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Whistle-blowing gap

September 5, 2010

The ongoing wrangling over the methods of WikiLeaks has led to a broader debate about whistle-blowing. While it has been an accepted practice in the United States for a long time, that's not the case in Europe.

Headline of a WikiLeaks article on Afghanistan seen through a magnifying glass
WikiLeaks has stirred up a debate over whistle-blowingImage: picture alliance/dpa

When Germans want to talk about whistle-blowing they quickly run into a linguistic problem: There is no German word for it. In order to describe a whistle-blower in their own language Germans have to resort to a negatively connotated word like informant or paraphrase it some other way. That's why Germans often simply use the English word to talk about whistle-blowing.

The lack of a proper name for the practice is indicative of the role and acceptance of whistle-blowing in Germany.

"In Germany there are no laws to protect whistle-blowers or to serve as an incentive for whistle-blowing," Johannes Ludwig, a professor at Hamburg's University of Applied Sciences and a board member of Germany's Whistle-blower Netzwerk, told Deutsche Welle. "In the US there is both."

The reasons why whistle-blowing plays a much smaller role in Germany than in the US are historical and also shaped by mentality, argues Ludwig. The US was founded by people that didn't want to acccept the traditional hierarchical structures in Europe.

"And that's why in the US everything that has to do with the state and government has to work effectively and serve a clear purpose. The Americans have a much looser understanding of government and state and their relation to government and business is much less bureacratic and authority-driven than ours."

What's more, argues Ludwig, democracy in Germany, even compared to other European countries has a relatively short history.

"And that's why it is understandable that rules or laws about whistle-blowing which actually only serves the purpose to improve things, are not as developed in Germany as they are in other countries."

Protecting whistle-blowers since the civil war

By comparison, the first legal incentive for whistle-blowing in the US dates back to the civil war. The False Claims act, which was passed by Congress in 1863, was a reaction by the federal government to deal with fraud. Basically it promised a reward to whistle-blowers who could prove that the government was being defrauded.

A television screen on the floor of the New York Stock Exchange shows the closing number for the Dow Jones Industrial Average
Major US companies are required to have instituted protections for whistle-blowersImage: AP

With some minor changes that law is still in effect today and remains an important factor in recognizing fraud, says Alexander Dyck, a finance professor and whistle-blowing expert at the Rotman School of Management at the University of Toronto.

"If someone brings information to light through whistle-blowing action and the government is being defrauded and the action is successfully pursued than that whistle-blower is entitled to between 15 and 30 percent of the money the government collects as a result of stopping this wrongdoing," he told Deutsche Wellle.

Tightening whistle-blower protection through Sarbanes-Oxley

More recently, the US government improved protection for whistle-blowers through the so-called Sarbanes-Oxley Act of 2002 as a reaction to the Enron and other corporate scandals. It also opened up the False Claims Act to private corporations.

"Corporations effectively have to have a whistle-blowing policy, have to set up a hotline, whereby if there are employees or others in the firm who think there is some wrongdoing, you can make the phone calls and allegations and that information is then communicated to folks within the firm that then follow up on this," explains Dyck.

The purpose of all those and additional measures that were instituted in March is to provide incentives for whistle-blowers to speak up about wrongdoings they know about and to protect them as much as possible from retribution for doing it.

Less stringent laws, more formal channels in Europe

In Europe, not just in Germany, many of these mechanisms simply don't exist yet.

An unidentified person leaves the embattled Enron Corporation
The Enron scandal led to a further tightening of whistle-blower lawsImage: AP

"One possible reason for less whistle-blowing in Europe is that many of the activities that whistle-blowing might bring to light wouldn't be illegal in many European countries, says Dyck. "Some things of corporate wrongdoing would be illegal in the US, but would not be illegal in Europe, so whistle-blowing on them wouldn't be very effective."

However, Dyck also offers a more positive explanation of why whistle-blowing is less of a phenomenon in Europe than in the US:

"There are more formal channels in Europe for employees who are concerned about wrongdoing to bring that information to light without going through a whistle-blowing channel," he notes."The existence of works councils, worker representatives on boards provide another channel for that sort of information to perculate up to the highest level of decision making that wouldn't require going through a formal whistle-blowing channel."

While it might take some time until European countries institute an Office of the Whistle-blower Protection Program like it exists within the US Department of Labor, the experts agree that Europe needs to provide more incentives for whistle-blowers to speak out if it wants to get serious about improving corporate governance both in the business and governmental sector.

Author: Michael Knigge
Editor: Rob Mudge