Good News! Trend Shows Employees Are Increasingly Likely to Report Corporate Misconduct

The False Claims Act dates back to the Civil War. Since then, states have added their own laws and the federal government has created other programs—for instance, to encourage reporting of SEC violations, financial fraud, and tax fraud. The success of all of these efforts to enforce regulations and stop fraud, waste, and abuse depends on the willingness of individuals—often but not always insiders—to tell what they know, in spite of sometimes punishing pressure to compromise their ethical standards. That willingness is a product of a strong individual moral compass, but it is influenced by the corporate atmosphere.[KS1] 

The Ethics & Compliance Initiative (ECI) looks at that atmosphere each year, in a global survey intended to assess the state of business ethics. The ECI surveys present an interesting picture of the forces exerted on employees who witness misconduct or resist pressure to bend their ethical frameworks.  

ECI surveys show a positive trend in the likelihood that employees who witness misconduct will try to report it, from 69% in 2017 to 86% in 2020. But pressure to compromise standards has also increased, with the percentage of survey respondents reporting pressure more than doubling since 2017, from 14% to 30%. Managers feel the pressure more acutely: they reported feeling such pressure roughly five times as much as non-managers. Managers were also far more likely to report observing misconduct. ECI attributed these differences to the fact that managers are more likely to be involved in the kinds of organizational changes that produce misconduct and accompanying pressures to compromise ethical standards.

That pressure sometimes takes very concrete forms. Biogen relator Michael Bawduniak was demoted and eventually forced out of the company when he refused to engage in conduct he saw as wrong. Mr. Bawduniak is not alone. In the ECI surveys, 79% of employees who reported misconduct or refused to compromise ethical standards reported experiencing retaliation. That’s up from 22% in 2013 and 44% in 2017. Managers were about twice as likely to report retaliation as non-managers (92% v. 45%).

Big settlements with big companies get the big headlines, but misconduct occurs in all kinds of companies. According to ECI’s 2022 report, employees in small and mid-sized organizations are more likely to report observing misconduct (52% and 30%, respectively, versus 28%) and more likely to report feeling pressure to compromise their standards than those in large organizations (71% and 54% versus 55%). But those in smaller organizations are also more likely to report misconduct they see (93% and 87% versus 80%).

All of which goes to show that whistleblowers can do good wherever they are.

MaryAnne Hamilton is an Attorney at Miller Law Group, PLLC