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The Cost of Retaliation: Why Employers Need Whistleblowers

On behalf of California Civil Rights Law Group on Friday, February 1, 2013.

Whistleblowers tend to get a bad rap in this country and around the world. From the employers exposed by their refusal to stand idly by to a media culture that tends to view them as traitors or worse, whistleblowers face an uphill battle as soon as they resolve to break the silence. Instead of being applauded for their bravery, they are often treated with suspicion, harassed, and even terminated by their employers. It should hardly come as a surprise, then, that studies have shown that as many as one in five American employees are aware of fraud and abuse taking place at work, yet out of the 80 percent of them who want to speak up, less than half actually do.

Such reluctance to do the right thing is largely attributable to the subtle – though hardly secret – cultivation of fear that lets potential tipsters know to stay silent or face retribution. However, if one takes the time to consider just how beneficial whistleblowers really are, one will realize what a critical role they play, not only to the preservation of an honesty and transparency, but frequently to the financial benefit of the employers who often treat them with such malice and contempt.

In its 2012 Report to the Nations, the Association of Certified Fraud Examiners (ACFE) determined that more than $3.5 trillion is lost each year as a result of fraud alone. On the rare occasion that such abuse is actually exposed by an employee willing to risk retaliation, a median of 18 months has already gone by before such fraud is finally detected. In addition, the ACFE reports that almost 50 percent of the organizations being extorted never recover these fraud-induced losses.

It’s hardly speculative, then, to suggest that such massive costs are at least partially attributable to the climate of intimidation that many potential tipsters face at work. Were it not for the fear of retaliation, fraud and other abuse would likely take less time to be exposed, thereby creating a greater opportunity for victimized companies to recover these fraud-related losses.

This is evidenced in part by a federal policy that offers protection, and even some incentive, to blow the whistle on fraud without fear of reprisal. Under the False Claims Act, individuals who report legitimate instances of fraud against the federal government receive a portion of the sum that’s recovered. According to an announcement from the Justice Department, that sum was a record-setting $3.3 billion during fiscal 2012.

“These figures give a sense of how important whistleblowing, and transparency generally, is to maintaining an efficient, effective government,” suggests watchdog group Center for Effective Government.

Perhaps now the private sector should follow suit. Instead of allowing executives and managers – the greatest perpetrators of fraud – to use their positions of power to intimidate and punish whistleblowers, these companies would stand to make significant gains by instituting policies that reward those who witness unethical or illegal activity at work.

Were employers to adopt this type of initiative, the benefits would extend well beyond the financial losses caused by fraud itself. Employers would face fewer retaliation lawsuits, which bear both financial and reputational costs. Employees would have a greater sense of loyalty and belonging, boosting employee morale and reducing turnover.

For companies with long-term success in mind, whistleblowers aren’t a liability. They’re an asset.

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2017-06-19T19:14:34+00:00