A recent Law & Social Inquiry article quells a myth commonly used to criticize whistleblower reward programs—that reward laws discourage reporting through corporate compliance structures. Written by Masaki Iwasaki, an associate professor at Seoul National University School of Law, “Environmental Governance and Whistleblower Rewards: Balancing Prosocial Motivations with Monetary Incentives” statistically disproves this misbelief and advises policymakers on effective strategies for legal frameworks.
When asked for comment, Professor Iwasaki revealed what led him to this field of study: “The main motivation was to challenge a long-standing misconception in policy circles that financial rewards for external reporting to authorities inevitably weaken internal control systems within companies. This claimed trade-off has exerted considerable influence despite lacking empirical support.”
Throughout the article, Iwasaki refers to this perceived trade-off as the “discouragement effect.”
Even before presenting statistical evidence that awards do not impact the behavior of potential whistleblowers, Iwasaki argues that the discussion about the “discouragement effect” is “superficial.” Although corporate executives use the excuse that award laws would undermine internal governance, this critique “overlooks the legal practices concerning whistleblowing and the decades of research in psychology and behavioral economics on social preferences that has been done.”
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