Globally, whistleblowers are afforded greater protections today than ever before, but the threats that come along with unveiling corruption still prevent people from coming forward. The United States offers a great body of laws and protections for whistleblowers, more than any other country, and this is reflected in the number of whistleblower reports and also the amount of awards granted each year. EU member states, including Germany, are also implementing new protections for whistleblowers, but lag behind their American counterparts. Overall corporate governance guidelines and trends have had an effect on the whistleblowing industry as people are encouraged to come forward from inside any affected companies. However, although there is some progress in certain geographic locations, the world needs to encourage whistleblowers to come forward and report wrongdoing. The result will be a better and more sustainable world.
Looking at the geographic differences in whistleblowing, let us review the status quo in the United States first.
The United States Leads the Way for Whistleblowers
When reviewing the global status of whistleblowing, it makes sense to begin with U.S. statistics, which dwarf all other countries in not only the number of whistleblower reports, but also the monetary awards granted to the whistleblowers. In October of 2020, the Securities & Exchange Commission (“SEC”), issued a record award of over $114 million to a whistleblower whose information lead to the successful enforcement of SEC and related activities. The number of whistleblower situations and, correspondingly, the number of awards resulting from successful prosecutions by the SEC are growing in the United States. As recently as May 19, 2021, the U.S. Securities & Exchange Commission (SEC) awarded $28 million to a whistleblower in connection with an SEC enforcement action and a related action by another federal agency. “The SEC has awarded more than $900 million over the life of the program, including almost $85 million to nine individuals in this month alone, which reflects the vitality and continued success of the SEC’s whistleblower program,” said Emily Pasquinelli, Acting Chief of the SEC’s Office of the Whistleblower. Overall, the SEC has awarded approximately $901 million to 163 individuals since issuing its first award in 2012. The United States is leading the way in monetary awards which are paid out of a self-funding investor protection fund established by Congress which is financed entirely through monetary sanctions obtained by the SEC from securities law violators. These financial benefits, among other things, seem to be an important factor or the most important factor in encouraging whistleblowing, as evidenced by comparing the sheer number of whistleblowers in the U.S. to the rest of the world where these financial awards are uncommon and less consequential.
In addition to the independence and freedom which comes with large monetary awards as incentives, local laws can offer specific protections to whistleblowers to encourage them coming forward. In the U.S., OSHA’s Whistleblower Protection Program, for example, enforces the whistleblower provisions of more than 20 whistleblower statutes protecting employees from retaliation for reporting violations.
However, the rest of the world is lagging behind. That prompts the question as to why and whether it is the legal protections or the financial awards/incentives granted in the U.S. enforcement system, which are encouraging more whistleblowing activity in the U.S. versus the rest of the world. And further, what non-U.S. governments, regulators or internal policies can or should offer to whistleblowers across the world, in order to encourage similar behavior and achieve similar results as in the U.S.? On the other hand, is it more than the laws and money that drives U.S. Whistleblowers? Does the U.S. mentality of individualism and freedom of speech contribute to these numbers?
Whistleblowing Standards Outside the U.S. (EU, UK and Germany)
Although the United States leads the way for whistleblowers, the rest of the world is starting to implement similar standards and awards. To ensure an EU-wide standard for the protection of people coming forward as whistleblowers and risking their careers, the EU member states are required to transpose a directive into national law by the end of 2021 (Directive 2019/1937). The “Whistleblower Directive” provides protection for individuals who report violations of European Union law in certain areas — such as when it comes to public procurement, financial services, product safety, transport safety, environmental protection, food, public health, consumer and data protection.
Germany calls for tougher sanctions against companies gained momentum, particularly as a result of the VW diesel affair and other scandals such as CumEx and Wirecard. A long-awaited piece of legislation is set to pass that would allow corporate entities to be held liable for crimes, including environmental crimes, while so far there is only individual liability for such acts. The proposed Corporate Sanctions Act (“VerbandssanktionenGesetz”) would lead to deeper investigations and enforcement of corporate crime in Germany, which is already common place and previously legislated in the U.S. the U.K. and most other EU member states. While the U.S. has already passed laws on corporate criminal liability for over one hundred years, and the U.K. Bribery Act passed more than a decade ago in 2010, Germany is late to join the charge. If the Corporate Sanctions Act (“CSA”) is adopted, which it is expected to happen this year, the threat of punishment is intended to deter corporate criminal actions. The Act would apply to all legal people based in or doing business in Germany. The CSA would introduce the principle of corporate criminal responsibility and permit the criminal prosecution and conviction of a corporate entity in two circumstances: first, where the entity’s directors or officers committed corporate crimes and, second, where the entity did not take reasonable precautions to prevent employees or agents from engaging in criminal wrongdoing within the scope of their employment or agency. It should be pointed out, however, that the draft does not address the protection of whistleblowers. Until now there is still a lack of clear guidelines on who may contact which authorities under what circumstances - and is then protected from reprisals or (retaliatory) dismissal. So far, whistleblower protection has largely been a matter for the courts in Germany. And although there is a commitment to implement the EU Whistleblower Directive into national law this year, there is currently no government agreement to that effect in sight. One point in particular is controversial: Should whistleblowers only be protected when it comes to violations of EU law or also when it comes to violations of national law? However, if the implementation deadline expires without a corresponding law, employees could also directly invoke the EU directive.
The U.K. already has legislation in place that should protect whistleblowers under the Public Interest Disclosure Act 1998 (PIDA), often whistleblowers have been met with retaliation in the form of bullying, demotions, pay reductions, suspensions and forced dismissals simply for speaking up against wrongdoing. That happens despite anti-retaliation provisions of the PIDA, which grant employees the right not to suffer detriment or be unfairly dismissed. These retaliatory actions are not unique to the U.K., and are unfortunate frequent reminders that whistleblowing is not yet being praised or welcomed, and not even accepted or tolerated.
Furthermore, internal whistleblowing mechanisms as well as external complaint systems or organizations receiving and filtering any complaints, are gaining in popularity and offer support for those taking a role in the fight for social and economic justice, human rights, peace and security. Transparency International, for example, is a public interest, global coalition against corruption. This coalition is working in over 100 countries and promote transparency, accountability and integrity at all levels and across all sectors of society. Transparency International reaches all over the world and has 112 national chapters, 2,000 employees and has been operating for over 25 years with thousands of reports. For example, in 2019, Transparency International Australia’s advocacy for stronger whistleblower protection led to new legislation that gives corporate whistleblowers greater protection, and could have a culture-changing impact on the way companies in Australia operate. Their work ranges from visiting rural communities to provide free legal assistance to advising governments on policy reforms. Its most notable publication is the Corruption Perceptions Index. Another important organization is the National Whistleblower Center (NWC), which works to protect and reward whistleblowers around the world. NWC educates whistleblowers about their rights, helps them seek legal counsel, and provides high-impact litigation support. NWC has a partnership with the National Whistleblower Legal Defense and Education Fund, a public interest law firm that provides a secure intake process, with all communications with the law firm protected by attorney-client privilege. Such organizations offer a guide with clear procedures, confidentiality, logistics of addressing a complaint, and other practical considerations.
Risks and Outlook for Whistleblowers
Encouraging whistleblowers to come forward benefits public interest by curbing corruption, fraud, and other illegal activity, including the protection of the environment from illegal pollution as well as human rights against abuse and exploitation (child labor). But, unfortunately concluding from the strong disparity between award incentive-based U.S. whistleblower successes on one hand, and non-financial awards limited cases outside the U.S. it is obvious that only financial incentives really work. The benefit of both the protection of legislation as well as financial compensation are crucial, as otherwise nobody would act as a whistleblower when that person’s career, reputation, and in some extreme circumstances, their lives and health, are or may be at risk.
Whistleblowing is a risky business, extending in its consequence even further than just losing your job or reputation. Michael Woodford, the former Olympus chief executive, blew the whistle on a billion-euro fraud in Japan, and ended up entangled with the Japanese Yakuza after alleging that Olympus was investing in companies used as front operations for the Japanese mafia. When Woodford wanted to criticize the company's accounting on the board of directors, he was promptly dismissed. Fearing for his safety, he immediately fled Japan and escaped to England.
Hence, finding what motivates people to speak up when they discover situations or information involving reportable wrongdoing is essential. While European directives focus on protection of the individual from retaliation, the United States offers both this legislative protection as well as financial incentives for whistleblowers, which are not common in the EU. However, it is these financial incentives or protections which provide a whistleblower with the security and independence to lead a normal life even after losing that long-term job and being unemployable in the future.
However, some argue that incentivizing whistleblowers financially to act outside of their organization undermines the objective of ensuring that organizations have internal channels for investigation and addressing allegations in-house. There may be some rationale in encouraging loyalty and attempts to improve internal situations first internally before going “public”. Unfortunately, the reality is that most wrongdoers know what they do wrong and are not too receptive to others pointing it out.
In the end, looking at the sheer number of whistleblowers in the U.S. versus elsewhere, it seems clear that the financial incentives are the deciding factor in encouraging people to come forward with information which is in the overall interest of the public, governments, regulators or the integrity of the market per se. An integration of legislation, financial rewards, confidentiality, and freedom from retaliation need to be emphasized to encourage whistleblowers to report and uncover wrongdoing. Only such an interaction creates an incentive for whistleblowers to expose wrongdoing and on the other hand a deterrent for the wrongdoers themselves.
 Union und SPD streiten über Umsetzung der EU-Richtlinie: Irgendwie wird der Whistleblower-Schutz schon kommen? . In: Legal Tribune Online, 06.05.2021 , https://www.lto.de/persistent/a_id/44900/ (abgerufen am: 11.05.2021).