Abstract
The purpose of this study is to examine whether United States (U.S.)-style regulatory intervention to encourage whistle-blowing can be immediately effective if transplanted into another country with a distinctly different historical cultural background and institutional system. A total of 98 U.S. and 84 German accountants participated in a laboratory experiment relating to a case of financial statement fraud. The provision of anti-retaliation protection and monetary rewards for whistle-blowing were manipulated and participants were asked to assume the role of an internal auditor. We hypothesize and find that the provision of anti-retaliation protection and monetary rewards encourage U.S. accountants to blow the whistle. In contrast, among German accountants, where their country features a historical fear and distrust of whistle-blowers, U.S.-style regulatory interventions are less effective. Together, our findings provide strong support for the theory of path-dependence, suggesting that whistle-blowing regulation should not be uniformly transplanted without due consideration of the unique history and culture of a country.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
Whistle-blowing is used within the business vernacular to describe an act whereby one exposes wrongdoing to parties who may be able to effect action (Near and Miceli 1985). Whistle-blowing can be classified as internal or external. External whistle-blowing occurs when the complaint recipient is outside of the organization, for example, law enforcement agencies and regulators, professional bodies, external “watch dog” organizations and interest groups, and the media (Near and Miceli 1995). Internal whistle-blowing is the reporting of wrongdoing to sources within the organization that can bring about change. This may include the board of directors, the audit committee, senior management or a designated complaint recipient within the organization (Finn 1995).
In 2013, the EU proposed that member states introduce monetary rewards for whistle-blowers, see §36 of the proposal for the regulation against market abuse (http://db.eurocrim.org/db/en/doc/1961.pdf). In April 2018, the European Commission proposed a new law to strengthen whistle-blower protection across the EU, see https://eur-lex.europa.eu/resource.html?uri=cellar:a4e61a49-46d2-11e8-be1d-01aa75ed71a1.0001.02/DOC_1&format=PDF. This proposal includes whistle-blower protection rights and the implementation of whistle-blowing systems.
In the U.S., cultural attitudes and values toward whistle-blowing, whistle-blowing regulation and the governance framework have developed together over many decades, whereas there has been a general lack of whistle-blowing-related regulation or a governance framework in Germany (described in detail in section “Whistle-Blowing Intention”). We are therefore effectively conducting a joint test of the type of whistle-blowing regulation and the impact of cultural attitudes and value orientation toward whistle-blowing fostered through decades of developments.
The most important characteristic of a market-controlled system is that an active external market exists, which functions as an effective instrument for corporate control. For example, independent shareholders actively influence managerial decisions. In contrast, in a network-oriented system, other stakeholder groups, such as banks and employees, are influential over managerial decisions via networks and relationships (Weimer and Pape 1999).
The German Democratic Republic was a socialist state from 1949 to 1990 in East Germany.
In coordinated market economies, employees are assured of job positions if they invest in firm-specific skills (Hall and Gingerich 2009). Compared to the U.S., which is a liberal market economy, employees in Germany have longer job tenures and more rights to participate in firm decision-making (Aguilera and Jackson 2003; Groenewegen 1997).
There are some relatively recent whistle-blowing cases involving German companies that also bear mention, namely Siemens and Volkswagen. At a glance, these are two German companies implicated in fraudulent activities brought about by whistle-blowers, which might perhaps be seen as reflective that a change has occurred in the culture toward whistle-blowing in Germany. Such a conclusion, however, should be tempered by the facts of these cases. It is true that both companies are headquartered in Germany. However, they are both multinational in nature, with subsidiaries dispersed around the globe, and each have their shares listed on the U.S. stock exchange, thus being governed by SEC rules. The whistle-blowers were able to access the Sarbanes–Oxley Act and Dodd–Frank Act provisions. Furthermore, the whistle-blowers were neither German citizens and nor were they working in Germany. Siemens’ whistle-blower, Meng-Lin Liu, a citizen and resident of Taiwan, was a former compliance officer working in Siemens China, a wholly owned subsidiary of Siemens. The whistle-blower in Volkswagen was Daniel Donovan, an information manager based in Michigan, and a U.S. citizen. Hence, while these whistle-blowing cases implicated German companies, we contend that they are not highly representative of a current shift in German attitudes toward whistle-blowing. Nevertheless, they may be a catalyst for a longer-term shift and had whistle-blowing regulations been available in Germany, perhaps these cases may have been detected earlier by German whistle-blowers.
For example, the public interest law movement has been seen as a distinctively U.S. project (Cummings 2007).
Monetary rewards for whistle-blowing could lead to a crowding-out effect, which in turn reduces whistle-blowing intentions (Lobel 2012; Feldman and Lobel 2010; Engstrom 2014; Berger et al. 2017). The crowding-out phenomenon argues that different forms of regulatory intervention can differ in the extent to which they map onto an individual’s moral obligations (Goeschl and Perino 2012). Any mismatch between an individual’s moral views and the relevant regulatory instrument can create negative feelings, which can be responsible for the reversal in behavior (Koenigs and Tranel 2007; Pillutla and Murnighan 1996). Applied to the context of whistle-blowing, the provision of monetary rewards could crowd out an individual’s moral obligation to blow the whistle. Given this competing argument, it is important to validate the prior findings by testing the effect indicated in Hypothesis 3a.
We considered individuals over the age of 25, employed in an accounting role and currently working in the respective countries to be a representative participant group (Andon et al. 2016).
Related studies in the field of whistle-blowing have used Qualtrics to gather data from accountants (e.g., Andon et al. 2016).
The U.S. Bureau of Labor Statistics reports that the majority of accountants and auditors are females. See Current Population Survey, “Table 11 Employed Persons by Detailed Occupation, Sex, Race, and Hispanic or Latino Ethnicity”. Available at http://www.bls.gov/cps/cpsaat11.pdf. German labor statistics similarly report that most accountants are females. See: https://statistik.arbeitsagentur.de/Statistikdaten/Detail/201703/iiia6/beschaeftigung-sozbe-bo-heft/bo-heft-d-0-201703-xlsx.
Professional standards could affect a respondent’s perceptions toward misconduct and whistle-blowing. Since 2001, the American Institute of Certified Public Accountants (AICPA) Professional Ethics Executive Committee (PEEC) has been converging the AICPA Code of Professional Conduct with the International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants (AICPA 2012). The AICPA is a member body of the International Federation of Accountants (IFAC), and agrees to have ethics standards that at a minimum meet the IESBA ethics standards. Effective December 15, 2014 “The revised AICPA Code is topically organized and restructured similar to that of the IESBA Code” (IESBA 2015, p. 2). Both the U.S. and Germany are member states of the IESBA (IMA 2017). To examine whether professional qualification affected respondents’ whistle-blowing intention, we included professional qualification as a covariate in our models. Our results (untabulated) remained robust and we did not find that holding a professional qualification significantly explained internal or external whistle-blowing intentions for U.S. or German accountants. This insignificant result (p > 0.10) between professional qualification and whistle-blowing is consistent with prior studies which do not find that professional commitment (i.e., the identification with the profession and the acceptance of professional ethics and goals) (Kaplan and Whitecotton 2001) affect whistle-blowing (Izraeli and Jaffe 1998; Kaplan and Whitecotton 2001).
Several whistle-blowing studies also compared different countries using Hofstede’s theoretical framework (e.g., Tavakoli et al. 2003; Trongmateerut and Sweeney 2013; Zhuang et al. 2005). Besides Hofstede, other studies have documented similar differences between the U.S. and German culture (e.g., House et al. 2004; Schwartz 1999).
Results of the Hofstede studies can be found at: https://geerthofstede.com/wp-content/uploads/2016/08/6-dimensions-for-website-2015-08-16.xls.
Regarding the degree of individualism, it is useful to highlight the country’s differences regarding their loyalty towards the employer. Employees from individualistic countries (e.g., U.S.) look out for themselves whereas employees from collectivistic countries (e.g., Germany) focus on the in-group. A higher loyalty towards the employer is therefore expected in collectivistic countries (Tavakoli et al. 2003). The long-term orientation also gives important insights into the relationship between the employee and the employer. Individuals with a long-term orientation perceive a higher dependence on employers and place a greater importance on their employer’s and fellow employees’ interests than do managers from countries with a short-term orientation (Zhuang et al. 2005).
Prior studies find internal and external whistle-blowing are affected by age, gender, educational level, and firm size of the organization the respondent worked for (see Andon et al. 2016; Bowen et al. 2010; Lee and Fargher 2013; Liyanarachchi and Adler 2011; Reckers-Sauciuc and Lowe 2010), as well as the perceived severity of misconduct (Andon et al. 2016; Schultz et al. 1993). While this list is not exhaustive of all factors known to impact whistle-blowing (see Lee and Xiao 2018 for a comprehensive review of factors that affect internal and external whistle-blowing), we examined pre-test differences with respect to these variables and found no significant differences (p > 0.10) across the four manipulated conditions. Consistent with scholarly recommendations (e.g., Kenny 1979; Rausch et al. 2003), these variables were not included in the model (i.e., reported in the model) as covariates because there were no pre-test differences. Nevertheless, additional tests indicate our results remain robust to the inclusion of these variables as covariates (see Sect. 5.5), which adds further support for internal validity.
Academic accountants served as experts in reviewing the survey instrument. Following this, sixty practitioners consisting of auditors, accountants, and executives or partners from large public companies participated in piloting the survey questionnaire. The review and pilot testing phases resulted in some changes to the wording of the case scenario to better expound the case material.
The German version of the survey can be obtained by contacting the corresponding author.
Under the current U.S. legal definition of materiality, a “disclosure generally should be evaluated as material based on whether there is a substantial likelihood that the omitted or misstated disclosure would have been viewed by a reasonable resource provider as having significantly [emphasis included] altered the total mix of information available in making a decision” (FASB 2015). Based on the FASB definition, we used the same terminology in our case scenario, i.e., respondents read “This has had the effect of significantly increasing income and overstating assets.” In Germany, the definition of materiality (“Wesentlichkeit”) is similar and is part of the Generally Accepted Principles of orderly bookkeeping (“Grundsätze ordnungsmäßiger Buchführung”). Information is material if it would be relevant to assess the financial position and the results of an organization’s operations. See https://wirtschaftslexikon.gabler.de/definition/materiality-39363/version-262773.
We asked participants to assess the extent to which Phillip would assess Martin’s action “To be harmful (e.g. shareholders and creditors)”; and “To be morally wrongful” using a seven-point scale anchored by 1 = not at all to 7 = to a large extent. Both U.S. (mean = 6.204, sd = 0.116) and German (mean = 6.012, sd = 0.117) accountants perceived the misconduct to be morally wrong. Similarly, U.S. (mean = 5.949, sd = 0.125) and German (mean = 5.905, sd = 0.125) accountants perceived the misconduct to be harmful. There were also no significant differences in perceptions between U.S and German accountants that the misconduct was morally wrong (p = 0.124) or harmful (p = 0.402).
Three attention check questions were also included throughout the survey to ensure a further layer of reliability to the information collected. Failure to answer any attention check question correctly resulted in the participant being excluded from the analysis.
Ethics-related studies can be affected by social desirability bias (Trevino and Youngblood 1990). We thus asked participants to respond to a six-item social desirability bias index (see Fischer and Fick 1993). We found no differences in social desirability between the U.S. and German accountants (t = − 0.912, p = 0.182).
The internal whistle-blowing definition read: “Internal whistle-blowing refers to reporting wrongdoing within the company: that is, reporting either to a member of the company’s hierarchy, such as a senior manager, to the board of directors, or the audit committee” (Chung et al. 2004). The external whistle-blowing definition, based on Near and Miceli (1995), read: “External whistle-blowing refers to the reporting of wrongdoing to an authority outside of the company, such as media, professional associations, politicians or Government regulatory bodies and interest groups.”
For internal (external) whistle-blowing, participants read the statement “What is the likelihood that Phillip would be willing to formally report Martin’s action internally (externally) to the company?” The three items which followed were: (1) “If his identity would be kept anonymous?”; (2) “If his identity would be known only to the investigator?”; and (3) “If his identity would be known to the company, the investigator, the wrongdoer and others?”
Our results are also robust to constructing the internal and external whistle-blowing measures using principal components factor analysis. For ease of interpretation, we report the average-weighted measures.
Contrary to expectation, the provision of monetary rewards for external whistle-blowing had no impact on U.S. accountants’ intention to blow the whistle. A possible reason for this is because of the extraordinary effort required to qualify for and get the rewards, and the risk of being retaliated and stigmatized. Monetary rewards alone may not be sufficient at encouraging whistle-blowers to report misconduct. For example, the 2015 Annual Dodd-Frank Act report stated that while 120 whistle-blowers had lodged award claims in 2015 alone, only 22 whistle-blowers received monetary rewards since the inception of the rewards program in 2011. Research also shows that 60% of whistle-blowers in the U.S. lost their cases, often because of failing to comply with the technical procedures of filing the report, and therefore did not receive a monetary reward (Patrick 2010). Another reason could be that the provision of monetary rewards may crowd out an individual’s intrinsic motivation to report fraud (Lobel 2012; Feldman and Lobel 2010; Engstrom 2014; Berger et al. 2017).
As reported in Panel A of Table 6, the mean likelihood of German accountants’ intention to internally whistle-blow in the absence of both monetary rewards and anti-retaliation protection is 5.242 on a scale where 1 = Extremely unlikely and 7 = Extremely likely. This indicates that German accountants demonstrate a relatively high likelihood to internally whistle-blow in the absence of any regulation.
This movement was pressured by the U.S. that forbid bribery payments from 1977 as enacted through the Foreign Corrupt Practices Act (FCPA). As a consequence of this came enunciations of the Organisation for Economic Co-Operation and Development (OECD) Anti-Bribery Convention (http://www.oecd.org/daf/anti-bribery/ConvCombatBribery_ENG.pdf). Each country that signed the convention was required to implement laws that criminalized bribery payments from February 1999. Germany and many other countries yielded to pressure of the U.S. (due largely to firms’ need in these countries to gain access to U.S. markets by cross-listing), signed the convention and duly passed laws that criminalized foreign corruption, including bribery (Wolf 2014).
A similar reaction is observable after the German legislator extended the provisions against insider trading. Insider trading was a common practice in Germany. The first law against insider trading was introduced in 1994 after pressures from the U.S. – some German financial instruments were not admitted by the SEC due to the missing insider trading regulations in Germany. After the European Market Abuse Directive, Germany had to strengthen this law. However, insider trading practices did not change in the first years after the introduction of the new law (Dymke 2011).
Siemens was alleged to have engaged in an elaborate scheme of systematic large off-the-books cash deposits related to bribing foreign officials.
Prior to this, although Siemens by virtue of listing on the New York Stock Exchange was subject to not only the German anti-bribery legislation but also the full extra-territorial reach of the U.S. FCPA, their guidelines to ensure compliance on bribery were largely for cosmetic reasons and were not strongly enforced by the firm (Berghoff 2018). No employee was fired before 2006 for illegal activities relating to dubious payments. Some Siemens managers did not even realize that their practices were illegal (Wolf 2014). As a signal to the prevailing culture in Germany at this time, Siemens’ compliance system was not considered at all backward relative to other large German corporations (Berghoff 2018).
A professional accountant is “An individual who is a member of an IFAC [International Federation of Accountants] member body” (IESBA 2018).
Examples of NOCLAR that are covered by The Code include fraud corruption and bribery, money laundering, terrorist financing and proceeds of crime, securities markets and trading, banking and other financial products and services, data protection, tax and pension liabilities and payments, environmental protection, public health and safety (see section 360.5 A2).
References
ACFE. (2018). Report to the nations: 2018 Global study on occupational fraud and abuse. Austin: Association of Certified Fraud Examiners.
Aguilera, R. V., & Jackson, G. (2003). The crossnational diversity of corporate governance: Dimensions and determinants. Academy of Management Review, 28(3), 447–465.
AICPA (2012). AICPA Ethics Codification Project. Retrieved April 15, 2018, from https://www.aicpa.org/InterestAreas/ProfessionalEthics/Community/DownloadableDocuments/AICPA-Ethics-Codification-Project.pdf.
Andon, P., Free, C., Jidin, R., Monroe, G. S., & Turner, M. J. (2016). The impact of financial incentives and perceptions of seriousness on whistleblowing intention. Journal of Business Ethics. https://doi.org/10.1007/s10551-016-3215-6.
Andon, P., Free, C., & Scard, B. (2015). Pathways to accountant fraud: Australian evidence and analysis. Accounting Research Journal, 28(1), 10–44.
Arnold, D. F., & Ponemon, L. A. (1991). Internal auditor’s perception of whistle-blowing and the influence of moral reasoning: An experiment. Auditing: A Journal of Practice & Theory, 10(2), 1–15.
Arthur, W. B. (1989). Competing technologies, increasing returns, and lock-in by historical events. The Economic Journal, 99(394), 116–131.
Bame-Aldred, C., Sweeney, J. T., & Seifert, D. (2007). An examination of the effectiveness of Sarbanes-Oxley whistle-blower protection. Journal of Forensic Accounting, 8(1/2), 105–118.
Bebchuk, L. A., & Roe, M. J. (1999). A theory of path dependence in corporate ownership and governance. Stanford Law Review, 52(1), 127–170.
Behling, O., & Lay, K. S. (2000). Translating questionnaires and other research instruments: Problems and solutions. Thousand Oaks: Sage Publications, Inc.
Berger, L., Perreault, S., & Wainberg, J. (2017). Hijacking the moral imperative: How financial incentives can discourage whistleblower reporting. Auditing: A Journal of Practice & Theory, 36(3), 1–14.
Berghoff, H. (2018). “Organised irresponsibility”? The Siemens corruption scandal of the 1990s and 2000s. Business History, 60(3), 423–445.
Berry, J. W. (2005). Acculturation: Living successfully in two cultures. International Journal of Intercultural Relations, 29(6), 697–712.
Beugelsdijk, S., Maseland, R., & van Hoorn, A. (2015). are scores on hofstede’s dimensions of national culture stable over time? A cohort analysis. Global Strategy Journal, 5(3), 223–240.
Beyer, J. (2005). Pfadabhängigkeit ist nicht gleich Pfadabhängigkeit—Wider den impliziten Konservatismus eines gängigen Konzepts. Zeitschrift für Soziologie, 34(1), 5–21.
Bowen, R. M., Call, A. C., & Rajgopal, S. (2010). Whistle-blowing: Target firm characteristics and economic consequences. The Accounting Review, 85(4), 1239–1271.
Brayfield, A. H., & Rothe, H. F. (1951). An index of job satisfaction. Journal of Applied Psychology, 35(5), 307–311.
Brink, A. G., Lowe, D. J., & Victoravich, L. M. (2013). The effect of evidence strength and internal rewards on intentions to report fraud in the Dodd–Frank regulatory environment. Auditing: A Journal of Practice & Theory, 32(3), 87–104.
Buck, T., & Shahrim, A. (2005). The translation of corporate governance changes across national cultures: The case of Germany. Journal of International Business Studies, 36(1), 42–61.
Buckless, F. A., & Ravenscroft, S. P. (1990). Contrast coding: A refinement of ANOVA in behavioral analysis. The Accounting Review, 65(4), 933–945.
Busekist, K., & Fahrig, S. (2013). Whistleblowing und der Schutz von Hinweisgebern. Betriebs-Berater, 68(3), 119–124.
Chizema, A., & Buck, T. (2006). Neo-institutional theory and institutional change: Towards empirical tests on the “Americanization” of German executive pay. International Business Review, 15(5), 488–504.
Chung, J., Monroe, G., & Thorne, L. (2004). An examination of factors affecting external and internal whistle-blowing by auditors. Toronto: York University.
Cummings, S. L. (2007). The internationalization of public interest law. Duke Law Journal, 57, 891–1036.
Dellaportas, S. (2013). Conversations with inmate accountants: Motivation, opportunity and the fraud triangle. Accounting Forum, 37(1), 29–39.
DeZoort, F. T., & Harrison, P. D. (2016). Understanding auditors’ sense of responsibility for detecting fraud within organizations. Journal of Business Ethics. https://doi.org/10.1007/s10551-016-3064-3.
Dowling, D. C. Jr. (2008). Sarbanes-Oxley whistleblower hotlines across Europe: Directions through the maze. International Lawyer, 42(1), 1–58.
Dworkin, T. M. (2007). SOX and whistleblowing. Michigan Law Review, 105, 1757–1780.
Dymke, B. (2011). Directors’ Dealings in Deutschland. Wiesbaden: Springer.
Eden, D. (2017). Field experiments in organizations. Annual Review of Organizational Psychology and Organizational Behavior, 4, 91–122.
Engstrom, D. (2014). Whither whistleblowing? Bounty regimes, regulatory context, and the challenge of optimal design. Theoretical Inquiries in Law, 15(2), 605–634.
Epley, N., & Dunning, D. (2000). Feeling “holier than thou”: Are self-serving assessments produced by errors in self- or social prediction? Journal of Personality and Social Psychology, 79(6), 861–875.
Eun-Seok, C., Kim, K. H., & Erlen, J. A. (2007). Translation of scales in cross-cultural research: Issues and techniques. Journal of Advanced Nursing, 58(4), 386–395.
FASB (2015). Conceptual framework for financial reporting FASB concepts statement No. 8. Norwalk: Financial Accounting Standards Board.
Feldman, Y., & Lobel, O. (2010). The incentives matrix: The comparative effectiveness of rewards, liabilities, duties, and protections for reporting illegality. Texas Law Review, 88(6), 1151–1211.
Finn, D. W. (1995). Ethical decision making in organizations: A management employee-organization whistleblowing model. Research on Accounting Ethics, 1(1), 291–313.
Fischer, D. G., & Fick, C. (1993). Measuring social desirability: Short forms of the Marlowe-Crowne social desirability scale. Educational and Psychological Measurement, 53(2), 417–424.
Fleischer, H., & Schmolke, K. U. (2012). Finanzielle Anreize für Whistleblower im Europäischen Kapitalmarktrecht? Rechtspolitische Überlegungen zur Reform des Marktmissbrauchsregimes. Neue Zeitung für Gesellschaftsrecht, 15(10), 361–368.
Forst, G. (2011). Strafanzeige gegen den Arbeitgeber – Grund zur Kündigung des Arbeitsvertrags? Neue Juristische Wochenschrift, 64, 3477–3482.
Forst, G. (2013). Whistleblowing im internationalen Vergleich—Was kann Deutschland von seinen Nachbarn lernen? Europäische. Zeitschrift für Arbeitsrecht, 6(1), 37–83.
Goeschl, T., & Perino, G. (2012). Instrument choice and motivation: Evidence from a climate change experiment. Environmental and Resource Economics, 52(2), 195–212.
Groenewegen, J. (1997). Institutions of capitalisms: American, European, and Japanese systems compared. Journal of Economic Issues, 31(2), 333–347.
Guthrie, C. P., & Taylor, E. Z. (2017). Whistleblowing on fraud for pay: Can I trust you? Journal of Forensic Accounting Research, 2(1), A1–A19.
Hall, P. A., & Gingerich, D. W. (2009). Varieties of capitalism and institutional complementarities in the political economy: An Empirical Analysis. British Journal of Political Science, 39(3), 449–482.
Hall, P. A., & Soskice, D. (2001). An introduction to varieties of capitalism. In P. A. Hall & D. Soskice (Eds.), Varieties of capitalism: The institutional foundations of comparative advantage (pp. 1–68). New York: Oxford University Press.
Hofstede, G. (1980). Culture’s consequences: International differences in work related values. Beverly Hills: Sage.
Hofstede, G. (1991). Cultures and organization: Software of the mind. New York: McGraw Hill.
Hofstede, G. (2001). Culture’s consequences: Comparing values, behaviors, institutions, and organizations across nations. New York: Sage.
House, R., Hanges, P., Javidan, M., Dorfman, P., & Gupta, V. (2004). Culture, leadership and organizations: The globe study of 62 Societies. Thousand Oaks: CA Sage Publications.
IESBA (2015). Consultation Paper, Improving the Structure of the Code of Ethics for Professional Accountants. Retrieved April 15, 2018, from https://www.ifac.org/system/files/publications/exposure-drafts/comments/AICPAPEECCommentLetter-StructureofCode-final.pdf.
IESBA (2018). International Code of Ethics for Professional Accountants (including International Independence Standards). Final Pronouncement April 2018, Retrieved July 10, 2018, from http://www.ifac.org/system/files/publications/files/Final-Pronouncement-The-Restructured-Code_0.pdf.
IMA (2017). IMA Statement of Ethical Professional Practice. Retrieved from https://www.imanet.org/-/media/b6fbeeb74d964e6c9fe654c48456e61f.ashx.
Izraeli, D., & Jaffe, E. D. (1998). Predicting whistle blowing: A theory of reasoned action approach. International Journal of Value-Based Management, 11(1), 19–34.
Kaplan, S., Pany, K., Samuels, J., & Zhang, J. (2009). An examination of the association between gender and reporting intentions for fraudulent financial reporting. Journal of Business Ethics, 87(1), 15–30.
Kaplan, S. E., & Whitecotton, S. M. (2001). An examination of auditors’ reporting intentions when another auditor is offered client employment. Auditing: A Journal of Practice & Theory, 20(1), 45–64.
Kenny, D. A. (1979). Correlation and causality. New York: Wiley-Interscience.
Kirkman, B. L., Lowe, K. B., & Gibson, C. B. (2017). A retrospective on culture’s consequences: The 35-year journey. Journal of International Business Studies, 48(1), 12–29.
Koenigs, M., & Tranel, D. (2007). Irrational economic decision-making after ventromedial prefrontal damage: Evidence from the ultimatum game. The Journal of Neuroscience, 27(4), 951–952.
Lacayo, R., & Ripley, A. (2002). Persons of the year 2002, Cynthia Cooper, Coleen Rowley and Sherron Watkins. Time Magazine, 160(27), 30–33.
Latan, H., Ringle, C. M., & Jabbour, C. J. C. (2018). Whistleblowing intentions among public accountants in Indonesia: Testing for the moderation effects. Journal of Business Ethics. https://doi.org/10.1007/s10551-016-3318-0.
Lee, G., & Fargher, N. (2013). Companies’ Use of Whistle-Blowing to Detect Fraud: An Examination of Corporate Whistle-Blowing Policies. Journal of Business Ethics, 114(2), 283–295.
Lee, G., & Xiao, X. (2018). Whistleblowing on accounting-related misconduct: A synthesis of the literature. Journal of Accounting Literature, 41, 22–46.
Lee, J. (2011). Corporate corruption & The new gold mine: How the Dodd–Frank act overincentivizes whistle-blowing. Brooklyn Law Review, 77(1), 303–339.
Licht, A. N., Goldschmidt, C., & Schwartz, S. H. (2005). Culture, law, and corporate governance. International Review of Law and Economics, 25(2), 229–255.
Liyanarachchi, G. A., & Adler, R. (2011). Accountants’ whistle-blowing intentions: The impact of retaliation, age, and gender. Australian Accounting Review, 21(2), 167–182.
Liyanarachchi, G. A., & Newdick, C. (2009). The impact of moral reasoning and retaliation on whistle-Blowing: New Zealand evidence. Journal of Business Ethics, 89(1), 37–57.
Lobel, O. (2012). Linking prevention, detection, and whistleblowing: Principles for designing effective reporting systems. South Texas Law Review, 54, 37–52.
Mahoney, J. (2000). Path dependence in historical sociology. Theory and Society, 29(4), 507–548.
Mesmer-Magnus, J. R., & Viswesvaran, C. (2005). Whistleblowing in organizations: An examination of correlates of whistleblowing intentions, actions, and retaliation. Journal of Business Ethics, 62(3), 277–297.
Miceli, M. P., & Near, J. P. (1994). Whistleblowing: Reaping the benefits. Academy of Management Executive, 8(3), 65–72.
Miceli, M. P., Near, J. P., & Dworkin, T. M. (2008). Whistle-blowing in Organizations. New York: Taylor-Francis.
Moberly, R. E. (2006). Sarbanes Oxley’s structural model to encourage corporate whistleblowers. Brigham Young University Law Review, 5, 1107–1176.
Nayir, D. Z., & Herzig, C. (2012). Value Orientations as Determinants of Preference for External and Anonymous Whistleblowing. Journal of Business Ethics, 107(2), 197–213.
Near, J. P., & Jensen, T. C. (1983). The whistle-blowing process: Retaliation and perceived effectiveness. Work and Occupations, 10(1), 3–28.
Near, J. P., & Miceli, M. P. (1985). Organizational dissidence: The case of whistle-blowing. Journal of Business Ethics, 4(1), 1–16.
Near, J. P., & Miceli, M. P. (1995). Effective whistle-blowing. Academy of Management Review, 20(3), 679–708.
North, D. C. (1992). Institutionen, institutioneller Wandel und Wirtschaftsleistung. Tübingen: Mohr Siebeck.
OECD (2011). Germany: Phase 3. Report on the Application of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and the 2009 Revised Recommendation on Combating Bribery in International Business Transactions, 89. Retrieved June 9, 2018, from https://www.oecd.org/berlin/47413672.pdf.
Oh, L. B., & Teo, H. H. (2010). To blow or not to blow: An experimental study on the intention to whistleblow on software piracy. Journal of Organizational Computing and Electronic Commerce, 20(4), 347–369.
Orren, K. (1991). Labor, the law, and liberal development in the United States. Cambridge: Cambridge University Press.
Park, H., Blenkinsopp, J., Oktem, M. K., & Omurgonulsen, U. (2008). Cultural orientation and attitudes toward different forms of whistleblowing: A comparison of South Korea, Turkey, and the U.K. Journal of Business Ethics, 82(4), 929–939.
Park, H., Blenkinsopp, J., & Park, M. (2014). The influence of an observer’s value orientation and personality type on attitudes toward whistleblowing. Journal of Business Ethics, 120(1), 121–129.
Patrick, P. A. (2010). Be Prepared Before You Blow the Whistle. Retrieved 24 May, 2016, from http://www.acfe.com/article.aspx?id=4294968656.
Pfeifle, T. (2016). Finanzielle Anreize für Whistleblower im Kapitalmarktrecht. Baden-Baden: Nomos.
Pillutla, M. M., & Murnighan, J. K. (1996). Unfairness, anger, and spite: Emotional rejections of ultimatum offers. Organizational Behavior and Human Decision Processes, 68(3), 208–224.
Pittroff, E. (2014). Whistle-blowing systems and legitimacy theory: A study of the motivation to implement whistle-blowing systems in German organizations. Journal of Business Ethics, 124(3), 399–412.
Pittroff, E. (2016). Whistle-blowing regulation in different corporate governance systems - an analysis of the regulation approaches from the view of path dependence theory. Journal of Management and Governance, 20(4), 703–727.
Primbs, M., & Wang, C. (2016). Notable Governance Failures: Enron, Siemens and Beyond. University of Pennsylvania Law School Seminar Paper Spring 2016. Penn Law: Legal Scholarship Repository. Retrieved June 9, 2018, from https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1009&context=fisch_2016.
Quigley, S. K. (2012). Whistle-blower tug-of-war: Corporate attempts to secure internal reporting procedures in the face of external monetary incentives provided by the Dodd-Frank Act. Santa Clara Law Review, 52, 255–296.
Rauhofer, J. (2007). Blowing the whistle on Sarbanes-Oxley: Anonymous hotlines and the historical stigma of denunciation in modern Germany. International Review of Law Computers and Technology, 21(3), 363–376.
Rausch, J. R., Maxwell, S. E., & Kelley, K. (2003). Analytic methods for questions pertaining to a randomized pretest, posttest, follow-up design. Journal of Clinical Child and Adolescent Psychology, 32(3), 467–486.
Reckers-Sauciuc, A. K., & Lowe, D. J. (2010). The influence of dispositional affect on whistle-blowing. Advances in Accounting, 26(2), 259–269.
Rest, J. (1986). Moral development: Advance in research and theory. New York: Praeger.
Robertson, J. C., Stefaniak, C. M., & Curtis, M. B. (2011). Does wrongdoer reputation matter? Impact of auditor-wrongdoer performance and likeability reputations on fellow auditors’ intention to take action and choice of reporting outlet. Behavioral Research in Accounting, 23(2), 207–234.
Rubin, D. B. (1974). Estimating causal effects of treatments in randomized and nonrandomized studies. Journal of Educational Psychology, 66(5), 688–701.
Salcido, R. (2010). The 2009 False Claims Act amendments: Congress’ efforts to both expand and narrow the scope of the false claims act. Public Contract Law Journal, 39(4), 741–784.
Schmidt, M. (2005). Whistle blowing regulation and accounting standards enforcement in Germany and Europe—An economic perspective. International Review of Law and Economics, 25(2), 143–168.
Schmidt, R. H., & Spindler, G. (2002). Path dependence, corporate governance and complementarity. International Finance, 5(3), 311–333.
Schubert, S., & Miller, T. C. (2008). At Siemens, bribery was just a line item, The New York Times, p. 21. Retrieved June 9, 2018, from https://www.nytimes.com/2008/12/21/business/worldbusiness/21siemens.html.
Schultz, D., & Harutyunyan, K. (2015). Combating corruption: The development of whistle-blowing laws in the United States, Europe, and Armenia. International Comparative Jurisprudence, 1(2), 87–97.
Schultz, J. J., Johnson, D. A., Morris, D., & Dyrnes, S. (1993). An investigation of the reporting of questionable acts in an international setting. Journal of Accounting Research, 31(Supplement), 75–80.
Schwartz, S. H. (1999). A theory of cultural values and some implications for work. Applied Psychology: An International Review, 48(1), 23–47.
SEC (2016). Annual Report to Congress on the Dodd-Frank Whistleblower Program, U.S. Securities and Exchange Commission.
Shutkin, J. J. (1969). One nation indivisible—A plea for a United States court of labor relations. Labor Law Journal, 20(2), 94–99.
Sonnier, B. M. (2013). The effects of wrongdoer motivation and internal versus external reporting channel on the intention to report fraud. Journal of Forensic & Investigative Accounting, 5(2), 77–113.
Sonnier, B. M., & Lassar, W. M. (2013). An empirical evaluation of Graham’s Model of Principled Organizational Dissent in the whistleblower context post-SOX. Journal of Forensic & Investigative Accounting, 5(2), 131–174.
Taras, V., Steel, P., & Kirkman, B. L. (2012). Improving national cultural indices using a longitudinal meta-analysis of Hofstede’s dimensions. Journal of World Business, 47(3), 329–341.
Tavakoli, A. A., Keenan, J. P., & Cmjak-Karanovic, B. (2003). Culture and whistleblowing an empirical study of Croatian and United States managers utilizing Hofstede’s Cultural Dimensions. Journal of Business Ethics, 43(1/2), 49–64.
Trevino, L. K., & Youngblood, S. A. (1990). Bad apples in bad barrels: A causal analysis of ethical decision-making behavior. Journal of Applied Psychology, 75(4), 378–385.
Trongmateerut, P., & Sweeney, J. T. (2013). The Influence of subjective norms on whistle-blowing: A cross-cultural investigation. Journal of Business Ethics, 112(3), 437–451.
Verschoor, C. C. (2010). Increased motivation for whistle-blowing. Strategic Finance, 92(5), 16.
Wainberg, J., & Perreault, S. (2016). Whistleblowing in audit firms: Do explicit protections from retaliation activate implicit threats of reprisal. Behavioral Research in Accounting, 28(1), 83–93.
Weimer, J., & Pape, J. C. (1999). A taxonomy of systems of corporate governance. Corporate Governance: An International Review, 7(2), 152–166.
Wisskirchen, G., Körber, A., & Bissels, A. (2006). Whistleblowing und Ethikhotlines. Probleme des deutschen Arbeits- und Datenschutzrechts. Betriebs-Berater, 61(28), 1567–1572.
Wolf, S. (2014). Korruption, Antikorruptionspolitik und öffentliche Verwaltung. Wiesbaden: Springer.
Wolfe, S., Worth, M., Dreyfus, S., & Brown, A. J. (2014). Whistleblower Protection Rules in G20 Countries: The Next Action Plan. Retrieved November 21, 2017, from http://transparency.org.au/wp-content/uploads/2014/06/Action-Plan-June-2014-Whistleblower-Protection-Rules-G20-Countries.pdf.
Wolfsgruber, A. (2017). Whistleblower in Deutschland - für die einen Helden, für andere Verräter. Retrieved November 18, 2017, from http://www.focus.de/kultur/kino_tv/focus-fernsehclub/tv-kolumne-die-wahrheit-und-ihr-preis-whistleblower-in-deutschland-fuer-die-einen-helden-fuer-andere-verraeter_id_7759640.html.
Worth, M. (2013). Whistleblowing in Europe: Legal Protections for Whistleblowers in the EU. Berlin: Transparency International.
Xu, Y., & Ziegenfuss, D. E. (2008). Reward systems, moral reasoning, and internal auditors’ reporting wrongdoing. Journal of Business and Psychology, 22(4), 323–331.
Zhuang, J., Tomas, S., & Miller, D. L. (2005). Examining culture’s effect on whistle-blowing and peer reporting. Business & Society, 44(4), 462–486.
Acknowledgements
Funding for this study was received from Deutsche Forschungsgemeinschaft (The German Research Foundation, Project No. 315357377).
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of interest
The authors declare that they have no conflict of interest.
Electronic supplementary material
Below is the link to the electronic supplementary material.
Appendix: Case Scenario and Manipulated Treatments
Appendix: Case Scenario and Manipulated Treatments
Case Scenario
Phillip is the Internal Auditor at a large public company in the business of grain marketing and exporting. The company has an extensive international network of trading offices providing access to world markets for grain (e.g., wheat, canola, cottonseed, sunflower seed, and soybeans). Phillip’s career is progressing well and he has been working with the company for 4 years.
Martin is the company’s Chief Accountant and is very pleased with Phillip’s performance. However, one evening while working late on a set of files Phillip went through the accounting records carefully to see what had happened and whether he had made a mistake. After further investigation Phillip is quite sure that Martin had engaged in an unethical act of misreporting financial information.
Details of Phillip’s discovery are that late last year he believes that he did properly record several items related to building maintenance as expenses. However, after year-end, Martin then appears to have then posted a series of journal entries into the accounting system that inappropriately changed the classification of these items from expenses to ‘‘long-term assets.’’ This has had the effect of significantly increasing income and overstating assets.
Another problem is that Martin had not talked with Phillip before improperly changing the classification of these expenses. In further support of the act of misreporting financial information, Phillip also notes that the same items had been expensed in prior years. Therefore, Martin’s changes therefore appear to be clearly out of harmony with prior year reports.
After due consideration, Phillip is sure there is sufficient and appropriate evidence to support his conjecture. Indeed, Phillip is absolutely certain that Martin has intentionally and inappropriately changed the expense classification, which has resulted in a significant increase in income and overstatement of assets. This appears to have enabled Martin to meet the aggressive financial targets set for him by the company. Such an action would be considered fraudulent financial reporting and a felony under Federal Law.
Manipulated Treatments
Anti-Retaliation Protection ‘Absent’ and Monetary Rewards ‘Absent’
There are no explicit protections under Federal law against an employer retaliating against an individual presenting an allegation of illegal behavior either internally to their employer or externally to the relevant Government authority.
And
Under Federal Law, there are no explicit provisions for the paying of any financial bounty to any individual who volunteers original information to the relevant Government authority and which results in monetary sanctions being brought against the offending company.
Anti-retaliation Protection ‘Absent’ and Monetary Rewards ‘Present’
There are no explicit protections under Federal law against an employer retaliating against an individual presenting an allegation of illegal behavior either internally to their employer or externally to the relevant Government authority.
And
Federal Law will provide for a financial bounty to be paid to any individual who volunteers original information to the relevant Government authority and which results in monetary sanctions/fines being brought against the offending company.
Anti-retaliation Protection ‘Present’ and Monetary Rewards ‘Absent’
Federal Law prohibits any employer from taking retaliatory actions in any way against an individual presenting an allegation of illegal behavior either internally to their employer or externally to the relevant Government authority. If an employee believes that they have been retaliated against, they are able to take legal action against their employer and to gain reinstatement of their position and to be monetarily compensated for any losses or damages caused to them by the retaliatory action.
And
Under Federal Law, there are no explicit provisions for the paying of any financial bounty to any individual who volunteers original information to the relevant Government authority and which results in monetary sanctions being brought against the offending company.
Anti-retaliation Protection ‘Present’ and Monetary Rewards ‘Present’
Federal Law prohibits any employer from taking retaliatory actions in any way against an individual presenting an allegation of illegal behavior either internally to their employer or externally to the relevant Government authority. If an employee believes that they have been retaliated against, they are able to take legal action against their employer and to gain reinstatement of their position and to be monetarily compensated for any losses or damages caused to them by the retaliatory action.
And
Federal Law will provide for a financial bounty to be paid to any individual who volunteers original information to the relevant Government authority and which results in monetary sanctions/fines being brought against the offending company.
Rights and permissions
About this article
Cite this article
Lee, G., Pittroff, E. & Turner, M.J. Is a Uniform Approach to Whistle-Blowing Regulation Effective? Evidence from the United States and Germany. J Bus Ethics 163, 553–576 (2020). https://doi.org/10.1007/s10551-018-4023-y
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10551-018-4023-y