Organizations bear the responsibility to foster an environment of transparency for their whistleblower programs to succeed.
In the years leading up to the eventual collapse of the cryptocurrency exchange FTX, insiders blew the whistle about the company’s severe governance and regulatory issues. The flouting of internal control requirements and commingling of client funds was so glaring that several witnesses felt compelled to say something.
That is precisely why whistleblowing laws and corporate whistleblowing programs exist. Had the whistleblowers’ concerns been approached with due attention and rigor, they would have unveiled massive corporate misconduct sooner, and some eventual losses could have been averted.
With several reported whistleblowing attempts before the fall, the FTX case is in fact an anomaly. In most cases of such corporate malfeasance, witnesses would rather keep their jobs, keep the peace and turn a blind eye.
That’s because whistleblowing is not easy. It is mostly a thankless task. Employees deciding to report when something seems amiss are taking a considerable risk. Instead of being praised and rewarded, they’re frequently ostracized and ridiculed. Often the companies that whistleblowers try to expose (and help) make their lives miserable.
Research by Francine Berman and Jennifer Lundquist, professors at the...
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