I once asked a room full of compliance officers if their company had ever made an internal whistleblower “employee of the month” or given them a raise. The room burst out laughing.

—Patrick Burns, Director of Communications of Taxpayers Against Fraud Education Fund

BOTH THE FEDERAL GOVERNMENT and many states have statutes reflecting a public policy that rewards and protects whistleblowers.1 None of these statutes requires employee whistleblowers to abide by internal corporate compliance policies as a condition for receiving the reward, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which became effective in July 2010. Despite these new public incentives for employee whistleblowing, few companies have reexamined the effectiveness of their current compliance policies.

Although the Sarbanes-Oxley Act of 2002 mandated that listed public companies establish an anonymous whistleblower policy, some companies have established good whistleblower policies while many others have created only ineffective paper policies. These public companies have done just the minimum amount required to comply with the law, partly because although some complaints by whistleblowers are legitimate, many are spurious. Many public company whistleblower policies are largely unpublicized, do not provide adequate protection for internal whistleblowers, and afford no meaningful reward or recognition for them. Even the supposedly “good” whistleblower policies provide ...

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