European Journal of Law and Economics

, Volume 27, Issue 3, pp 233–256

An economic rationale for firing whistleblowers

Article

DOI: 10.1007/s10657-008-9091-5

Cite this article as:
Bac, M. Eur J Law Econ (2009) 27: 233. doi:10.1007/s10657-008-9091-5
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Abstract

Organization members disclosing their superiors’ violations of duty are characterized by high ethical standards and, surprisingly often, fired for blowing the whistle. This paper provides an economic rationale for firing whistleblowers in a model where only the “ethical” type of agent can internally report the manager’s violation of duty. Revelation of an ethical type in the organization increases the perceived future probability of detecting and punishing the manager. Replacing the ethical type by an agent of unknown type restores this probability to its initial level, and this is optimal in organizations in which the standard of proof in establishing the manager’s violation of duty is low.

Keywords

Incentives Whistleblowing Information Organization 

JEL Classification

D23 D82 L22 

Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.Faculty of Arts and Social SciencesSabanci UniversityTuzla, IstanbulTurkey

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