Auditing Section Research Summaries Space

A Database of Auditing Research - Building Bridges with Practice

This is a public Custom Hive  public

research summary

    When do employers benefit from offering workers a financial...
    research summary posted February 20, 2017 by Jennifer M Mueller-Phillips, tagged 14.0 Corporate Matters, 14.02 Corporate Whistle Blowers 
    175 Views
    Title:
    When do employers benefit from offering workers a financial reward for reporting internal misconduct?
    Practical Implications:

    This study helps to clarify the conditions under which employers are most likely to benefit economically from offering their workers an explicit financial reward for reporting internal misconduct. His cost-benefit analysis reveals that offering a financial reward is likely to be most cost-effective when the existing rate of whistleblowing within the firm is low and least-cost effective when it is high. Furthermore, employers who pay relatively low wages and/or whose workers have weak ethical incentives to report internal misconduct are likely to gain the most economic benefit from offering a reward. 

    Citation:

    Stikeleather, B. R. 2016. When do employers benefit from offering workers a financial reward for reporting internal misconduct? Accounting, Organizations and Society 52: 1 – 14. 

    Keywords:
    whistleblowing, reward, employee misconduct, gift wage, experimental economics
    Purpose of the Study:

    Many employers incur significant economic losses from internal misconduct, such as stealing inventory, falsifying time records, or operating equipment under the influence of drugs or alcohol. As a result, employers are attempting to find a solution to combat this misconduct. One solution that has arisen is offering workers an explicit financial reward for reporting internal misconduct; however, no consensus exists on whether or when this approach should be used. This study seeks to clarify the matter by identifying organizational factors that help determine whether an employer will benefit from offering workers a financial reward for reporting internal misconduct. Specifically, the author investigates whether the level of workers’ fixed compensation and their moral convictions influence their whistleblowing decisions and whether variation in these two key organizational factors moderates the cost-effectiveness for offering financial rewards for internal whistleblowing. 

    Design/Method/ Approach:

    To test his hypothesis, the author runs an experiment consisting of three between-subjects conditions.

    Findings:
    • The author finds that workers who observed theft blew the whistle more frequently as their fixed wage increased and as their conviction increased that employees in the workplace have a moral obligation to report internal misconduct to their employer.
    • The author finds that offering a reward had an overall positive economic effect on employer payoffs; however, he also finds that the positive difference in employer payoffs decreases as the level of wages paid to workers increases to the point that employers who offered relatively high wages obtained statistically similar payoffs in both conditions.
    • The author finds that the positive difference in employer payoffs decreases as workers report having stronger convictions that employees have a moral obligation to report internal misconduct; thus, the economic benefit of offering a reward accrues primarily to employers who offer relatively low pay and whose workers have weak moral convictions about reporting internal misconduct. 
    Category:
    Corporate Matters
    Sub-category:
    Corporate Whistle Blowers