The SEC’s adoption of the final whistleblower reward and protection rules yesterday will make a few squealers and their lawyers rich. But what about the real cost?
The new rules say a whistleblower doesn’t need to report violations internally in order to qualify for a reward.
Maybe we’re old fashioned, but we think employees should be loyal to the companies they work for. All companies have problems. But the ones that work to uncover and fix those problems always grow into better and stronger companies. Course corrections made from the inside are a sign of health, not a symptom of weakness.
Can those internal course corrections happen anymore? We don’t see how.
Whistleblowers will run to the SEC whenever there’s a whiff of overseas bribery. They won’t talk about it with their bosses inside the company first. Why should they? That would be like giving away a lottery ticket. And why expose themselves to retaliation? If they go straight to the SEC, they’re immune from corporate discipline. So they’ll go to the feds, taking with them as many internal emails, audit documents, and bank records as they can carry. How’s that for loyalty?
(The SEC said it built in incentives for employees to report the problem internally first, as way to support existing compliance programs. Let’s see how often the new breed of whistleblower law firms advise their clients to report the problem inside the company before going to the SEC.)
Even overseas employees are learning how to turn against their U.S. bosses. Have you heard the stories from China? How workers at American companies are seeing pop-up ads on their computer screens from whistle-blower law firms in the States? Quite a lesson in western capitalism.
Is putting everyone on the government’s lookout going to make managers more ethical? Or is it going to make them suspicious, timid, and reluctant to talk openly about problems and how to fix them?
Sure, whistleblower complaints will expose some big-time FCPA violations. But how many of those violations would have come to light anyway? Before Dodd-Frank, we were already in the age of Sarbanes–Oxley and the era of self-reported FCPA offenses. Enforcement had already increased ten fold in the past five years. Our antibribery regime was already the most robust on the planet — by a long shot. Wasn’t that good enough?
If the SEC, the guardian of the securities markets, failed to do its job on Wall Street, why not fix the SEC? Why instead weaken every public company in America?