Practical analysis for investment professionals
12 December 2018

Whistleblowing: The Risks and Rewards

Stephanie Gibaud did not plan on inserting herself into a controversy. “You do not wake up one morning saying, ‘Well, I am going to be a whistleblower,’” she explained at the 2018 CFA Institute European Investment Conference.

But Gibaud spent years trying to get her employer to address internal misconduct, ultimately gathering information to help regulators build a US$6 billion tax evasion case against UBS Group AG.

“This word, whistleblower, is so negative,” she said. “It’s really like radioactive when someone says he or she is a whistleblower.”

At the conference, Gibaud joined Peter Massey-Cook, regional head of ethics at State Street, and Josina Kamerling, head of regulatory outreach for Europe, the Middle East, and Africa (EMEA) at CFA Institute, to discuss the risks and rewards involved in whistleblowing. Massey-Cook, who prefers to avoid the term “whistleblower,” said that State Street has adopted a “Speak Up” program to improve its organizational culture.

Despite the negative perceptions of whistleblowing, ethically minded employees are an important force for positive change. Internal programs — when they are structured and administered well — allow people to flag minor issues before they become major problems. Without them, companies can develop an entrenched culture of corruption that brings years of lawsuits, millions of dollars in regulatory fines, and worse.

Massey-Cook explained that some people can feel too intimidated to alert their organization when things are going wrong. “We are hard-wired not to speak up,” he said. “The sense of groupthink, the tendency to conform, the culture of obedience, the tendency to shoot the messenger.”

“To speak up requires a lot of courage,” Massey-Cook said. That’s why he thinks that a combination of education and robust internal reporting programs are necessary. “It’s all the more important that we put that effort into really encouraging people, and for it to be seen to be the right thing,” he said.

Kamerling agreed about the importance of speaking up and the difficulties involved. Executives in the financial industry recognize the importance of ethical behavior, but there is a significant gap between that belief and the industry practice.

“It’s that fine line about the flexibility, and how you behave in a group, and you follow things without thinking about it,” she said.




Employees who are motivated to improve their organizations can also have a difficult time getting their colleagues to understand why they’re trying to change things. After hearing Gibaud’s story, Kamerling summarized her compulsion to speak up. “You felt concerned for the company,” she said. “You felt concerned for the clients. That’s what was driving you.”

Gibaud found that her efforts were unwelcome, and she experienced intense criticism after asking her company to revisit its compliance with French tax laws. Gibaud had been regarded as a skilled professional for years, but she said that she began hearing complaints about her performance once she shared her information with superiors. She said, “you suddenly start to be like a five-legged sheep.”

A Paris labor tribunal would later declare that Gibaud had endured bullying for refusing to destroy documents that might have been relevant to the tax investigation.

Most employees fear that they will experience similar retaliation for speaking up, and decisions to defy the status quo are not made lightly. Massey-Cook said, “It requires a great sense of commitment, and wanting to do the right thing on the part of the person speaking up.”

Both Gibaud and Massey-Cook agreed that monetary incentives would not make it easier for these individuals to come forward.

“I am against that,” said Gibaud. “You don’t stand up to get rewarded.”

“I’m with Stephanie,” Massey-Cook said. “I do think that there is also evidence to suggest that when you put in those monetary incentives, then it changes people’s calculation.” Instead of working towards the best possible outcome, individuals may start sharing information selectively to gain the greatest personal reward.

It may be time to re-brand the idea of reporting bad behavior and the way that whistleblowers are perceived. “I think it’s about communication, and people seeing the benefit of the whistleblowing,” Massey-Cook said. “And not seeing them as a traitor.”

The key is for organizations to develop supportive environments where people can trust that they will be able to speak up without fear of reprisal.

“We want people to come forward with ideas and concerns,” Massey-Cook said. “That way we get the right outcomes.”

This article originally appeared on the CFA Institute European Investment Conference blog.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©Getty Images/thomas-bethge

About the Author(s)
Peter M.J. Gross

Peter M.J. Gross is an online content specialist for CFA Institute, where he has managed blogs for the CFA Institute Annual Conference, European Investment Conference, and Middle East Investment Conference. Previously, he worked at Hampton Roads Publishing Company and at MFS Investment Management. Mr. Gross' articles have been published by Enterprising Investor, City A.M., Seeking Alpha, and The Hook. His work has also been highlighted by Real Clear Markets and the World Economic Forum. Mr. Gross holds a BA degree from Connecticut College.

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