Behavioral Economics for Leaders

CHAPTER 45The Stunted Career Path of Whistleblowers: Employees View Them As Disloyal

The list of corporate scandals is prominent and long. To strengthen the support of ethical conduct at work, many companies adopt a code of ethics and establish “whistleblowing systems” to uncover criminal or unethical acts. The fact that such systems often do not have the desired effect is largely due to typical human patterns of behavior.

With hindsight, it’s easy to cover up unethical acts. The diesel scandal at VW involved manipulated software used to fake favorable emission values that couldn’t be adhered to in reality. After it was uncovered, in media reports, talk shows, and political statements, people expressed their astonishment that the scandal did not become public earlier and that VW employees did not draw attention to the criminal acts early enough so they could have been eliminated at an earlier stage. Such action would have spared VW, its employees, and its customers a great deal of aggravation. Even if exact details—who knew what and when—have not been fully clarified up till now, you have to assume that internally a whole bunch of people must have known about the manipulations going on; nonetheless, it was only the testing conducted by the U.S. Environmental Protection Agency that brought the scandal to light.

What are the reasons why major corporate scandals—at Volkswagen, Enron, Wells Fargo, and many other places—are frequently uncovered only late in the game? Financial aspects ...