Whistleblowers are getting a pat on the back from a new study by a University of Iowa assistant professor of accounting. The research by Jaron Wilde shows that these insiders, often former or current employees of a target company, have an impact in getting the companies to change their bad behavior.
New York Times reporter Gretchen Morgenson recently wrote about the study and interviewed Wilde. Here is an excerpt of her article:
For those who doubt that whistle-blowers are a force for good in corporate America — and yes, such skeptics exist — a new study out of the University of Iowa could not be more important. It demonstrates for the first time that financial shenanigans at companies decrease markedly in the years after truth tellers come forward with information about wrongdoing inside their operations.
Federal and state whistle-blower programs that award bounties to individuals providing tips about corporate fraud have grown in recent years. They are increasingly seen as a way to help understaffed regulators enhance their oversight of sprawling and complex corporations.
But the costs to whistle-blowers are high; they often face retaliation from their employers and are unable to find work because they are blackballed in their industry. These very real perils underscore the significance of the new research by Jaron H. Wilde, an assistant professor of accounting at the University of Iowa’s Tippie College of Business; he found a sharp and lasting drop in financial wrongdoing at companies that were subject to whistle-blower investigations.
The incidence of such tips appears to be rocketing. The whistle-blower program at the Securities and Exchange Commission, for example, heard from 4,218 tipsters in fiscal 2016, up 40 percent from the number who came forward in 2012.