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

Sat, January 17, 1:45 to 3:15pm, TBA

Abstract

In recent years, policymakers have focused significant attention on the use of financial incentives as a means of encouraging whistleblower reporting. While such incentives are ostensibly meant to increase the likelihood that fraud will be identified in a timely manner, prior research in psychology calls this proposition into question. We point to the psychological theory of motivational crowding, which predicts that offering financial incentives may unintentionally hijack a person’s intrinsic moral motivation to “do the right thing” (i.e., an autonomous motivation) and replace it with a motivation focused primarily on the financial benefit to be received (i.e., a controlled motivation). Inspired 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 organizational governance.

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