Executives, like everyone, tend to stay the course instead of trying something new. But the familiar path isn’t always the best one.
By Jennifer (Jennie) Latson
Are Whistleblowers Heroes Or Snitches?
What do we know about the whistleblower? Not THAT whistleblower, but whistleblowers in general. How do we view an individual who brings someone else’s (alleged) misdeeds to light?
President Donald Trump recently described one as “almost a spy.”
“You know what we used to do in the old days when we were smart? Right? The spies and treason, we used to handle it a little differently than we do now,” he said, according to audio obtained by the L.A. Times.
Others, meanwhile, defend whistleblowers — sometimes literally. “We must protect those who demonstrate the courage to report alleged wrongdoing, whether on the battlefield or in the workplace,” Joseph Maguire, the acting director of national intelligence, said at a September hearing.
Whether you see a whistleblower as a hero entitled to legal protection or a snitch who should be outed (and possibly convicted of treason) may depend on where you stand politically. It may also depend on whether the whistle is pointed in your direction.
“For people who wish to encourage whistleblowing, then whistleblowers can be heroic,” says Duane Windsor, a management professor at Rice University’s Jones Graduate School of Business. “People who are being reported on typically try to dismiss and vilify whistleblowers.”
Whistleblowers have met with ambivalence throughout the history of whistleblowing — and that history is a long one. Policies enabling the rank and file to expose wrongdoing by people in power have been in place since Beowulf battled Grendel. “Qui tam” provisions — short for the Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” meaning “He who sues on behalf of our Lord the King and on his own behalf” — date as far back as the early Middle Ages, according to Tom Mueller, author of “Crisis of Conscience: Whistleblowing in an Age of Fraud.”
In what’s considered to be the first of the qui tam laws, King Wihtred of Kent declared in 695 A.D. that anyone caught working on the Sabbath would be fined — and whoever turned him in was entitled to half the fine. Because medieval kings didn’t have a standing police force, Mueller explains, it made sense to incentivize private citizens to do the policework. But that meant the earliest whistleblowers were essentially bounty hunters spying on their neighbors. And it didn’t make them popular in the community, particularly when they brought down its pillars. (“William Shakespeare’s father was sued, and perhaps ruined, by qui tam informers who accused him of usury and the illicit sale of wool,” Mueller writes.)
Bounties are the most controversial element of many whistleblowing laws — including our own False Claims Act, originally passed in 1863 after war profiteers swindled the Union Army by, among other things, passing sawdust off as gunpowder and selling the same horses several times. By that time, England was phasing out its own qui tam laws, since the cash reward was seen as overly corrupting, particularly for a policy meant to rout corruption. Some informers resorted to entrapment to get their share of the fine; others simply lied, according to Randy Beck, a law professor and associate dean at the University of Georgia.
In the U.S., however, the False Claims Act still rewards whistleblowers for exposing fraud against the government. Sherry Hunt, who blew the whistle on mortgage fraud at Citigroup in 2011, was awarded $30 million of the $158 million settlement Citigroup ultimately paid. The IRS also pays informers who report tax dodgers, while those who report securities fraud are entitled to payment under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
And even profit-motivated whistleblowers can produce useful tips, Windsor argues. If anything, they’re more essential today than in medieval England, since scams are getting more complicated and harder for regulators to uncover without help from the inside. A 2018 PricewaterhouseCoopers survey found that nearly 30 percent of corporate fraud detection came via tip-offs by an internal source or from anonymous whistle-blowing hotlines.
“There may be some division of opinion about motive: unrewarded reporting is heroic; rewarded reporting is somewhat less noble or even mercenary,” Windsor says. “I do not agree. We need whistleblowers, whether heroic or mercenary. Both channels are socially valuable.”
Windsor teaches his Rice MBA students the case studies of two different whistleblowers: Sherry Hunt at Citigroup and Sherron Watkins at Enron. While Hunt went directly to the feds, Watkins blew the whistle internally, alerting Enron CEO Kenneth Lay to her discovery of widespread accounting fraud at the company. Instead of earning a reward, however, she became a pariah at the company; the CFO tried to have her fired. After Enron’s abuses became public, Congress passed the Sarbanes-Oxley Act, which includes unprecedented protection for whistleblowers like Watkins, making it a felony to retaliate against them and holding executives personally liable when they do.
“Whistleblowing can be difficult and risky, at best,” Windsor says. “It seems to me that cash awards are in order. We want to encourage whistleblowers in as many ways as possible.”
The alternative, of course, is to witness wrongdoing and say nothing. And far greater numbers of people choose this path — what management scholar Margaret Heffernan refers to by the legal term “willful blindness.” In fact, Heffernan says, when researchers surveyed employees at American corporations, 85 percent said they were aware of problems at work that they were too afraid to mention.
In a world without whistleblowers, we’d go on buying the same horses over and over, or worse, investing in Enron. But even with the promise of a cash reward, few people are willing to endanger their career by speaking out — and risk being called a spy or a traitor for their trouble.
Jennifer Latson is an editor at Rice Business and the author of “The Boy Who Loved Too Much.”