Investing in Corporate Governance

Investors Engage with Companies on Employee Whistleblower Protections


Employees, customers, and suppliers who speak up publicly about corporate legal or ethical violations play a vital role in keeping companies honest.

For that reason, some environmental, social, and governance (ESG) investors are paying close attention to the whistleblower protections businesses provide their stakeholders.

Revelations That Save Lives

Defined by the Principles for Responsible Investment (PRI) as the disclosure or reporting of wrongdoing at companies, corporate whistleblowing generally involves employees or others who reveal information about activities that violate an organization’s code of conduct, legal obligations, or human rights standards. This behavior may take a range of forms, from knowingly selling harmful products to fraud. These revelations have helped save lives, protect the environment, and much more.

Additionally, disclosures from corporate whistleblowers can help mitigate some of the potential risks of corporate malfeasance. One study found that 43% of the detected cases of fraud against organizations came through tip-offs, compared with 12% revealed through management review.

For many, the quintessential example of a corporate whistleblower is Jeffrey Wigand, a former vice president of research and development at tobacco company Brown & Williamson. In 1996, he disclosed that the business had deliberately added carcinogenic ingredients to cigarettes to make them more addictive. In a more recent instance, an anonymous whistleblower was awarded over $45 million from the Commodities and Futures Trading Commission in 2018 for their efforts to publicize the manipulation of a key interest-rate benchmark in the private derivatives market.

At the same time, few companies provide whistleblower protections. According to the PRI, MSCI research found that just 10% of the 2,631 issuers it assessed under the category of corruption and instability had publicly disclosed a whistleblower policy that included legal protections and a process for anonymous reporting. Unprotected whistleblowers risk becoming the targets of retaliation: Wigand was sued by Brown & Williamson, although the suit was dismissed as part of a 1997 settlement between the attorneys general of 40 states and the tobacco industry.

Whistleblowers’ revelations have helped save lives, protect the environment, and much more.

Whistleblower Protections and Good Corporate Governance

For many ESG investors, clearly delineated whistleblower protections are a vital part of good corporate governance and anti-corruption policies. They see these mechanisms as essential to companies’ overall risk management efforts and culture for good reason: research shows that whistleblower protection practices are associated with fewer government fines and material lawsuits.

Investors engaging with companies to strengthen whistleblower protections use a variety of tools in their tool kit, including shareholder resolutions and corporate dialogues. For example, sustainable investment firm Trillium Asset Management submitted a shareholder proposal in 2019 raising concerns about whether Alphabet’s whistleblower protections adequately support the company’s human rights responsibilities. Still concerned, Trillium refiled the proposal in December 2020.

The PRI recommends a few key steps for investors trying to engage with companies on whistleblower policies. First among them is defining expectations for the mechanisms that should be in place. In addition, they need to pinpoint the red flags likely to indicate a potential problem. Also important is a defined escalation strategy, such as a requirement stating that investors should vote against the relevant board director if a company fails to make progress on a publicly available whistleblowing policy within one year.


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