Some of the worst corporate disasters of the past two decades were heralded by whistleblowers: Sherron Watkins raised the red flag internally at Enron, Cynthia Cooper let management know of major accounting problems at WorldCom, and Matthew Lee brought problems to his management team at Lehman Brothers. The whistleblowers weren’t able to halt their companies’ declines and—in some cases—faced punishment for calling attention to internal misdeeds. Looking at these examples, it would be easy to say that whistleblowers have little impact on how companies both conduct themselves and weather corporate storms. But that’s not the case.
Research: Whistleblowers Are a Sign of Healthy Companies
When there aren’t any, it’s time to worry.
November 14, 2018
Summary.
An analysis of more than 1.2 million records of internal reports made by employees of public U.S. companies reveals that whistleblowers are crucial to keeping firms healthy. The more employees use internal whistleblowing hotlines, the fewer lawsuits companies face, and the less money firms pay out in settlements. A one standard deviation increase in the use of an internal reporting system is associated with 6.9% fewer pending lawsuits and 20.4% less in aggregate settlement amounts over a three-year period.
New!
HBR Learning
Ethics at Work Course
Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Ethics at Work. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
Avoid integrity traps in the workplace.
Learn More & See All Courses
New!
HBR Learning
Ethics at Work Course
Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Ethics at Work. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
Avoid integrity traps in the workplace.