Could the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 be Helpful in Reforming Corporate America? An Investigation on Financial Bounties and Whistle-Blowing Behaviors in the Private Sector

Abstract

The purpose of this study is to investigate whether the availability of financial bounties and anonymous reporting channels impact individuals’ general reporting intentions of questionable acts and whether the availability of financial bounties will prompt people to reveal their identities. The recent passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 creates a financial bounty for whistle-blowers. In addition, SOX requires companies to provide employees with an anonymous reporting channel option. It is unclear of the effect of these provisions as they relate to whistle-blowing. Our results indicate that a financial bounty has the potential to increase participants’ propensity to report questionable acts and their willingness to reveal their identities when reporting, but the availability of an anonymous reporting channel does not affect participants’ propensity to report questionable acts. These findings could potentially help corporate management, government policy makers and accounting researchers to assess the effectiveness of their internal compliance programs and help determine if financial bounties in the private sector could encourage whistle-blowing.

This is a preview of subscription content, log in to check access.

Notes

  1. 1.

    http://www.sec.gov/news/press/2010/2010-213.htm.

  2. 2.

    An individual can only continue with a case under the Dodd–Frank Act if the government is interested in pursuing the alleged fraud.

  3. 3.

    Only two participants indicated that they do not have working experience.

References

  1. Alvarado, K. (2007). Sarbanes Oxley changes sources of whistleblowing. Internal Auditor, 64(2), 18.

    Google Scholar 

  2. Arnold, D. F., & Ponemon, L. (1991). Internal auditors’ perceptions of whistleblowing and the influence of moral reasoning: An experiment. Auditing A Journal of Practice & Theory, 10, 1–15.

    Google Scholar 

  3. Association of Certified Fraud Examiners (ACFE). (2004). Report to the nation on occupational fraud and abuse. Austin, TX: ACFE.

    Google Scholar 

  4. Barnett, T., Cochran, D., & Taylor, S. (1993). The internal disclosure policies of private-sector employers: An initial look at their relationship to employee whistleblowing. Journal of Business Ethics, 12(2), 127–137.

    Article  Google Scholar 

  5. Brinker Dozier, J., & Miceli, M. (1985). Potential predictors of whistleblowing: A prosocial behavior perspective. The Academy of Management Review, 10(4), 823–836.

    Google Scholar 

  6. Brown, J. D. (1986). Evaluations of self and others: Self-enhancement biases in social judgements’. Social Cognition, 4, 353–376.

    Article  Google Scholar 

  7. Duck, J. M., Terry, D. J., & Hogg, M. A. (1995). The perceived influence of AIDS advertising: Third-person effects in the context of positive media content. Basic and Applied Social Psychology, 17, 305–325.

    Article  Google Scholar 

  8. Dyck, I. J. A., Morse, A., & Lingales, Luigi. (2007). Who blows the whistle on corporate fraud? CRSP Working paper no. 618. Available at SSRN.

  9. Gundlach, M. J., Douglas, S. C., & Martinko, M. J. (2003). The decision to blow the whistle: A social information processing framework. The Academy of Management Review, 28(1), 107–123.

    Google Scholar 

  10. Gunther, A. C., & Thorson, E. (1992). Perceived persuasive effects of product commercials and public service announcements. Third-person effects in new domains. Communication Research, 19, 547–596.

    Article  Google Scholar 

  11. Hooks, K. L., Kaplan, S. E., & Schultz, J. J., Jr. (1994). Enhancing communication to assist in fraud prevention and detection. Auditing: A Journal of Practice & Theory, 13(2), 86–117.

    Google Scholar 

  12. Howse, R., & Daniel, R. J. (1995). Rewarding whistleblowers: The costs and benefits of an incentive-based compliance strategy. In R. J. Daniels & R. Morck (Eds.), Corporate decision-making in Canada (pp. 525–549). Calgary: University of Calgary Press.

  13. Kaplan, S. E., & Schultz, J. J., Jr. (2006). Intentions to report questionable acts: An examination of the influence of anonymous reporting channel, internal audit quality, and setting. Paper Presented at the annual meeting of the American Accounting Association, Washington, D.C.

  14. Kohn, A. (1993). Why incentive plans cannot work. Harvard Business Review, 71(5), 54–63.

    Google Scholar 

  15. KPMG. (2003). KPMG 2003 fraud survey. New York: KPMG.

    Google Scholar 

  16. KPMG. (2006). KPMG forensic integrity survey 2005–2006. New York: KPMG.

    Google Scholar 

  17. Miceli, M. P., & Near, J. P. (1985). Characteristics of organizational climate and perceived wrongdoing associated with whistleblowing decisions. Personnel Psychology, 38, 525–544.

    Article  Google Scholar 

  18. Miceli, M. P., & Near, J. P. (1992). Blowing the whistle: The organizational and legal implications for companies and employees. Lexington, MA: Lexington Books.

    Google Scholar 

  19. Miceli, M. P., Roach, B., & Near, J. P. (1988). The motivations of anonymous whistleblowers: The case of federal employees. Public Personnel Management, 17, 281–296.

    Google Scholar 

  20. Moberly, R. (2007). Unfulfilled expectations: An Empirical analysis of why sarbanes oxley whistleblowers rarely win. William & Mary Law Review, 49, 65. SRN: http://ssrn.com/abstract=977802. Accessed 22 Nov 2012.

  21. Near, J. P. (1988). The internal auditor’s ultimate responsibility: The reporting of sensitive issues. Altamonte Springs, FL: The Institute of Internal Auditors.

    Google Scholar 

  22. Near, J. P., & Miceli, M. P. (1995). Effective whistle-blowing. Academy of Management Review, 20(3), 679–708.

    Google Scholar 

  23. Read, D. (2005). Monetary incentives, what are they good for? Journal of Economic Methodology, 12(2), 265–276.

    Google Scholar 

  24. Rosenbaum, D. P., Lurigio, A. J., & Lavrakas, P. J. (1989). Enhancing citizen participation and solving serious crime: A national evaluation of crime stoppers programs. Crime & Delinquency, 35, 401.

    Article  Google Scholar 

  25. Salcido, R. (2010). The 2009 False Claims Act amendments: Congress’ efforts to both expand and narrow the scope of the false claims act. Public Contract Law Journal, 39(4), 741–784.

    Google Scholar 

  26. Schultz, J. J., Jr., Johnson, D. A., Morris, D., & Dyrnes, S. (1993). An investigation of the reporting of questionable acts in an international setting. Journal of Accounting Research, 31, 5–103.

    Article  Google Scholar 

  27. Stauffer, R.R., & Kennedy, A.D. (2010). Dodd–Frank act promises large bounties for whistleblowers. Retrieved 13 November, 2010 from www.Law.com.

  28. Wartzman, R., & Barrett, T. (1989, September 27). Government could stifle False Claims Act. Wall Street Journal, B1.

Download references

Author information

Affiliations

Authors

Corresponding authors

Correspondence to Kelly Richmond Pope or Chih-Chen Lee.

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Pope, K.R., Lee, C. Could the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 be Helpful in Reforming Corporate America? An Investigation on Financial Bounties and Whistle-Blowing Behaviors in the Private Sector. J Bus Ethics 112, 597–607 (2013). https://doi.org/10.1007/s10551-012-1560-7

Download citation

Keywords

  • Whistle-blowing
  • Dodd-Frank Act
  • Financial bounties
  • Anonymous reporting channel