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Whistleblowers, East and West

While both the PRC and the U.S. provide financial incentives for whistleblowers to report violations, the difference in scale of the incentives offered is huge.

The U.S. has comprehensive federal-level whistleblower policies that generally pay the whistleblower between ten and thirty percent of amounts recovered from defendants, and guarantee certain anti-retaliation protections. Awards can literally reach $100 million.

In China, the Administration for Industry and Commerce (AIC) for Shandong province wil pay whistleblowers just RMB 1000 (about $160). The bounty from an AIC in Guangdong is RMB 30,000 ($4,900). These AICs provide for both online and telephone hotline whistleblowing, sometimes anonymously via a password system.

Notwithstanding the modest bounties, whistleblowing in China is common. I have seen examples in my law practice representing companies with compliance issues in China, and from talking with AIC officers.

In both the PRC and the U.S., whistleblowing has escalated compliance risks. In 2011, I conducted a survey to assess the perception of the possible impact of Dodd-Frank’s whistleblowing regime on risk exposures of companies operating in China. The general consensus was that it would drastically increase the risks of operating, and that it would mostly be leveraged by competitors against companies falling under U.S. jurisdiction to gain market advantage. The survey result is available upon request.

Rather than worrying about corporate espionage and whistleblower bounty hunters, companies should first and foremost work to strengthen their internal compliance and reporting systems to ensure that concerns of employees are addressed and dealt with rather than ignored and redirected to government agencies.

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Henry Chen can be contacted here.

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