently and constantly emphasizing the firm's code of conduct is a critical step toward setting the right tone. Issuing employees a handbook outlining the company's rules and testing them on it once a year just won't suffice.

Milliken & Co., a Spartanburg, S.C.-based manufacturing company, has been recognized for its ethical behavior for the last 13 years by the Ethisphere Institute, an organization that promotes strong corporate character. The company stresses its high expectations in job candidate interviews, onboarding and staff meetings. Posters explaining how to use the company hotline, which is managed by a third party, are placed in visible locations throughout the office, says Craig Haydamack, senior vice president of human resources. In the company's overseas offices, the posters have been translated into local languages, he says.

"We want people to feel comfortable," he says. The overwhelming majority of the calls don't involve serious offenses, but tend to be employee relations issues such as complaints about co-workers or vacation policy. Nevertheless, he says, "we'd rather they call than not." Mark Ehrlich, vice president of global compliance and privacy at Hilton in McLean, Va., says part of its strategy to promote ethical behavior is relating the concept to an individual's specific role. A front desk clerk is unlikely to be in a position to commit accounting fraud or break trade laws, for example. When training and onboarding people for such a position, managers would discuss how it's against policy to give friends and relatives discounts reserved for corporate clients. 

"If you don't tie it back to their job function, it is harder to understand," Ehrlich explains.

Three years ago, the company started a quarterly publication called Integrity in Action, which details how it handled real-life situations in which people broke the rules or acted unethically. Names and identifying details are not included. Ehrlich says it's critical that people understand that the company acts when it learns something's wrong.

Keeping whistleblowers abreast of the investigation into their reports is challenging because the probes often include confidential and sensitive information. "We follow up as best we can, but we often can't provide detail," Ehrlich says.

It's crucial to thank employees for reporting and find a way to let them know that their concerns are being taken seriously. If not, employees may alert a government agency or just leave the company if they believe they're being ignored.

If employees believe "that bad actions are being tolerated, it creates a situation where they don't want to be involved and they leave," says Carrie S. Penman, chief risk and compliance officer at NAVEX. "That's why good employees leave companies."

Theresa Agovino is workplace editor for SHRM. 


Explore Further

SHRM provides resources to help employers encourage employees to report wrongdoing internally and protect them from retaliation.

HR Should Educate Employees About Protecting Whistleblowers' Rights
The emergence of whistleblower claims that President Donald Trump sought a foreign country's interference in the next presidential election gives employers an opportunity to educate their employees about whistleblower laws.

How to Prevent Workplace Retaliation Claims
When employees complain about discrimination or harassment, employers must ensure that workers aren't retaliated against for raising these issues. Otherwise, businesses may face legal liability even when the underlying claim isn't proven.

Whistleblowers Must Report to SEC for Dodd-Frank Retaliation Protection
The U.S. Supreme Court ruled in 2018 that whistleblower protections under the Dodd-Frank Act don't cover a fired employee who reported alleged securities law violations to his employer but not to the Securities and Exchange Commission (SEC).

#MeToo Has 'Significant Impact' on Harassment Filings
Retaliation was again the type of discrimination charge most frequently filed with the U.S. Equal Employment Opportunity Commission (EEOC) in fiscal year 2018, followed by allegations of sex, disability and race discrimination, the agency reported.

OSHA Whistleblower Claims Are on the Rise. Are Employers Prepared?
The number of whistleblower complaints filed to the Occupational Safety and Health Administration has increased by 29 percent over the last five years, from 7,408 complaints in 2014 to 9,566 complaints in 2018.

Toolkit: Introduction to the Human Resources Discipline of Ethics and Corporate Social Responsibility and Sustainability
Ethics is defined as rules of conduct or moral principles that guide individual or group behavior. The focus in business ethics is on awareness of organizational values, guidelines and codes, and behaving within those boundaries when faced with dilemmas in business or professional work.

Whistleblower Policy
This sample whistleblower policy outlines confidentiality and protection against retaliation.

Code of Ethics and Business Conduct
This sample ethics code encourages employees to discuss questionable or unethical behavior with their managers or HR managers.

Subscribe to the All Things Work Newsletter
Ethical Practice
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