Corporate Whistleblowers: Sacked for telling tales

by The Economist, July 7th, 2011.

Snitching on your bosses’ dodgy doings has never been more rewarding. In May America’s Securities and Exchange Commission (SEC) announced a programme to make payments to whistleblowers whose tip-offs lead to their employers being fined $1m or more. The SEC was given the powers to set up the scheme under the Dodd-Frank financial-reform law, passed in the wake of the credit crunch. An earlier post-crisis law, Sarbanes-Oxley, passed in 2002 after accounting scandals at Enron and other big companies, included legal protections for individuals who speak out about corporate wrongdoing. But a recent court appeal raises doubts about how much protection whistleblowers can count on.

Nicholas Tides and Matthew Neumann, both internal auditors at Boeing, were sacked for talking to a reporter from the Seattle Post-Intelligencer about their concerns over the planemaker’s internal controls. The two men said they had gone to the newspaper after they had raised their worries with their bosses 27 times but had been ignored. They sued their former employer, claiming protection under Sarbanes-Oxley, but the district court and, in May, a federal appeals court  ruled that Boeing did have the right to fire them.

Lawyers for the two auditors had argued that disclosures made “through” the news media were a means to “cause information to be provided” to federal regulators, law-enforcers or Congress. Boeing’s lawyers argued that the sacked men had made a disclosure “to” the press, whereas Sarbanes-Oxley only protects people who report their suspicions directly to the relevant authorities. The judges found Boeing’s arguments the more convincing. (continue reading… )

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