In the wake of Sarbanes-Oxley, some serious misconceptions have arisen about what blowing the whistle actually means.


The canonization of Enron's Sherron Watkins has fostered some serious misconceptions about what blowing the whistle means in the wake of the Sarbanes-Oxley Act. Employees believe that now they can report financial fraud without fear of reprisal, and maybe even reap a financial reward for doing so. Executives are spooked by the prospect of disgruntled employees burning up hotlines with spurious complaints. They worry that the anti-retaliation provisions in Sarbox will saddle them with unproductive malcontents they're afraid to fire.

Lost in these dark imaginings are two critical points. First, responsibility for managing the new whistle-blower provisions has been assigned to OSHA, a division of the Department of Labor best known for handling workplace safety. Worthy though that agency may be, as Alix Nyberg reports in our cover story (see "Whistle-Blower Woes"), OSHA has neither the manpower nor the authority to conduct real investigations of corporate fraud.

Second, most whistle-blower cases—around 75 percent—are eventually dismissed or withdrawn. Why? Sometimes the companies have better attorneys. Sometimes the accusers are just poor performers with a grudge. Others mistake legitimate accounting techniques for fraud.

It's perhaps inevitable that the people most likely to blow the whistle are the least likely to have damaging information. Worse, the reverse is also true. The act of turning on one's own colleagues is hard for everyone, and the higher one's spot in the hierarchy, the more difficult it becomes. Even Watkins, who has made a speaking career of her courage at Enron, did not actually blow the whistle—she took her concerns to her boss, and was happily able to demonstrate after the fact that he did not address them.

Anyone who has survived fourth grade knows that the tattletale often suffers more than the guilty party. Sarbox may offer some protection, but it doesn't change that fact.


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