Whistle-blowing regulation in different corporate governance systems: an analysis of the regulation approaches from the
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Whistle-blowing regulation in different corporate governance systems: an analysis of the regulation approaches from the view of path dependence theory Esther Pittroff
Ó Springer Science+Business Media New York 2015
Abstract The research question of this paper is, if and why countries need different legal approaches to whistle-blowing regulation. The paper specifically explores whether regulation approaches from other countries are suitable to regulate whistle-blowing in the German corporate governance system. First, it is clarified which factors influence the choice of the desired action—that is, ‘‘internal whistleblowing’’—and it is demonstrated that the underlying corporate governance system has a potential influence on these factors. Next, it is shown that the consistency of systems is responsible for the lack of success of some legal approaches of the whistle-blowing regulation in special corporate governance systems, whereas in other systems they can be very successful. Finally, the paper presents the requirements for whistle-blowing regulation that does not damage the consistency of the underlying corporate governance system. The findings support path dependence theory, which claims that legal approaches of one country cannot be transferred to other countries. Moreover, whistle-blowing literature is expanded by the fact that the underlying corporate governance system of a country influences the power and loyalty of the employee. It suggests new avenues for whistle-blowing research as well as for the potential convergence of corporate governance regulation. The findings offer insights for policy makers interested in the development of legal proposals for whistle-blowing regulation in their countries. Moreover, it provides a new perspective to enable managers of multinational firms to design whistleblowing systems within different corporate governance systems. Keywords Whistle-blowing Corporate governance system Path dependence theory Exit Voice Consistency
E. Pittroff (&) Institute of Accounting, Finance and Taxation, University of Leipzig, Grimmaische Str. 12, 04109 Leipzig, Germany e-mail: [email protected]
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E. Pittroff
1 Introduction Whilst German regulators are debating the necessity and the design of statutory protection of whistle-blowers, the importance of the implementation of whistleblower regulation has already been discussed by the Group of Twenty (G 20), who determined that every member state must implement whistle-blower protection by the end of 2012. Germany has failed to fulfil this requirement. Moreover, the EU is willing to allow its member states to introduce financial rewards for whistleblowers.1 Other countries have made greater progress than Germany. For example, the USA and the UK have had whistle-blower protection rights for many years. Consequently, the German legislative proposals are often compared with both of these countries’ approaches (Wrase and Fabritius 2011; Fleischer and Schmolke 2012; Groneberg 2011). In particular the success of financial rewar
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