A behavioral analysis of whistleblowing at Japanese firms

Abstract

This paper analyzes the background to whistleblowing—one of the key means by which a spate of corporate misdeeds have been revealed at established Japanese firms—by applying a framework of psychology and organizational behavior to people’s decisions and judgments. The paper first analyzes the organizational aspects of whistleblowing, such as fear of retaliation within firms, and the psychological aspects, such as conflicts of interest that unconsciously favor sponsors. Despite such internal restraints, observed phenomena of whistleblowing paint a more nuanced picture of human psychology. Along with moral concerns, people have the desire to exhibit an appreciation of social trust and fairness, even when their actions are inconsistent with an economic calculus. Traditional Japanese firms are characterized by a collectivist culture featuring a meticulously crafted, closely knit internal order and lifetime employment. Information technology, however, has led to a more liquid flow of information on corporate misconduct, making it hard to conceal misdeeds that blur organizational boundaries and relativizing internal norms. These changes tip the psychological balance of people within firms and prompt firms to adapt. Changes in the corporate governance code, and a law requiring firms to introduce internal control systems, give whistleblowers the organizational protection which is key to according them psychological safety and encouraging constructive dissent. Advances in research from the behavioral perspective promise to deepen our understanding of Japanese corporate phenomena and behaviors.