Motivating Whistleblowers

38 Pages Posted: 13 Dec 2017

See all articles by Jeffrey V. Butler

Jeffrey V. Butler

Dept. of Economics, University of California, Merced

Danila Serra

Texas A&M University - Department of Economics

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Date Written: October 23, 2017

Abstract

Law-breaking activities within an organization benefiting the firm at the expense of the general public are widespread but difficult to uncover, making whistleblowing by employees desirable. We employ a novel laboratory experiment to investigate if and how monetary incentives and expectations of social approval or disapproval, and their interactions, affect the decision to blow the whistle. Experimental results show that: i) financial rewards significantly increase the likelihood of whistleblowing and do not substantially crowd out non-monetary motivations activated by expectations of social judgment; and ii) the possibility of social judgment decreases (increases) whistleblowing when the public is unaware (aware) of the negative externalities generated by fraud, suggesting that whistleblowers are at least partly motivated by a desire for social approval. Our findings suggest that whistleblowers on corporate fraud should be financially rewarded and should be shielded from public/media scrutiny when the social cost of the illegal activity is not visible or salient to the public. We also find evidence of an interesting relationship between political orientation and social judgment: while left-leaning subjects react to the possibility of receiving social approval or disapproval as expected, right-leaning people are unaffected by it.

Keywords: Whistleblowing, fraud, rewards, social judgment, experiment

JEL Classification: K42, C92, D04

Suggested Citation

Butler, Jeffrey Vincent and Serra, Danila and Spagnolo, Giancarlo, Motivating Whistleblowers (October 23, 2017). CEIS Working Paper No. 419, Available at SSRN: https://ssrn.com/abstract=3086671 or http://dx.doi.org/10.2139/ssrn.3086671

Jeffrey Vincent Butler

Dept. of Economics, University of California, Merced ( email )

5200 N. Lake Road
Merced, CA 95343
United States

HOME PAGE: http://jeffreyvbutler.org

Danila Serra

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States

Giancarlo Spagnolo (Contact Author)

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501
Stockholm
Sweden

HOME PAGE: http://https://sites.google.com/site/giancarlospagnoloshomepage/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133
Italy

EIEF ( email )

Via Due Macelli, 73
Rome, 00187
Italy

HOME PAGE: http://WWW.EIEF.IT

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