Internal Whistleblowing Systems Research Articles

Does internal whistleblowing enhance firm innovation?

This paper examines whether and how internal whistleblowing enhances innovation. We have discovered that the establishment of an internal whistleblowing system help to increase firms' innovation output, in terms of patent application and citation. Furthermore, our paper draws on the monitoring effect of whistleblowing on CEO, and the evidence shows that whistleblowing reduces executives' misconduct and therefore increases investment in R&D. Besides, we also find that such monitoring effect between employees also improves firms' innovation efficiency. Finally, we find that whistleblowing has a positive impact on firm's profits among more innovative firms. This paper aims to investigate how employee monitoring enhances firm innovation, making a contribution to the growing literature on innovation.

Does employee whistleblowing inhibit corporate pollutant emission

This paper examines whether and how internal whistleblowing enhances corporate pollution control. We find that setting up an internal whistleblowing system help to reduce the firms' SO2 emission intensity. Our findings are robust after implementing a series of endogeneity test. Further, we show that the impacts of internal whistleblowing on corporate pollution emission are more pronounced in firms facing stronger environmental monitoring, firms contribute more to the local economy, state-owned enterprises, firms with lower litigation risk, and firm with more information disclosed. Finally, we find that internal whistleblowing helps to promote the effectiveness of internal control and improve the corporate social responsibility to inhibit enterprise pollution. This paper is the first to explore how employee monitoring reduce firm pollutant emission, contributing to the growing literature on firm environmental behavior.

Internal whistleblowing systems without proper sanctions may backfire

Internal whistleblowing systems are supposed to fight misconduct within organizations. Because it is difficult to study their efficacy in the field, scientific evidence on their performance is rare. This is problematic, because these systems bind substantial resources and might generate the erroneous impression of compliance in a company in which misconduct is prevalent. We therefore suggest a versatilely extendable experimental workhorse that allows the systematic study of internal whistleblowing systems in the lab. As a first step, we tested the efficacy of whistleblowing systems if internal punishment for misconduct is mild and hesitant which is usually the case in practice, as several fraud surveys confirm. Our results show that under these conditions almost nobody blew the whistle, and misconduct occurred even more frequently with than without a whistleblowing system. The institutionalization of whistleblowing seemed to crowd out the intrinsic motivation to act compliantly. Moreover, when a whistleblowing system was either unavailable or not used, misconduct was highly contagious and spread quickly. Yet, when we implemented severe and ensured punishment for misconduct, whistleblowing systems could deter wrongdoing. In such a setting, people were willing to blow the whistle and the prevalence of misconduct dropped substantially. Altogether, our results highlight the interaction between institutions and preferences and can support the design of compliance measures within organizations. For compliance managers a key takeaway is that if companies preach a zero-tolerance policy, they should practice it as well. Otherwise, they might even worsen the situation.

The Effectiveness of the Internal Whistleblowing System in Fraud Detection and Prevention (Empirical Study at PT Asuransi Jiwasraya (Persero)

This research mainly aims to test and analyze the effectiveness of the Internal Whistleblowing System in Fraud Prevention. The population in this study are all employees who work in the Division of Finance & Accounting, Internal Audit PT. Asuransi Jiwasraya (Persero). While the sample used the purposive sampling method, amounting to 50 respondents. The independent/independent variables of the study are the influence of the Internal Auditor, Internal Control System, Whistleblowing System, Whistleblower Protection, Organizational Commitment. The dependent/dependent variable is Fraud Prevention. The research methodology uses Structural Equation Modeling (SEM) using smartPLS 3.2.7 software. The tests carried out are the Outer model, Inner model, indirect effect test, and hypothesis testing. The test results show the influence and significance of the internal control system on the prevention of fraud, the influence and significance of the internal auditor on the prevention of fraud, the influence and significance of the audit committee on the prevention of fraud, there is a significant effect of the independent commissioner on the prevention of fraud and there is a significant effect on the protection of the whistleblower on preventing fraud, there is a significant effect of the whistleblowing system on fraud prevention, there is a significant influence on the internal control system, internal auditors, audit committees, independent commissioners through the protection of whistleblowers against fraud prevention, and there is a significant influence on internal control, internal auditors, audit committees

Building an ethical culture by improving conditions for whistleblowing

PurposeThis paper aims to discuss the importance of an effective internal whistleblowing system in building a more ethical organizational climate.Design/methodology/approachThis study draws on the literature to make recommendations for organizations, managers and boards of directors regarding implementing an effective whistleblowing process.FindingsThis paper offers practical information on what constitutes an appropriate level of preparedness and responsiveness. Organizations can reinforce their internal ethics by encouraging whistleblowers to report complaints internally. An effective whistleblowing process depends on the organization’s desire to build an ethical climate and its awareness of the power of whistleblowing as an ethical tool.Originality/valueThis study will help managers and other professionals to create and maintain an ethical climate by implementing an effective whistleblowing process. The discussion in this paper is important for any type of organization concerned with empowering whistleblowers and the whistleblowing process.

Internal Whistleblowing Systems – New Standards for Active Security Management and Protection Against Systemic Risks

Purpose: The article analyzes contemporary conditions for the emergence of complex systemic threats resulting from the development of the risk industry. The authors are looking for an answer to the question whether the obligatory incorporation of internal whistleblowing systems in organizations producing dangerous products in dangerous processes with the use of dangerous devices would minimize the systemic risks resulting from organized irresponsibility. Design/Methodology/Approach: The research carried out using the problem analysis method was aimed at the initial structuring of the research field and theoretical and conceptual preparation of tools for detailed exploration. Findings: The conducted analysis revealed surprising constellations of interests in keeping security as low as possible. The mutual interactions between the risk industry, security administration and professional science create conditions that are particularly favorable to disasters and unlimited chains of damage. To disrupt these interactions, all organizations with a security impact should be required to install credible internal whistleblowers systems. Practical Implications: The problems presented in the article will contribute to the increased awareness of the hidden dimensions of threats and the need to change the current security paradigm based on the elementarization of threats, linear-deterministic understanding of causality, Cartesian methodical skepticism, computability as the dominant objectivisation strategy, passive responsibility, crisis response and method learning trial and error. Originality: The article problematizes the hitherto unknown contexts of using internal whistleblowing systems.

Internal Whistleblowing Systems – New Standards for Active Security Management and Protection Against Systemic Risks

Internal Whistleblowing Systems – New Standards for Active Security Management and Protection Against Systemic Risks

Beware of Toothless Tigers: Institutionalizing Whistleblowing May Crowd Out Compliance

Internal whistle-blowing systems are supposed to fight misconduct within organizations. Because it is difficult to study their efficacy in the field, scientific evidence on their performance is rare. This is problematic, because these systems bind substantial resources and might generate the erroneous impression of compliance in a company in which misconduct is prevalent. We therefore suggest a versatilely extendable experimental workhorse that allows the systematic study of internal whistle-blowing systems in the lab. As a first step, we tested the efficacy of whistle-blowing systems if internal punishment for misconduct is mild and hesitant which is usually the case in practice, as several fraud surveys confirm. Our results show that under these conditions almost nobody blew the whistle, and misconduct occurred even more frequently with than without a whistle-blowing system. The institutionalization of whistle-blowing seemed to crowd out the intrinsic motivation to act compliantly. Moreover, when a whistle-blowing system was either unavailable or not used, misconduct was highly contagious and spread quickly. Yet, when we implemented severe and ensured punishment for misconduct, whistle-blowing systems could deter wrongdoing. In such a setting, people were willing to blow the whistle and the prevalence of misconduct dropped substantially. Altogether, our results highlight the interaction between institutions and preferences and can support the design of compliance measures within organizations. For compliance managers a key takeaway is that if companies preach a zero-tolerance policy, they should practice it as well. Otherwise, they might even worsen the situation.

Corporate Whistleblowing, Smart Regulation and Regtech: The Coming of the Whistlebot?

The recent evolution of corporate whistleblowing has demonstrated the capacity of effective internal corporate whistleblowing systems to support regulatory aims. Further, theoretical support for the role of internal corporate whistleblowers can be found in the smart regulation paradigm, which points to the potential for whistleblowers to operate as surrogate regulators. In light of this, the potential impact of fast-developing ‘RegTech’ applications on corporate whistleblowing activity has significant regulatory implications. While ‘first’ generation RegTech applications such as improved data analytics already have the capability to assist corporations to implement more efficient internal whistleblowing systems, the rise of second-generation AI-powered RegTech technologies is likely to further disrupt, and potentially transform, the practice of whistleblowing in corporations. As AI advances, internal corporate whistleblowers may be supplemented, or even replaced, by ‘whistlebots’ with the ability to report autonomously, with dramatic implications for the role of whistleblowing as a corporate regulatory device.

Evidence on the Use and Efficacy of Internal Whistleblowing Systems

ABSTRACTUsing a proprietary data set from a provider of internal whistleblowing (WB) systems, we analyze nearly two million internal WB reports submitted to over 1,000 publicly traded U.S. firms. We provide descriptive statistics, over time and across report types, on the amount and summary details of information provided, how extensively management reviews reports, the amount of time until reviews were completed, and the outcome of these reviews. Further, we examine the characteristics of firms with more actively used systems (i.e., a higher volume of reports, more information provided in reports, and reports that are more frequently reviewed by management). Finally, we show that internal WB report volume is associated with fewer and lower amounts of government fines and material lawsuits.

The Impact of Whistleblowing Awards Programs on Corporate Governance

Since the introduction of a whistle-blower awards program by the US Securities and Exchange Commission in 2010, securities regulators in other countries, including Canada, have adopted, or are considering adopting, similar programs. For example, in 2016, the Ontario Securities Commission adopted its own whistle-blower award program. Although the primary main reason for these programs is to encourage the reporting of securities violations to the regulator, they could also have an impact on corporate governance. This is because the implementation of such a program may prod companies to design, and then instigate, a more effective internal whistle-blowing system. A truly successful internal whistle-blowing system can enable a company to detect and correct potential wrongdoing before it causes significant harm. This article closely examines this connection between whistle-blowing award programs, companies’ compliance and risk management systems, and how a whistle-blowing award program might well result in more effective internal whistle-blowing systems without the need for a regulator to resort to the imposition of prescriptive rules. As such, this article reflects upon how whistle-blower award programs fit within new governance regulatory theory that challenges traditional “command-and-control-type”regulation in favour of an outcome-driven approach.

Evidence on the Use and Efficacy of Internal Whistleblowing Systems

Using a proprietary dataset from a provider of internal whistleblowing (WB) systems, we analyze nearly two million internal WB reports submitted to over one thousand publicly traded U.S. firms. We provide descriptive statistics, over time and across report types, on the amount and summary details of information provided, how extensively management reviews reports, the amount of time until reviews were completed, and the outcome of these reviews. Further, we examine the characteristics of firms with more actively used systems (i.e., a higher volume of reports, more information provided in reports, and reports that are more frequently reviewed by management). Finally, we show that internal WB report volume is associated with fewer and lower amounts of government fines and material lawsuits.

A Summary of Research on the Influencing Factors of Employees’ Willingness to Whistle-Blowing

Intra-firm whistle-blowing is a mechanism that effectively suppresses the problem of entrusted agents within enterprises. Although China has already issued some whistle-blowing laws and many companies have established internal whistle-blowing systems, there are still loopholes in the existing internal whistle-blowing systems of enterprises. The internal whistle-blowing department of the enterprise is virtually empty and has little effect. Many employees observe the existence of wrongdoing but do not choose to report it. Internal problems of the company are still frequent. Foreign scholars have made some achievements in the study of corporate employees’ willingness to whistle-blowing for a few decades, and China’s research on employees’ willingness to report is still lacking. This article reviews the influencing factors of employee’s willingness to blow the whistle, makes an outlook for future research, and puts forward constructive suggestions for improving the internal whistle-blowing system in China.

The Effect of Incentive Framing and Descriptive Norms on Internal Whistleblowing

AbstractFirms are under increasing pressure to implement effective internal whistleblowing systems. While firms can provide incentives to encourage internal whistleblowing, it remains controversial how such incentives should be structured. We examine whether the effectiveness of incentives encouraging internal whistleblowing is a joint function of the framing of such incentives (reward or penalty) and the strength of descriptive norms supporting internal whistleblowing. We predict and find in a lab experiment that penalties lead to a greater increase in internal whistleblowing (compared to rewards) when descriptive norms supporting whistleblowing are stronger. Our study contributes to the previous accounting literature on dishonesty and the role of management control systems design in promoting honesty and ethical norms in organizations. We also contribute to an emerging accounting literature on the links between controls, norms, and individual behavior by distinguishing between descriptive norms and injunctive norms and by highlighting the interplay between these two types of norms. Our results have important implications for organizations considering adopting incentives to encourage internal whistleblowing.

Do government administered financial rewards undermine firms’ internal whistle-blowing systems?

PurposeThis paper aims to provide a discussion of the application of the research pitch template developed by Faff (2015, 2016b) to a research topic on whistle-blowing. Specifically, the template was used to develop a research proposal that investigates whether government administered financial rewards undermine a firm’s internal whistle-blowing system. This letter provides a brief commentary on using the pitch template and then discusses personal reflections on the pitch exercise.Design/methodology/approachThis paper applies the template of Faff (2015) and provides a narrative of the pitching exercise.FindingsAs a first-time user of Faff’s (2015) pitching template, I have found the template very helpful in articulating the essence of this research project and mapping out the fundamentals for the project.Originality/valueThis is a new research idea that is not a pitch retrofitted from published papers or theses. The pitch template was used for the purposes of developing and refining the research idea.

The Role of the Audit Committee in Their Oversight of Whistle-Blowing

SUMMARYWe examine the role of the audit committee in their oversight of whistle-blowing. Our study examines whether the quality of the audit committee, captured by its independence, expertise, and diligence, is associated with two whistle-blowing outcomes: the choice of reporting channel (external whistle-blowing versus internal reporting) and the likelihood of retaliation against the whistle-blower. Using a sample of internal and external whistle-blowing cases, we find that a high-quality audit committee reduces the probability that misconduct is reported externally relative to internally, and reduces the probability that a whistle-blower experiences retaliation. We further find that a higher-quality audit committee is associated with the implementation of a stronger internal whistle-blowing system, which in turn reduces the likelihood of external relative to internal reporting. Together, our findings suggest that a high-quality audit committee helps to ensure that whistle-blowing disclosures are received and resolved through internal channels.

Whistle-Blowing Systems and Legitimacy Theory: A Study of the Motivation to Implement Whistle-Blowing Systems in German Organizations

Until now, there has been no theoretical foundation that explains why organizations implement whistle-blowing systems. By understanding whistle-blowing systems as an instrument that is desired by society, the legitimacy theory could be transferred to the whistle-blowing concept. A survey of German managers shows that legitimacy theory may be supported. Further insights into legitimacy theory are given by the motivation for the design of the implemented systems. The survey shows that, in particular, the implementation of external whistle-blowing systems is seemingly not driven by desired effectiveness. This supports legitimacy theory, since it reveals that external systems are symbolic rather than substantive systems. However, the results do not hold for internal whistle-blowing systems because the implementation of internal systems is ostensibly driven by power theories. The results are interesting for the planned statutory whistleblower protection as they reveal a partially restrained attitude toward whistle-blowing. Whistle-blowing systems are not effective if management is not convinced of their benefits.