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Motivating Whistleblowers

by Giancarlo Spagnolo (with Jeffrey V. Butler and Danila Serra), Working Paper

Law-breaking activities within an organization benefiting the firm at the expense of the general public are widespread but difficult to uncover, making whistleblowing by employees highly desirable. We investigate monetary and non-monetary incentives for whistleblowers. We test the effectiveness of financial rewards and examine whether crowding-out of non-monetary motivations is a reason for concern. We also ask whether exposure of whistleblowers to social judgment through public, e.g, media, scrutiny may act as an important deterrent to whistleblowing. Experimental results show that: i) financial rewards significantly increase the likelihood of whistleblowing and do not substantially crowd out non-monetary motivations; and ii) public scrutiny decreases (increases) whistleblowing when the public is unaware (aware) of the negative externalities generated by fraud, suggesting that whistleblowers are, at least partly, image motivated. We also found evidence of an interesting relationship between political orientation and responsiveness to public scrutiny: while left-leaning subjects react to the possibility of social judgment as expected, right-leaning people are unaffected by it.

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