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The Profile of a Whistleblower

    Client Alerts
  • October 08, 2015

The SEC’s ongoing effort to strengthen its whistleblower program and broaden the universe of potential award recipients (see this Doug’s Note) has kept whistleblowing compliance at the forefront of most compliance and legal departments. Whistleblowers, however, may not be who you think they are.

A recent report from The Network, a NAVEX Global Company provider of ethics and compliance software, provides interesting data regarding the profile of what it calls the “average” whistleblower. As it turns out, rather than being “disgruntled employees out to get revenge,” The Network says that:

  • the average whistleblower (92%, in fact) goes to the company first with his or her concerns about misconduct before going outside of the company, rather than running straight to the SEC,
  • only 20% of whistleblowers ever tell someone outside the company of their concerns,
  • only 9% of employees report to the government, and
  • 20% of whistleblowers are non-employee contractors and consultants hired by the company.

Furthermore, The Network quotes a University of North Carolina report as concluding that whistleblowers report outside the company primarily due to a fear of retaliation, rather than a desire for cash awards.

What should you make of this?

First, it’s comforting to note, as The Network reports, that the SEC received 3,620 tips in 2014, but granted only nine whistleblower awards. This suggests that the whistleblower program has not turned into the fortune-seeker magnet many believed it would become when it was first implemented in 2011. (See this Doug’s Note.)

Second, The Network’s report highlights once more the importance of developing and properly implementing a strong compliance program, particularly one that clearly prohibits retaliation. Furthermore, that program should extend to contractors and consultants in order to lessen the possibility of an outside whistleblower.

Here are some principles to consider:

  • Educate employees, including internal audit and compliance personnel, and non-employee service providers about the company’s commitment to a culture of compliance, the existence of the company’s internal reporting process and the benefits of internal, rather than SEC, reporting.
  • Take all reports of wrongdoing seriously. Be sure that any investigations are properly designed to fit the circumstances. Properly document the reasons for closing or resolving an internal investigation.
  • Act in a “timely manner,” which generally means within 120 days at the latest, but in some cases may be much sooner.
  • Communicate with the potential whistleblower throughout the process so that he or she will know the complaint is being taken seriously.
  • Be aware of, and sensitive to, foreign laws or customs that may impact internal communications and investigations regarding possible wrongdoing.
  • Be alert to any behavior that could be seen as improper retaliation against the potential whistleblower.
  • Remember that confidentiality provisions or other contractual limitations cannot be used to prevent someone from reporting to the SEC (see this Doug’s Note).