Whistleblower rewards, false reports, and corporate fraud

Abstract

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 sufficiently 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.

Reward Expectancy and External Whistleblowing: Testing the Moderating Roles of Public Service Motivation, Seriousness of Wrongdoing, and Whistleblower Protection

“…Such efforts hold the potential to inspire those with strong dedication to public service. Moreover, the current findings suggest that when dealing with serious misconduct such as large-scale corruption, regulatory bodies should offer commensurate rewards or other forms of compensation that adequately offset the potential risks involved in reporting (Buccirossi et al, 2021).…”

“…This is further corroborated by the results from the supplementary analyses, which showed that perceived seriousness of wrongdoing only interacted with “monetary” rewards to predict external whistleblowing intention. In this respect, a higher reward may be seen as a necessary incentive to outweigh these risks and motivate individuals to come forward with valuable information (Buccirossi et al, 2021).…”