Editorial
| Pages | 634-635 |
| Date | 02 July 2018 |
| DOI | https://doi.org/10.1108/JFC-05-2018-0052 |
| Published date | 02 July 2018 |
| Author | David Chaikin |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
Editorial
Blowing the Whistle –No Rewards,please!
One of the major policy debates in corporate governance is should we promote an
aggressive whistle-blowing culture so as to weed out wrongdoers, or should we create a
whistle-blowing regime that principally focusses on protecting whistle-blowers from
retaliation by powerful corporate actors? In Australia, this is a hot issue, with new whistle-
blowing legislationcurrently before the Senate. In answering this question,we need to think
about what should be the objectives of the whistle-blowing legislation and how a system of
rewards fits into such goals.
There are three possible goals of any whistle-blowing legislative regime. The first and
the most important aim is to provide effective legal protection to whistle-blowers who
disclose misconduct or an improper state of affairs in relation to a corporation or non-
compliance with an important law such as taxation laws. Effective protection requires the
criminalisation of reprisals against whistle-blowers who act in the public interest; it also
requires a system of compensation for losses suffered from whistle-blowing conduct. The
second aim is to encourage whistle-blowers to disclose intelligence, information and
evidence of corporate misconduct and tax crimes to regulators and law enforcement
agencies. That is, whistle-blower laws should have a prophylactic effect so that the
regulators are given early warning signs of inappropriate conduct. The third aim arises
from the enforcement reality that government bodies will never have the resources to
investigate every whistle-blower complaint to the satisfaction of whistle-blowers. Here, the
private sector has an importantrole to play in that corporates should have whistle-blowing
policies and a culture that encourages employees to report misconduct to management
within the corporation. How to create such a corporateculture in a modern business setting
is not clear. What is required is that the management positively acts on the reported
misconduct, and if it does not, that regulatorsare responsive to whistle-blower complaints.
A highly contested issue is whethercountries should provide a system of rewards so as
to incentivise whistle-blowersto file reports with government authorities. Although there is
no international best practice requiring countries to have bounties for whistle-blowers, the
USA is frequently cited as the best example of why there should be rewards. However, an
understanding of the history of rewards in the USA provides another perspective. Bounty
schemes have been a part of the enforcementof laws since the foundation of an independent
republic. Bounty schemes proliferateat every level of government –federal, state and local.
But the bounty system is tied to a unique US tradition of privatisation of law enforcement
which does not existto the same extent as in countries such as Australia. It is alsointimately
linked to the aggressive litigation culture in the USA which is fuelled by a contingency fee
system for lawyers, who relentlessly pursue their clients’whistle-blower claims, not
necessarily for public interest but rather for their own private, personal benefit. In extreme
cases, unethical lawyers will advise their whistle-blowing clients as to what information
should be stolen from their employers or which computer should be hacked so as to
maximise profit-making recovery.There are a myriad of crimes that may be committed by
whistle-blowers including theft, criminal trespass and illegal penetration of computer
systems and devices.
The views expressed by the author are his private opinion and do not represent the views of the
Australian Treasury’s Expert Advisory Panel on Whistle-blower Protections.
JFC
25,3
634
Journalof Financial Crime
Vol.25 No. 3, 2018
pp. 634-635
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-05-2018-0052
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