Whistleblowing as a means of deterring fraud has gained more acceptance in the last ten years. For example, the Sarbanes Oxley Act of 2002 requires publicly traded companies to have a confidential whistleblowing mechanism in place. More recently, during the aftermath of the Madoff scandal, the SEC established a whistleblower hotline. Additionally, the Dodd-Frank Act of 2010 adds retaliation protections for those individuals reporting fraud to the SEC.
Organizations are best served by whistleblowing when fraud is reported internally (Miceli, Near, Rehg, and Van Scotter 2012). When fraud is reported internally, a company has the ability to rectify the situation without a loss of reputation. The academic literature is supportive of whistleblowing as improving corporate governance (Bowen, Call, and Rajgopal 2010). The literature has also offered suggestions on how to make the internal whistleblowing process more amenable to employees. Seifert, Sweeney, Joireman, and Thornton (2010)...
