In May, the SEC announced its largest-ever award for a whistleblower: $279 million. This amount is more than double the previous highest amount of $114 million, which was awarded in 2020. The SEC is sending a clear message: there are strong incentives for employees to blow the whistle on corporate wrongdoing.
Details About The Wrongdoing
The SEC does not disclose information about whistleblowers, so its press release focuses on the size of the award and the related Order is heavily redacted. However, we do know that the sum awarded by the SEC for whistleblowers is typically in the range of 10-30% of the total penalty enforced against a company if the penalty is more than $1 million – which we can safely assume in this instance.
The Wall Street Journal subsequently reported that the sum was awarded to the whistleblower in the Ericsson bribery matter.
Key Takeaways for Employers
The SEC is Actively Encouraging Whistleblowing – and it’s working
The record sum awarded will act as an incentive for employees (and others) who are considering blowing the whistle on corporate wrongdoing. But whistleblower activity has been steadily increasing for the past few years.
“The size of today’s award – the highest in our program’s history – not only incentivizes whistleblowers to come forward with accurate information about potential securities law violations, but also reflects the tremendous success of our whistleblower program,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
The SEC received over 12,200 tips in 2021 – 76% more tips than the prior year (which was its second-highest tip year). Clearly, whistleblower activity is trending upwards at the SEC.
Your Internal Whistleblowing Policies Should Be Strong
Whistleblowing is complex – and internal policies may not be sufficient to prevent external whistleblowing. However, it’s important to have an internal whistleblowing policy and to encourage internal whistleblowing as a first step.
To achieve this, it should be made clear to employees that:
- Internal whistleblowing will be taken seriously, and
- Whistleblowers will not suffer retaliation.
Practical steps to consider here include:
- Is your complaints process straightforward, safe, and easy to access – and does it work in practice?
- Does your company culture foster open communication? (It may be challenging for employees to believe the complaints process has been set up in good faith otherwise)
- What processes are in place to protect whistleblowers?
- Have you circulated clear processes for handling investigations?
- Do you track, analyze, and share the results of complaints?
Change the Conversation About Whistleblowing
US Regulators are strongly encouraging corporations to come clean when they do the wrong thing. (Earlier this year, we shared an email about the DOJ’s self-reporting incentives.)
Meanwhile, consumers are increasingly favoring companies that do the right thing.
So, it may be beneficial to change the conversation about whistleblowing – highlighting that it’s a good thing that will help to keep your company on track. This approach will need to be advocated for and advanced by those in the highest rungs of your company to ensure buy in.
For more information, read our earlier article covering Legal Risk Management Through an Ethical Corporate Culture.
Reach out with any questions about your internal whistleblower policies. Our employment attorneys would love to help.
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