An Examination of the Impact of an Evidentiary Privilege Protecting Corporate Whistleblowers on Intention to Report Wrongdoing

• In Event: Internal Control Issues in Fraud

Abstract

Current law does not protect the disclosure of the reports, communications, or identity of whistleblowers to SOX-mandated employee hotlines in judicial or administrative proceedings. Using an experiment, we find that employees are more likely to report a questionable accounting matter to an employee hotline when protected by a whistleblower evidentiary privilege. Employees perceive less risk of discovery of their identity by management, less risk of adverse job action, and less personal costs of reporting when protected by a whistleblower evidentiary privilege. Our study further demonstrates that the name of whistleblowers can be obtained by the hotline without significantly impacting the perceived personal cost or likelihood of reporting by granting an evidentiary privilege to whistleblowers. This should improve the ability of audit committees to investigate the allegations of whistleblowers by obtaining clarification of their report and asking follow-up questions. Based on the results of this study, further investigation is warranted by policymakers and academics regarding the feasibility of adopting an evidentiary privilege protecting the reports, communications, and identity of whistleblowers to SOX-mandated employee hotlines.


Key words: employee hotline; reporting intentions; whistleblow; whistleblowing; evidentiary privilege

Authors

• Blaise Michael Sonnier, University of Colorado-Colorado Springs

• Walfried Lassar, Florida International University