Why do employees blow the #whistle? by #Robin #Singh (Published by ACFE)

SHELL OUT P. 18

MORAL EQUILiBRIUM P. 24

LESSONS FROM 1MDB P. 38

HIDDEN SYNTHETIC ID P. 46

5 DON’TS, 5 DO’S P. 52

Lisa Osofsky New head of the U.K. Serious Fraud Office takes charge P. 30

FRAUD BASICS

Fundamentals for all

Why do employees blow the whistle?

Sentinels face few positive reasons for reporting questionable activity or fraud. They often lose their jobs, health, reputations and family stability. Yet every year a handful of whistleblowers step out from the crowd.

Here are some reasons why they do it.

J

ames Holzrichter believed he was doing the right thing when as an eager young analyst and systems auditor in the 1980s for an American aerospace and defense technology company, he innocently brought some problems of material acquisition and management to his supervisor.

Ultimately, Holzrichter discovered anomalies that led to a “qui tam” suit (under the U.S. False Claims Act) against his company for alleged fraud of overcharging the government and selling it defective equipment, and a 17½-year ordeal in which he’d lose his job, his health and his house. And someone attempted to harm him, his son and daughter. Yet, he didn’t quit. (See “Vindication at a high price,” Fraud Magazine, July/August 2015, tinyurl.com/y9xq6qcz.)

Severity and gravity of situations Holzrichter reported anomalies because his father’s advice, “When is it ever wrong to do the right thing?” was programmed into his life. According to researchers at Boston College and Northwestern University who’ve been studying whistleblowing since the 1980s,

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would-be whistleblowers base their deci-

in Psychology, Volume 6, December 2015,

sions to report problems on two things:

tinyurl.com/y9n5jygo.)

the severity and gravity of the situations. (See “The psychology of whistle-

If an employee stumbles upon grave misconduct and wrongdoing — problems that can demolish a

blowing,” by James Dungan, Adam

system — they’re more than likely not

Waytz and Liane Young, Current Opinion

to blow the whistle. And if the would-be

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whistleblower isn’t sure about the validity of what they’ve uncovered, they’re unlikely to tell authorities because their career could be destroyed if they’re proven wrong. Whistleblowers might spend years investigating a case before they report it.

A whistleblower never wants to be wrong or proven wrong. That’s why even though 45 percent of workers might notice wrongdoing, only 65 percent of them are likely to report what they saw, according to a 2011 National Business Ethics Survey, “Retaliation: When Whistleblowers Become Victims,” tinyurl.com/yd2wt44d. They’ll likely brush it off as anomalies or chalk it up to human error. According to the Ethics & Compliance Initiative, nearly none receive widespread media coverage. (See “Retaliation against Whistle-Blowers: No Good Deed Goes Unpunished,” by Michael McMillan, CFA, Enterprising Investor, Oct. 24, 2012, tinyurl.com/y8b2fa5e.)

A whistleblower is counted as one only if they’re employed by the organization that they’re reporting on and can suffer the consequences of their actions from that organization. An outsider, independent person or committee that uncovers wrongdoing often isn’t considered a whistleblower.

Psychology behind whistleblowing According to the British Psychological Society, employees can determine if they might fit the profile of a whistleblower if they answer positively to most of these questions: • Are you highly educated?

• Do you show good performance in your work?

• Do you think something can be done about the problem?

COLUMNIST

CFE COMPLIANCE AND ETHICS LEAD OFFICER

• Is your organization seemingly responsive to complaints?

• Is the problem not widely known?

• Are you a dominant but not always the most agreeable in character?

(See “Why do some people choose to blow the whistle,” by Craig Lewis and Laurence Cawley, BBC News, March 24, 2015, tinyurl.com/ybopq9ld.)

Whistleblowers commonly talk about how employees and managers in their organizations bully them after they’ve reported problems. Contrary to what some might think, if a whistleblower is a favored employee, then the blowback is far greater.

Ethics versus loyalty As Holzrichter discovered, the stakes are quite high for a would-be whistleblower.

They need to understand that they’ll pay a price for blowing the whistle on their boss or peers. However, if they decide not to blow the whistle they need to live with that decision, which could have even more negative implications for their psyche.

In “The psychology of whistleblowing” article in Current Opinion in Psychology, the researchers outline a concept they call, “the whistleblower’s dilemma: the fairness-loyalty tradeoff.” The authors write that “moral foundations theory” identifies five basic moral values: harm, fairness, loyalty, authority and purity, which employees consider when they’re faced with deciding whether a behavior is right or wrong. They say that “fairness and loyalty are brought into

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direct conflict by situations that allow for the possibility of whistleblowing.”

They tested the hypothesis “that when norms for fairness dominate norms for loyalty, whistleblowing will increase, whereas when norms for loyalty dominate norms for fairness, whistleblowing will decrease.”

In a controlled study, the subjects were asked to rank how likely they were to blow the whistle on various targets, including strangers, close friends, family members and acquaintances for degrees of wrongdoing ranging from stealing $1 out of a restaurant tip jar to killing a store clerk.

The results of subsequent studies showed that those who endorsed fairness over loyalty reported greater willingness to be whistleblowers. In fact, whistleblowers were seen to generally speak, write and describe incidents from a fairness point of view rather than the loyalty point of view. Whistleblowers, the researchers found, consistently had an ethical viewpoint, rather than a loyalty point of view.

Factors influencing whistleblowing Personal Specific personal factors can identify a whistleblower, the researchers report in the Current Opinion in Psychology article.

According to data collected and analyzed, a correlation exists between a certain type of worker and their propensity to blow the whistle, especially if they’re the “fairness” sort of person. While correlation doesn’t always equal causation, this is an interesting look into the type of person who’d place fairness above loyalty to a company and the people that are in it. The idea here is that clearly a high sense of loyalty can deter and hinder whistleblowing, but it doesn’t

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FRAUD BASICS

Fundamentals for all

necessarily mean that a loyal person

study of the dynamics of disobedience

won’t blow the whistle. The researchers

and whistle-blowing,” by Piero Bocchi-

Thanks to whistleblowers regardless of their motivations

say that the few employee demographic

aro, Philip G. Zimbardo and Paul A. M.

factors that correlate with higher rates

We can’t generalize why a whistleblower

Lange, Social Influence, Volume 7, 2012,

of whistleblowing include:

decides to report possible unethical or

Issue 1, tinyurl.com/yb7ogxbs.)

illegal events. Each has unique legal,

The majority, 77 percent, complied

• Increased tenure of employment at

with the experimenter’s unethical

the company.

request. The minority was split between

• Increased pay.

those refusing — 14 percent — and those

• Increased education.

reporting the misconduct to higher au-

• Being male.

thorities — 9 percent. (However, when the experimenter asked an independent

Situational

According to the Current Opinion in Psychology article, strong predictors of whether an employee will become a whistleblower include: 1) organizational support and encouragement for whistleblowing, 2) adequate dissemination of knowledge of ways to report unethical behavior plus protection from retaliation. Some organizations include these whistleblower protections and employee encouragement in their written official policies.

Another situational point is the time factor. According to the article,

sample to predict their behavior, they gave the opposite reaction. Only 4 percent believed they’d obey the authority.)

It’s not easy for people to blow the whistle against authority figures, especially when dealing within a group.

Group loyalty is a strong feeling.

Cultural factors Geographic cultures can affect an employee’s decision to blow the whistle.

For example, according to the Current Opinion in Psychology article, those in Asian cultures — including Japan, China

“people are more likely to voice disap-

and Taiwan — view whistleblowing less

proval of others’ behavior when that

favorably than those in the U.S. This

behavior becomes unethical abruptly

could be because collectivist cultures,

rather than slowly over time.” However,

often in the East, fiercely value loyalty to

the more an employee feels an act of

their authority figures. Western cultures

whistleblowing is immediate and notice-

are more individualistic.

The researchers say that the amount

able, the more difficult the reporting of

cultural and personal factors that affect their decision. But we know they will pay a price. They’ll probably lose their job.

They might have to endure harassments, ill health and family disruptions. They might never find justice and closure.

The path to justice is uneven. Half the battles are lost during the uphill climb of legal assessment. Others are lost because of society’s pressures and loss of livelihood. More are lost in court because of lack of evidence. Only a handful remain to see the light of the day. But because of courageous whistleblowers stepping out of the crowd we see many frauds vanquished and wrongs righted.

And for that, we’re grateful. n FM Disclaimer: The views and opinions expressed in this article are those of the author and don’t reflect the opinion, views or policy of the Abu Dhabi government or its business entities or its affiliates.

Robin Singh, CFE, is the compliance and ethics lead officer at an Abu Dhabi Government entity (healthcare sector).

of collectivism in a culture is positively

Contact him at robin@whitecollar.org,

related to that culture’s propensity for

whitecollar.org and LinkedIn.com/in/

students, when an experimenter asked

bribery “and the perception that col-

whitecollarinvestigator.

them if they’d raise ethical questions

lectives, rather than individuals, are

about inhumane research on humans

responsible for personal conduct.” Loy-

most of them said they would. (See “To

alty increases the inclination to overlook

defy of not to defy: An experimental

unethical acts.

the wrongdoing will be.

In a study conducted on university

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Visit Fraud-Magazine.com for an expanded column, which contains worldwide legislation to aid whistleblowers.