Whistleblowing in Audit Firms: Do Explicit Protections from Retaliation Activate Implicit Threats of Reprisal?

Despite the increasing number of statutory protections now provided to whistleblowers, fear of reprisal remains a primary reason why individuals fail to report misconduct. In order to alleviate such fears and encourage reporting, hotline policies often describe explicit whistleblower protections from specific types of retaliation (e.g., harassment, threats or intimidation, loss of job, etc.). However, we posit that such vivid descriptions may actually achieve the opposite of their intended effect by increasing the salience of retaliatory threats, thereby discouraging whistleblower reporting. We conduct an experiment and find evidence that when explicit protections are added to an audit firm's whistleblower hotline policy, auditors assess the risk of reporting as higher and, as a result, are less likely to indicate that the misconduct will be reported through the hotline. To our knowledge, our study is the first to demonstrate that offering explicit protections to whistleblowers can have these unintended and counter-intuitive consequences.