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Whistle-Blowing Systems and Legitimacy Theory: A Study of the Motivation to Implement Whistle-Blowing Systems in German Organizations

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Abstract

Until now, there has been no theoretical foundation that explains why organizations implement whistle-blowing systems. By understanding whistle-blowing systems as an instrument that is desired by society, the legitimacy theory could be transferred to the whistle-blowing concept. A survey of German managers shows that legitimacy theory may be supported. Further insights into legitimacy theory are given by the motivation for the design of the implemented systems. The survey shows that, in particular, the implementation of external whistle-blowing systems is seemingly not driven by desired effectiveness. This supports legitimacy theory, since it reveals that external systems are symbolic rather than substantive systems. However, the results do not hold for internal whistle-blowing systems because the implementation of internal systems is ostensibly driven by power theories. The results are interesting for the planned statutory whistleblower protection as they reveal a partially restrained attitude toward whistle-blowing. Whistle-blowing systems are not effective if management is not convinced of their benefits.

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Notes

  1. I am aware of the fact that ordinally-scaled independent variables are used. However, in line with many similar research approaches, I nonetheless apply multivariate analyses. See, for example, Miceli and Near (2002), Stansbury and Victor (2009), Park and Blenkinsopp (2009).

  2. For the purpose of publication, the translated statements are shown. The questionnaire posed the statements in German language.

  3. For further reading on logistic regression analysis see Hosmer and Lemeshow (2000).

  4. This value bases on the calculation of Nagelkerke. The Pseudo R-square formed in accordance with Cox and Snell is 44.0%. See for the differences between the methods see Hair et al. (2010, p. 420).

  5. All variables are tested for multi-collinearity. None of the variables show serious multi-collinearity problems, thus one can adhere to the model. The variance inflation factor (VIF) is in every case smaller than 10 (Stevens, 2002, pp. 92–93). Since a VIF smaller than 3 is sometimes demanded (Hair et al. 2010, p. 204), two variables exceed this level: cost of equity and cost of debts with 4.84 and 4.90, respectively. These high values derive from a high correlation of both variables (r = 0.85). Neither of these two variables are significant for the model, so there are no problems with interpretation. Moreover, the results are unchanged if these two variables are left out of the model. The correlation matrices are available on request from the author.

  6. An approach of this kind is planned by German legislation; see http://dipbt.bundestag.de/dip21/btd/17/097/1709782.pdf.

  7. Possible statutory models are, for example, the US Corporate Sentencing Guidelines or the Public Interest Disclosure Act in the UK. For a short description of these models see, for example, Schmidt (2005).

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  1. Institute of Accounting, Finance and Taxation, University of Leipzig, Grimmaische Str. 12, 04109, Leipzig, Germany

    Esther Pittroff

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Pittroff, E. Whistle-Blowing Systems and Legitimacy Theory: A Study of the Motivation to Implement Whistle-Blowing Systems in German Organizations. J Bus Ethics 124, 399–412 (2014). https://doi.org/10.1007/s10551-013-1880-2

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