Business Responses to Regulation
Edited by Christine Parker and Vibeke Lehmann Nielsen
Chapter 12: Individuals as Enforcers: The Design of Employee Reporting Systems
Yuval Feldman and Orly Lobel* INTRODUCTION Employee reporting of noncompliance both within the organization and to external government agencies can be an important tool for enhancing compliance. Understanding and explaining whistle blowing by employees is central to the study of compliance, regulation and private action because it involves an individual decision by organization members to take action when confronting illegal practices (Near and Miceli, 1985: 4). This chapter argues that any attempt to understand compliance in organizational contexts must take into account not only organizational motivations to comply with laws and regulations, but also the motivations of individual employees (and other observers) to come forward and report noncompliance. With the increasing significance of decentralized techniques of regulatory enforcement, as observed by a number of contributors to this volume including May and Winter, and Gray and Silbey, scholars must also consider the potential for whistle blowing as part of the overarching explanation for compliance and noncompliance. In the history of corporate capitalism around the world, whistle blowing has proved an important factor in ensuring compliance in organizations. In the US in 2002 the whistleblowers in the WorldCom and Enron financial debacles were featured on the cover of Time Magazine as the ‘Persons of the Year.’1 Cynthia Cooper of WorldCom requested an internal audit after discovering serious accounting misrepresentations. Even though the company’s chief financial officer asked Cooper to suspend the investigation, she chose to alert the board of directors’ auditing committee about her suspicions. Sherron Watkins, the former vice president of...
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