All whistleblowers are the same. True?

“They are in for the money.” “Another disgruntled one.” “They stretch the truth for the dough.” And so it goes on. Grumpy commentary, overheard. Whistleblowers have been given a bad rep – ask by whom -, but is it true and are they really all the same?

One whistleblower withdraws his claim, and leaves everyone guessing, another one turns down a sizable award, and issues his statement of motivation for doing so. Thousands remain unmentioned, though, their cases never hit the headlines.

The US Securities and Exchange Commission boasted in a recent press release to have “awarded more than $111 million to 34 whistleblowers since [the award program’s] inception in 2011.”.  However, on the US Department of Labor’s site the Whistleblower Protection Programs’ data set spanning a ten year period between 2005 and 2015 reveals that more than 15,000 cases were dismissed, another 4,500 plus cases were withdrawn.  In total, more than 26,000 cases were considered and determined.

While the case Daniel Donovan (former information manager at VW) vs Volkswagen at Oakland County in Michigan, USA, will leave much room for speculation, it has given us insight in the court’s workings and the timeline it set for the proceedings.  The  publicly available  Court’s Official Timeline [1 page pdf]  underpins the notion of the realistic possibility of and a commitment to a fair and timely handling of a lawsuit brought against a global major player.  A significant aspect that may encourage others to take such a step, if needed.

In contrast, Eric Ben-Artzi (former risk manager at Deutsche Bank) , argued that his award share  of over USD 8 million, as offered by the SEC, would have burdened the employees and stockholders while failing to hold accountable any executives.  Regulatory bodies go easy on executives and undermine accountability of senior staff, resulting from a lack of independence between banks and regulators, he argued.

He’s got a point, no doubt. Despite large fines and sizable awards to those who come forward and take substantial risks in terms of retaliation, career damage and personal sacrifices, eventually, large corporations have not shown convincingly that misconduct has been tackled satisfyingly.  Rather, the financial pressure created by losses emanating from such fines, tends to translate predominantly into redundancies, restructuring, off-shoring, right-shoring, and other forms of staff re-shuffles.

Few, if any, tackle the deep-seated cultural issues, at corporate and societal level. These issues require behavioral change and concerted efforts, in particular at the very top, in order to yield genuine and sustainable results. What they do cause though, is setting off a wave of fear and panic, especially in those individuals and teams that have become heavily dependent on their comfortable salaries (compensation) and a particular lifestyle.

The job cuts are being calculated, announced and implemented, markets price this in, while the fight for professional survival in this environment gets ugly.  It is rather unreasonable to expect this to instill any stronger sense of less misconduct and more ethical behavior, especially in those who have been climbing their way up in such an environment for decades.

We need to raise at least two key questions in this context:

  1.  Do we need a mechanism to prevent cases from being withdrawn without meaningful communication to the stakeholders and wider public?  Should the widespread practice of tying a claimant into a corset of confidentiality clauses in exchange for withdrawing the case upon settlement become subject to more scrutiny and if so, how can this be achieved?
  2. Is offering an award to those who speak up and blow the whistle really the right [main] approach or could we achieve a stronger and lasting shift towards desired behavior by outlawing the practice of by-standing, i.e. a duty to assist and rescue in the sense of Germany’s concept of Unterlassene Hilfeleistung, an offense according to StGB section 323c? In other words, should looking away become punishable by default?

As Ben-Artzi had argued, the financial award was a “powerful incentive” when he first decided to help the SEC but he grew disappointed with the SEC’s protracted investigation and the strong links between the SEC and Deutsche Bank.

The revolving door between regulators and regulated entities has long been criticized, with a marked lack of signs that this would change towards more independence any time soon.

The lack of regulatory efficacy and misguided externalizing of losses resulting from internal misconduct and malpractices though does not remain entirely unregulated.  The markets may be expecting the German government to intervene in either crisis, whether VW or DB.

However, the long-term issue of eroding trust in the ability and willingness of these corporations to genuinely tackle their deep-seated issues and address the tone at the top, continues to build up as systemic risk.  As such this particular risk constitutes an even more severe issue.

Unless taken seriously and addressed comprehensively and sustainably it will end in crumbling empires, with further jobs being automated, off-shored, and shipped to low-wage locations but no cuts at the tip of the iceberg in sight.  Rather, we may see further increases at the head of such corporations in reward for all the slashing and restructuring. Stakeholders and shareholders now need to get much more actively involved in the questions posed above.

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