Regulating Culture: Improving Corporate Governance with Anti-Arbitration Provisions for Whistleblowers

Abstract

A focus on corporate culture, especially at financial institutions, has emerged as a regulatory, public, and media priority in the aftermath of the 2008 financial crisis. With Dodd-Frank, Congress embraced whistleblower statutes as a key instrument to improve corporate culture and governance, and to extirpate undesired and unethical business practices. Despite the clear policy goals, Dodd-Frank’s unclear statutory text has created interpretative controversies. While Dodd-Frank adds anti-arbitration provisions to preexisting whistleblower statutes, it does not include a dedicated, standalone anti-arbitration provision for Dodd-Frank’s new whistleblower cause of action.

This essay argues that courts should not allow employers to use pre-dispute arbitration agreements to compel whistleblowers to arbitrate their Dodd-Frank claims. To make the case, we review policy concerns for whistleblower actions that favor public actions in public courts. We argue for a pragmatic interpretation of the statute that protects whistleblowers and the public’s right to know by exempting Dodd-Frank’s whistleblowers from arbitration. The essay draws on existing literature discussing the importance of developing case law through court decisions, enforcement and responsiveness to reputational risk, and public supervision of corporate governance issues.