Corporate wrongdoing and whistleblower regimes: Evaluation and suggestions for reform

Abstract

Morality makes stupid. – Custom represents the experiences of men of earlier times as to what they supposed useful and harmful - but the sense for custom (morality) applies, not to these experiences as such, but to the age, the sanctity, the indiscussability of the custom. And so this feeling is a hindrance to the acquisition of new experiences and the correction of customs: that is to say, morality is a hindrance to the creation of new and better customs: it makes stupid. - Friedrich Nietzsche, Daybreak, 1881.1 When considering this Preface, I thought of what its most valuable contribution to this Thesis could be, and concluded that it would be to address the two common concerns brought up when discussing whether to pay whistleblowers to aid law enforcement. The first line of concern argues that rewards are not in tune with our legal culture, are legally reprehensible, and point out that the Nazis and the Soviet Union used informants extensively. This argument typically appeals to intuitions about sound legal principles and argues that monetary incentives run counter to the spirit of the current legal culture. The second concern is that economic incentives provide a wrong reason to do something that should be done out of duty or selflessness, and that providing financial incentives would taint the reputation of all whistleblowers. There is an aversion toward ‘unclean’ motivations introduced by rewards and a distaste for catering to lesser motivations. The same persons frequently make these two points together, occurring in different variations from the schematic outlined here. An illustrative example of how they are often expressed together comes from a 1998 statement by US Senator Harry Reid: ‘What I want to prohibit the [Internal Revenue Service] from doing in the future is continuing with a program that I refer to as the ‘Reward for Rats Program.’ This is a program where the IRS, in effect, has a contingent fee, much like a lawyer gets in a personal injury case. They say, ‘If you have somebody who will snitch on a neighbor, an ex-wife, or business partner, and this will lead to our collecting money, then we will give you part of that money.’ I believe anyone who owes money to the Internal Revenue Service should pay it. But I think it should be collected in a way that is in keeping with the American system, not go into people’s personal lives, where you have a wife—former wife or former husband who just completed a long divorce, and the IRS contacts one of them and says, ‘Hey, if you can give us a little information on your ex-spouse, then we will give you part of the money we collect.’ […] Such informants, most of the time, are not acting in some sense of civic duty. They don’t act from a selfless interest in the Nation’s well-being.’2 Reid is not alone in this sentiment. In 2013, Public Concern at Work conducted a study that assessed UK employees’ attitudes toward rewarding whistleblowers and found that they were predominantly negative. The concerns raised were summarised under six headings: one related to ‘inconsistent with the culture and philosophy of the UK’,3 three reasons related to the moral character and credibility of paid whistleblowers, including ‘undermines the moral stance of a genuine whistleblower,’ ‘could undermine credibility of witnesses in future criminal or civil proceedings,’ ‘could result in the negative portrayal of whistleblowers’. One concern was more general about culture/legal culture: ‘would be inconsistent with current compensatory regime in the UK.’4 More recently, an impact assessment by the EU Commission before the introduction of the EU Whistleblowing Directive noted that providing rewards may make whistleblowing ‘appear as a commercial transaction, which may discredit whistleblowers in general’.5 It also noted that the stakeholders that had been consulted, including whistleblowers themselves, were also against rewards at the EU level ‘taking into account also the particularly negative perceptions of whistleblowers in some national contexts, which date back to social and political circumstances resulting in distrust towards ‘informers’’.6 The impact assessment also alluded to the fact that such rewards ‘might be considered as running counter to ECtHR case law’.7 I have heard objections along the two lines mentioned above at conferences, on Zoom calls, in person, expressed by academics, prosecutors, enforcement agency staff, family, and whistleblower advocates. A preface is unlikely to revert these entrenched intuitions, but, if anything, this Thesis hopes to show the value of so doing. It aims to show that the morality, as expressed above, is a hindrance to the creation of new and better customs. The remainder of this preface makes some points to blunt these intuitions. Concerning the first line of concern, this is typically not as straightforward as is often suggested. Incentives are utilised to elicit information frequently, even from guilty persons, such as under plea bargaining. Bounties are put on the heads of terrorists, which does not engender much criticism. More importantly, the UK has used informant rewards in enforcement since the 8th century, which was only discontinued in 1951, making the ‘legal culture’ argument less striking. Rewards were also used in the Roman empire, have always been used in the US to some extent, and were even endorsed by Abraham Lincoln. This ‘legal culture’ argument appears to stem from a concern of creating an informant society, akin to those in many authoritarian regimes. We must distinguish, however, the tool from the purposes it is used for. The Soviet and the Nazi regimes, like contemporary democracies, also had tax collectors, police, and public bureaucrats that brutally suppressed opposition and were designed to serve the purposes of those regimes. That does not mean that tax collectors or police are inherently flawed. There are also significant differences between informing in a democratic society and informing under a dictatorship. First, under the former, laws are democratically enacted and (at least in theory) supported by a majority of the population. Law-making is also constrained by constitutions and fundamental rights of individuals who enjoy due process and legal representation. Second, punishment is proportional if you are informed on, unlike under authoritarian regimes where simply not tolling the party line could lead to a death sentence or life imprisonment. The reward programmes discussed in this Thesis are not indiscriminate carte blanche regimes as they typically are in authoritarian states; instead, they are designed for specific regulatory areas and apply only to severe wrongdoing. What should be asked, instead, is why almost every authoritarian state relied significantly on informants and how such systems can be structured to serve the aims of democratic societies while preserving judicial safety. Concerning the second line of concern, this Thesis shows how appealing to purer motivations has not worked to a satisfying degree in combating corporate wrongdoing and that people typically don’t engage in self-harming behaviour, which whistleblowing mostly is. When whistleblowers are recognised in statute as important to enforcement, the legislative response has more typically been to protect them if they suffer retaliation. Yet, experience and prior legislation have shown this is, in most cases, insufficient for employees to come forward. Wrongdoers have a range of carrots and sticks that can be leveraged to dissuade whistleblowing under a protection regime, and these regimes have also failed in practice to remedy whistleblowers effectively.