Whistleblowers: Implications for Corporate Governance
18 Pages Posted: 22 Jun 2021
Date Written: June 11, 2021
Often overlooked in academic accounts of corporate governance and the actors who populate governance structures, whistleblowers are no more visible in formal governance frameworks. Within a corporation, whistleblowers may be lower-rank employees, not directors or officers; they may report perceptions of wrongdoing to others within the corporation or inform governmental or other actors who are externally situated. Nonetheless, it is striking how often retrospective accounts of corporate scandals involve episodes of internal whistleblowing associated with governance and compliance failures. This paper argues that incorporating whistleblowers into formal governance structures could spur more proactive involvement by directors in monitoring compliance with law and regulation.
Whistleblowing is significant to internal compliance because it reveals private information suggestive of wrongdoing, often furnished by actors not subject to duties to blow the whistle. Credible whistleblowers are valuable because they create friction that abrades the plausibility of officially sanctioned narratives. Whistleblowers’ reports can also furnish documentation in after-the-fact investigations into wrongdoing. Charging the board—as one state statute has done—with responsibility to adopt and oversee compliance policies with whistleblowing components underscores the importance of directors’ proactive engagement. It also increases the likelihood of engagement by lawyers who advise the board as well as the likelihood that whistleblowers’ reports will be used more effectively, not consigned to informational siloes.
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