The Dodd-Frank Act of 2010 marks a paradigm shift in the U.S. corporate whistleblowing legislation. Whistleblowers are entitled to monetary rewards if they provide information resulting in sanctions against an accused company.
The authors analyze the impact of monetary rewards on the prevalence of whistleblowing and identify the equilibrium behavior of managers and employees induced by the regulation. Their model shows that, in order to be effective, monetary rewards need to be sufficiently high to compensate for retaliation damages. If monetary rewards fulfill this condition, they indeed foster whistleblowing while they do not guarantee lawful manager behavior. However, increasing monetary rewards can also have unintended consequences such as an increasing number of false accusations. The results further highlight that regulators have to carefully weigh whistleblower rewards, protection from retaliation, and fines for uncovered manipulation to achieve an efficient whistleblower regime.
- A Carrot Without a Stick - Whistleblowing Rewards Under the Dodd-Frank Act door Benedikt Franke, Henrik Moser en Dirk Simons