Hijacking the Moral Imperative: How Financial Incentives Can Discourage Whistleblower Reporting

• In Event: Ethical Reporting Decisions

Abstract

In recent years, policymakers have focused significant attention on the use of financial incentives as a means of encouraging whistleblower reporting. While such financial incentives are ostensibly meant to encourage reporting, prior research in psychology calls this proposition into question. We point to the psychological theory of motivational crowding, which predicts that offering such extrinsic financial incentives may unintentionally hijack a person’s intrinsic moral intention to report by changing the reporting decision frame from one of right versus wrong (i.e., an autonomous motivation) to one of risk versus reward (i.e., a controlled motivation). Motivated by this theory, we conducted an experiment and found that, in certain contexts, whistleblower incentive programs may inhibit reporting to a greater extent than if such incentives were not offered at all. We believe our results have important implications for auditors, regulators, and those charged with corporate governance.

Authors

• Leslie Berger, Wilfrid Laurier University

• Stephen Joseph Perreault, Bryant University

• James Wainberg, University of Waterloo