Laws that incentivize employees to blow the whistle when they perceive a financial risk and protect them from retaliation have sharply increased in popularity and have even become commonplace at the state level for fraud related to government money. Dodd-Frank codified a similar kind of protection for whistleblowers who report private-sector fraud. This Note suggests that states, especially New York, have an opportunity to propose new financial fraud whistleblower legislation in response to the Trump administration s efforts to reduce the federal government's active regulatory role in the financial sector. However, the prevalence and potential of such legislation should inspire a closer look at how legal mechanisms target and encourage participation across the employee population. Any program that seeks to encourage participation within an existing context, such as the financial services workplace, risks entrenching bias and inequality if it fails to consider the differential effects of its design across different demographics.
This Note therefore addresses whistleblower laws ' implications for women employees' participation in whistleblowing when they observe financial services sector-based misconduct. It reviews existing research regarding women's participation (1) in whistleblowing and considers how that evidence should shape choices of policymakers who seek to encourage employee reporting while still fostering workplace environments and regulatory structures that value and benefit from women's voices.
"Whistleblowing," or an employee's act of reporting misconduct when he or she observes it within an organization, is the result of a complicated calculation on the reporting employee's part. The whistleblower makes the choice to "change, rather than escape from, an objectionable state of affairs," (2) and that will only happen when an employee decides that the costs that come with reporting wrongdoing do not outweigh the benefits. (3)
This Note considers both internal reporting (such as to a company hotline or a manager) and external reporting (such as to the government or a media outlet) types of whistleblowing. The nature and effects, as well as the moral status and attendant risks, of these two kinds of reporting diverge sharply. However, to the extent that existing or potential policies attempt to encourage compliance through voluntary private action, the frequency of both these kinds of action speaks to policies' successes.
Furthermore, the effects of a law like the federal Dodd-Frank Act ("Dodd-Frank") reach beyond the reporting systems that it structures directly--that is, formal reporting to a government agency. Rather, an important suggestion based on the academic literature is that we should expect laws that explicitly relate only to external reporting to increase the moral salience of whistleblowing and therefore impact a broader range of reporting behaviors. Therefore, I adopt an expansive whistleblower definition: "organization members ... who disclose illegal, immoral, or illegitimate practices ... to [those] who may be able to effect action," (4) regardless of where the "persons or organizations" who receive the reports sit.
Whether an individual makes an internal or an external report, regulation and law affect the calculation that leads the whistleblower to reach out and report conduct. Laws can provide protection from retaliation, assurances of confidentiality, or monetary incentives. In fact, state and federal False Claims Act (FCA) legislation, (5) as well as Dodd-Frank, (6) have used monetary incentives and inspired controversy among commentators for doing so. This Note contemplates the potential effectiveness of a mini Dodd-Frank that implements the same policies on a statewide basis, which was a model the New York State Attorney General alluded to developing in February 2015. (7) Financial incentives for whistleblowers therefore figure particularly prominently in the following analysis.
Policy discussions in cities throughout the country and in liberal-leaning states like New York have focused on attempts to counteract and resist Trump administration initiatives that have struck a chord and inspired anxiety among local citizens. (8) The administration has also signaled its willingness to embark on an "extensive effort to loosen regulation on banks and other major financial companies." (9) This area presents itself as another opportunity for New York's leaders to wield the state's power in the opposite, progressive direction of the administration's policies.
Research regarding the current landscape of federal and state whistleblowing legislation offers extensive implications for how a thoughtful new law would form. This Note identifies and discusses research conclusions regarding women and whistleblowing (10) and highlights important takeaways for policymakers attempting to craft a whistleblowing system that encourages all employees, regardless of gender, to raise their voices and participate in the monitoring mechanisms the law creates.
This Note attempts to envision the components of a gender-effect-conscious whistleblowing policy that could be effectively implemented at the state level. Despite existing research, a central conclusion is that further, more specific research into the particular circumstances of women in the New York financial services industry would be necessary to develop a thorough policy proposal that will achieve this goal. However, given what we know, 1 emphasize that including a duty to report in a whistleblower law would potentially serve to enhance women's participation in workplace reporting.
Part I situates whistleblowing policy in the broader relevant historical, legal, and political context. It addresses the status of whistleblowing in terms of public perception, existing law, and the "New Governance" philosophy that has underpinned most twenty-first century compliance efforts. Evidence of a sea change in state false claims laws in particular lends strength to the idea that there is potential for a similar shift in the way states deal with damaging financial fraud. Next, Part II describes the extensive social science research that indicates that superficially gender-neutral whistleblower mechanisms affect men and women differently. Given that research, Part II also considers what gender effects we would expect from aspects of the proposed law as it was described in 2015. Finally, Part III addresses the question of what the social and legal whistleblowing context demands of policymakers concerned with drafting and implementing a whistleblower law that will encourage diverse participation. This Part emphasizes the need for a detailed inquiry into the context of the financial services industry in particular, in an effort to avoid misapplying general conclusions about female employees to the behavior of professional women who work in a specific industry and are therefore likely to have had distinct experiences. However, Part III also offers suggestions for mechanisms that policymakers should consider, given the information that is currently available.
Current Whistleblower Landscape
Politics and Perception of Whistleblowing
At best, the public responds to whistleblowers as heroes who stand up against powerful forces to protect the public interest. But public perception can also feed off of a natural distaste for tattletales, leading to distrust and a perception that whistleblowers report for selfish, destructive reasons." Interviews on the subject indicate that the public is inconsistent in its evaluation of whistleblowers. Interviews led to subjects admitting that the category includes the quintessential brave reporter, but they also reflected an expectation that some whistleblowers are disgruntled employees or slightly unhinged troublemakers. (12) Fear of such accusatory or derogatory responses to whistleblowing weigh on employees deciding whether to report on misconduct.
On one hand, employees may worry about explicit retaliation from inside their organizations, including demotion and firing. Corporations and public organizations alike at least present a pro-whistleblower attitude in many cases, encouraging employees to report wrongdoing in order to bolster performance. (13) However, actual employees respond not to those formal messages but to accounts of previous whistleblowers' negative experiences and to the realities of power dynamics within organizations, which discourage participation. According to one whistleblower advocate, the employees thinking about reporting assume "the fact that adverse consequences are generally not assured but their occurrence is probabilistically determined." (14) Employees are conditioned to understand that any product or company action comes with some kind of risk, and that is built into their work in some way. The risk of retaliation based on a whistleblowing tip that receives a hostile response, though, is actually more difficult to manage by comparison. (15) Research indicates that these concerns structure not just whether but also how a reporter blows the whistle. Employees who fear retaliation from superiors may turn to external reporting in an effort to find protections that they do not see within their organizations. (16)
But well-known whistleblowers' experiences in the past have indicated even more far-reaching negative effects that follow from reporting. Beyond discrete incidents of job loss, retaliation against whistleblowers can include isolation in the workplace. (17) The cost of whistleblowing can reach to family strife and long-term financial well-being. The risk of psychological consequences and anxieties that come with reporting should not be understated: whistleblowers as a whole tend to suffer from alcoholism and depression. (18)
Conflicting ideas about whistleblower motivations characterize social attitudes toward whistleblowers. Public discourse can paint...