Incentivising Whistleblowing – is it the right thing to do?

Whistleblowers serve private and public interests when they raise concerns about wrongdoing but how do we recognise those who choose to come forward? Should we offer financial rewards for their moral courage to stand up for what is right?

Whistleblowers serve private and public interests when they raise concerns about wrongdoing but how do we recognise those who choose to come forward? Should we offer financial rewards for their moral courage to stand up for what is right?

Last year, the US Securities and Exchange Commission (SEC) awarded more than $14 million to a whistleblower for information that helped bring an enforcement action in relation to a large-scale investment fraud. This was the largest reward made since new whistleblower rules were introduced in 2011 in the USA. Given the size of US fines in relation to foreign corruption claims, analysts are concerned that the relatively new US whistleblower program will lead to would-be whistleblowers bypassing internal fraud controls such as company specific whistleblowing mechanisms to report suspicious activities directly to the SEC.

Policies and procedures for whistleblowing are becoming increasingly common in both the public and private sector – not just in South Africa, but also the UK, Australia and on the rest of the African continent. With the exception of the USA it seems, however, that most countries, South Africa included, tend to shy away from incentivising whistleblowers.   

In the UK, for example, the Whistleblowing Commission said that such rewards:

  • Are inconsistent with the culture and philosophy of the UK
  • Undermine the moral stance of a genuine whistleblower
  • Could lead to false or delayed reporting
  • Could undermine credibility of witnesses in future criminal or civil proceedings
  • Could result in the negative portrayal of whistleblowers
  • Would be inconsistent with (current) compensatory regime in the UK

In South Africa the deputy public protector, Kevin Malunga, voiced his support for a system similar to that of the USA in January 2015.  He suggested that the amended Protected Disclosure Act should include payments for whistleblowers that helped the state recover money.  The debate is, however, still open and often controversial.

One of the main questions is whether people should be paid for ‘doing the right thing’? There are some that state that people, when offered these incentives, will view it as financial coercion into something they consider should be intrinsic in motivation.  On the other side of the coin, extrinsic motivation could lead to those with dubious motivations taking advantage of such rewards and devise schemes to abuse the system.  

Whistleblowers face intimidation, harassment, dismissal and violence in retaliation for speaking out.  There might be those who do it for the love of the country or their organisation, but for many people that does not outweigh the risks involved.  For this reason the benefits of encouraging personal ethics in the workplace or society and rewarding those for taking a stand, should be up for discussion.

The main lesson to be learnt from the US experience is that organisations need to ensure that their employees report violations through internal reporting mechanisms in the first instance. Ethical organisations will cultivate a culture where employees trust the internal ethics program. This should be coupled with a comprehensive action plan for a swift response to whistleblower reports and providing feedback to whistleblowers about the findings of investigations.

By Liezl Groenewald
Sept 2015