A Theory of Whistleblower Rewards

Givati, Yehonatan

doi:10.1086/684617

Cited by 35 publications

(25 citation statements)

References 15 publications

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“…Piccolo and Immordino (2016) study leniency programs against organized crime, and suggest that when a boss can design complex internal rules that reward his agents based on the quality of the information they can disclose, the legislator must rely on rewards to induce agents to report information. The most recent theoretical analysis, and the closest to our paper, is Givati (2016). This paper studies the optimal size of whistleblower rewards in a model where whistleblowers bear a personal cost, and where a reward may encourage false reports.…”

Section: Related Literaturementioning

confidence: 99%

Whistleblower Rewards, False Reports, and Corporate Fraud

2017

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It is often claimed that rewards for whistleblowers lead to fraudulent reports, but for several US programs this has not been a major problem. We model the interaction between rewards for whistleblowers, sanctions against fraudulent reporting, judicial errors and standards of proof in the court case on a whistleblower's allegations and the possible follow-up for fraudulent allegations. Balancing whistleblower rewards, sanctions against fraudulent reports, and courts'standards of proof is essential for these policies to succeed. When the risk of retaliation is severe, larger rewards are needed and so are tougher sanctions against fraudulent reports. The precision of the legal system must be su¢ ciently high, hence these programs are not viable in weak institution environments, where protection is imperfect and court precision low, or where sanctions against false reporting are mild. Internal reporting channels may interfere with external ones in unexpected ways.

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Section: Related Literaturementioning

confidence: 99%

Whistleblower Rewards, False Reports, and Corporate Fraud

2017

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“…Another important difference from the US may be linked to the experience with Nazi Germany and Soviet Russia, states that relied heavily on citizens reporting on one another, in particular in satellite and occupied countries. Fleischer and Schmolke (2012, p. 10) and Givati (2016, p. 26), among others, suggest that this may have led Europeans to view mechanisms that incentivize reporting with suspicion, as they are for many associated with informants to occupation armies or autocratic states. At the same time, few were blowing the whistle on the atrocities committed in the Gulags and Nazi concentration camps, so it is unclear how we should draw these parallels.…”

Section: Discussionmentioning

confidence: 99%

Myths and numbers on whistleblower rewards

Nyreröd¹,

Spagnolo²

2019

Regulation & Governance

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Whistleblower rewards have been used extensively in the US to limit procurement fraud and tax evasion, and their use has been extended to fight financial fraud after the recent financial crisis. There is currently a debate on their possible introduction in Europe, but authorities there appear considerably less enthusiastic than their US counterparts. While it is important that these tools are scrutinized in a lively democratic debate, many things have been written-even by important institutional players-that have no empirical backing or that are in open contrast to the available evidence from independent research. In this paper we review some of the most debated issues regarding the potential benefits and costs of financial incentives for whistleblowers, while trying to separate existing evidence from conjectures with no empirical support, and myths in contrast to available evidence.

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“…Second, there is a literature that analyzes the role of monetary rewards in fostering whistleblowing, as for example implemented in the False Claims Act and the Dodd-Frank Act. 13 Dyck, Morse, and Zingales (2010) and Zingales (2004) stress the beneficial role of such rewards in uncovering fraud, while others discuss potentially adverse effects such as fostering fraudulent claims or even the fabrication of cases (see e.g., Givati, 2016;Howse and Daniels, 1995;Callahan and Dworkin, 1992). Our paper focusses on analyzing the impact of different requirements for obtaining (employment) protection, and hence we do not consider financial rewards.…”

Section: Related Literaturementioning

confidence: 99%

Whistleblower protection: Theory and experimental evidence

Mechtenberg

Muehlheusser

Roider

2020

European Economic Review

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Whistle-blowing by employees plays a major role in uncovering corporate fraud. Various recent laws aim at improving protection of whistle-blowers and enhancing their willingness to report. Evidence on the effectiveness of such legislation is, however, scarce. Moreover, critics have raised worries about fraudulent claims by low-productivity employees. We study these issues in a theory-guided lab experiment. Easily attainable ("belief-based") protection indeed leads to more reports, both truthful and fraudulent. Fraudulent claims dilute prosecutors' incentives to investigate, and thereby hamper deterrence. These effects are ameliorated under more stringent ("fact-based") protection.

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A Theory of Whistleblower Rewards

Cited by 35 publications

References 15 publications

Whistleblower Rewards, False Reports, and Corporate Fraud

Whistleblower Rewards, False Reports, and Corporate Fraud

Myths and numbers on whistleblower rewards

Whistleblower protection: Theory and experimental evidence

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