Are Secondhand Internal Whistleblowing Reports Credible?

The validity of whistleblower reports based on secondhand information has been called into question by President Trump:

A whistleblower with second hand information? Another Fake News Story! See what was said on the very nice, no pressure, call. Another Witch Hunt!—President Donald J. Trump Twitter @realDonaldTrump

The Inspector General of the Intelligence Community (ICIG) seemed to hold a similar view of secondhand reports. An earlier version of ICIG Form 401 stated ICIG protocol as:

FIRST-HAND INFORMATION REQUIRED. In order to find an urgent concern ‘credible,’ the ICIG must be in possession of reliable, first-hand information. The ICIG cannot transmit information via the [Intelligence Community Whistleblower Protection Act] based on an employee’s second-hand knowledge of wrongdoing (ICWSP, 2018).

The above disclaimer has since changed, and whether that change signaled a shift in the types of internal whistleblowing reports that are acceptable continues to be debated. What is clear is that many people assume that secondhand information from a whistleblower is of lower quality. We set out to examine this question in our most recent study, Are Secondhand Internal Whistleblowing Reports Credible?

NAVEX Global provided us secure access to more than 2 million reports to over 1,000 publicly traded U.S. firms between 2004 and 2017. Surprisingly, claims in secondhand reports are 47.7 percent more likely than firsthand reports to be substantiated by management. Further, we find negative associations between the number of secondhand reports and negative outcomes, including lawsuits and government fines. This is consistent with secondhand reports providing valuable information that allows management to identify and address issues before they become more costly to the firm.

At first, these findings may seem counterintuitive. Psychology academics have long confirmed what most of us know from playing the child’s game of telephone: Secondhand information is less reliable than firsthand information. However, internal whistleblowers face a much different system and dynamics than what is tested in psychology research or in a game of telephone. For example, individuals with firsthand knowledge of a problem may be reluctant to come forward out of fear being penalized for their involvement in an activity. Additionally, individuals are more likely to make a frivolous firsthand report (e.g. Dwight submits a report that Jim moved his stapler) than a frivolous secondhand report (e.g. Creed submits a report that Jim moved Dwight’s stapler). This self-serving nature of some reports causes more insubstantial firsthand reports to be made.

When reflecting on secondhand reports, Daniel Garen, principle at Pivot Point Compliance Management and former compliance officer at Danaher and Siemens noted, “I see this all the time. When a secondhand report comes in a system I know there is a problem because people don’t submit petty or selfish secondhand accounts. Hotlines get much more firsthand reports and many are not serious issues. Firsthand accounts require more effort to sort and filter reports that are identifying real problems.”

The findings from this paper and our prior work on whistleblowing have implications for how managers, directors, and regulators engage with whistleblowing systems. While firsthand information of any given event is presumably more accurate, secondhand whistleblowing reports may be the only source of information about certain activities. Moreover, secondhand reports are less likely to be self-serving. This has implications for the current debate on the credibility of internal whistleblowing reports based on secondhand information. The evidence in the study shows that there is secondhand whistleblowing reports are often credible, and there is value in examining them.

This post comes to us from professors Stephen Stubben at the University of Utah and Kyle T. Welch at George Washington University. It is based on their recent article, “Are Secondhand Internal Whistleblowing Reports Credible?” available here.

 

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