by Sharon Oded
Sharon Oded (photo courtesy of the author)
In the evolving landscape of corporate regulation, whistleblower frameworks have emerged as indispensable instruments for surfacing misconduct that might otherwise remain obscured. From financial fraud to sanctions violations, whistleblower disclosures have catalyzed some of the most significant enforcement actions of the past decade. Yet, as enforcement agencies increasingly adopt aggressive, incentive-driven approaches, a critical inflection point has been reached: Are we inadvertently undermining the very cultures of integrity we seek to cultivate?
This post offers a strategic analysis of the unintended consequences of aggressive whistleblower enforcement. Drawing on recent regulatory developments and practical experience advising multinational organizations, it argues for a recalibration—one that preserves the deterrent value of enforcement while safeguarding the internal trust and cohesion essential to sustainable compliance.
This discussion builds on insights shared during our recent webinar, now available via the ICA InConversation platform: Link 1 (ICA). Link 2 (YouTube).
Whistleblowing in Context: A Dual-Edged Mechanism
Whistleblowing is often lauded as a cornerstone of modern compliance architecture. Rightly so—it enables early detection of misconduct, facilitates regulatory oversight, and empowers employees to act in the public interest. However, for corporations, whistleblowing is not merely a compliance mechanism; it is a strategic vulnerability and a governance opportunity.[1]
On one side lies the risk: disclosure can trigger regulatory investigations, reputational damage, and operational disruption. On the other lies the opportunity: internal reporting can surface latent risks, enable timely remediation, and reinforce a culture of accountability. The challenge for in-house professionals is to navigate this duality with precision—leveraging whistleblowing as a governance asset while mitigating its potential to destabilize.
Global Trends: Incentivization, Harmonization, and Fragmentation
Across jurisdictions, whistleblower frameworks are evolving rapidly—driven by a shared recognition of their value in uncovering misconduct, but shaped by divergent legal traditions, enforcement philosophies, and political contexts. While the global trajectory points toward greater protection and incentivization of whistleblowers, the implementation remains uneven, creating a patchwork of obligations and opportunities for multinational organizations.
This section explores how different jurisdictions exemplify broader global trends—highlighting both convergence and divergence in regulatory approaches.
United States: Institutionalizing Incentives
The U.S. continues to lead in embedding financial incentives into whistleblower enforcement. The SEC’s whistleblower program, which awarded over $255 million in FY2024 alone, has become a cornerstone of securities enforcement.[2] Furthermore, the Department of Justice has expanded its pilot program to include procurement fraud and sanctions violations, signaling a broader institutional embrace of whistleblower-driven criminal enforcement.[3]
These developments reflect a mature, incentive-based model that prioritizes external disclosures and high-impact enforcement. However, they also raise concerns about bypassing internal controls and fostering adversarial dynamics between employees and employers.[4]
European Union: Harmonization with Structural Complexity
The EU Whistleblower Directive represents a landmark attempt to harmonize protections across member states. It mandates internal reporting channels, feedback obligations, and robust anti-retaliation measures.[5] Yet, its implementation has revealed structural tensions: the requirement for localized reporting mechanisms in each mid-to-large subsidiary has created operational burdens for multinational companies, often duplicating systems and fragmenting oversight.[6]
While the Directive promotes accessibility and legal certainty, its rigidity may inadvertently undermine the efficiency and coherence of global compliance programs—especially where national transpositions diverge in scope and enforcement intensity.
United Kingdom: A System in Transition
The UK’s whistleblower regime, historically rooted in the Public Interest Disclosure Act (PIDA), is undergoing critical reassessment. Recent consultations have explored the potential adoption of U.S.-style bounty systems, and HMRC’s introduction of a reward mechanism for tax disclosures suggests a cautious shift toward incentivization.[7]
However, the UK remains anchored in a more conservative enforcement culture, emphasizing internal resolution and judicial oversight. This hybrid model—balancing protection with restraint—may offer a middle path between the U.S. and EU approaches, though its future direction remains uncertain.
Global Implications: Navigating a Fragmented Landscape
These jurisdictions illustrate a broader global dynamic: while the principles of whistleblower protection are converging, the mechanisms of enforcement are diverging. For multinational organizations, this creates a complex compliance environment marked by:
1. Regulatory asymmetry: Different thresholds for protection, reporting obligations, and enforcement priorities.
2. Operational friction: Conflicting requirements for internal systems, data handling, and privilege.
3. Strategic uncertainty: Varying degrees of regulator engagement, public scrutiny, and legal exposure.
To navigate this landscape, companies must adopt a globally coherent yet locally adaptable approach—anchored in core principles of trust, transparency, and ethical leadership.
The Intoxication of Force: When Enforcement Undermines Integrity
Short-Term Gains, Long-Term Erosion
Aggressive enforcement often yields immediate results: misconduct is exposed, penalties are imposed, and public confidence is bolstered. Yet these outcomes can obscure deeper, more insidious effects:
1. Erosion of internal trust: Employees may perceive enforcement as externally imposed punishment rather than a reflection of internal accountability, leading to disengagement and cynicism.
2. Distorted motivations: Financial incentives can encourage opportunistic or strategic reporting, undermining intrinsic ethical behavior.
3. Atmosphere of suspicion: Overly punitive environments can fracture team cohesion, discourage collaboration, and stifle open dialogue.
These dynamics are particularly acute in cases involving multi-jurisdictional investigations, where a single disclosure can trigger overlapping inquiries, repeated interviews, and prolonged uncertainty—creating a chilling effect on voluntary self-reporting and internal cooperation.[8]
Structural Overreach: Lessons from the EU Directive
The EU Directive’s emphasis on structural compliance—particularly the requirement for decentralized reporting channels—reflects a well-intentioned effort to enhance accessibility. However, in practice, this approach can lead to[9]:
1. Operational inefficiencies: Duplicated systems across jurisdictions increase administrative burden without necessarily improving outcomes.
2. Inconsistent standards: Variability in local implementation can undermine coherence and comparability.
3. Governance fragmentation: Tensions between local and central compliance functions can dilute accountability and strategic oversight.
These challenges underscore a broader concern: Are regulators best positioned to prescribe the architecture of internal governance? Or should organizations retain the discretion to design systems that reflect their operational realities and risk profiles?
The Erosion of Privilege and the Criminalization of Compliance
A further consequence of aggressive enforcement is the gradual erosion of legal privilege. Increasingly, regulators are demanding access to internal investigations, legal analyses, and privileged communications—sometimes as a condition of cooperation or settlement.[10]
While such demands may facilitate enforcement, they risk criminalizing the compliance function. Companies may become reluctant to document sensitive issues, or may coach employees to avoid creating discoverable records. This undermines transparency, impedes learning, and ultimately weakens the integrity of internal controls.
Considerations for Policymakers
To preserve the legitimacy and effectiveness of whistleblower frameworks, policymakers must adopt a more calibrated approach—one that balances deterrence with empowerment, and enforcement with institutional resilience.
1. Reframe Enforcement as a Means, Not an End
The ultimate objective of enforcement is not punishment, but the promotion of responsible corporate behavior. Enforcement strategies should be evaluated not only by the penalties imposed, but by their impact on organizational culture, governance maturity, and ethical resilience.
2. Incentivize Internal Resolution
Regulators should encourage companies to resolve issues internally where appropriate. This requires:
1. Recognizing robust internal reporting systems as a mitigating factor in enforcement decisions
2. Providing safe harbors for self-reporting and remediation
3. Avoiding punitive responses to good-faith internal disclosures
3. Respect Organizational Autonomy
Rather than imposing prescriptive structures, regulators should allow companies the flexibility to design systems that align with their governance models, risk profiles, and operational contexts—subject to clear principles of fairness, accessibility, and accountability.
4. Promote Cross-Border Coordination
For multinational organizations, fragmented enforcement creates inefficiencies, legal uncertainty, and compliance fatigue.[xi] Greater alignment among regulators—particularly in areas such as privilege, data protection, and investigative procedures—is essential to reduce friction and enhance effectiveness.
Strategic Imperatives for In-House Leaders
For in-house counsel and compliance officers, the imperative is clear: move beyond reactive compliance and embrace whistleblowing as a strategic governance function.
1. Build Trust-Based Systems
Design reporting mechanisms that are not only compliant, but credible and trusted. This includes:
1. Ensuring confidentiality and protection from retaliation
2. Training managers to respond constructively
3. Communicating outcomes transparently
2. Reinforce Ethical Culture
Whistleblowing should be embedded within a broader culture of integrity. This requires visible leadership commitment, consistent messaging, and alignment between values and incentives.
3. Integrate Compliance with Strategy
Compliance should not be siloed. It must be integrated into strategic decision-making, risk management, and performance evaluation—ensuring that ethical considerations inform business outcomes.
Conclusion: Toward a More Sustainable Compliance Ecosystem
Whistleblower enforcement is a powerful tool—but like all tools, its effectiveness depends on how it is wielded. Overreliance on aggressive tactics may yield short-term victories, but at the cost of long-term trust, cohesion, and ethical maturity.
The future of compliance lies not in fear, but in trust. Not in coercion, but in collaboration. And not in rigid mandates, but in principled flexibility that empowers organizations to build cultures of integrity from within.
As regulators, companies, and professionals, we must move beyond the binary of enforcement and embrace a more sophisticated, strategic approach—one that recognizes that true accountability is not imposed, but cultivated.
Sharon Oded leads the Regulatory, Compliance, and Investigations practice at Norton Rose Fulbright in Amsterdam. He is a professor of corporate compliance and enforcement at the Rotterdam Institute of Law and Economics, Erasmus University Rotterdam, the Netherldands and a former research fellow at the University of California, Berkeley.
The views, opinions and positions expressed within all posts are those of the author(s) alone and do not represent those of the Program on Corporate Compliance and Enforcement (PCCE) or of the New York University School of Law. PCCE makes no representations as to the accuracy, completeness and validity or any statements made on this site and will not be liable any errors, omissions or representations. The copyright of this content belongs to the author(s) and any liability with regards to infringement of intellectual property rights remains with the author(s).
Footnotes
[1] See, for instance, Sharon Oded & Ingaborg Braam, ‘Breaking the silence from the inside: effective mitigation of whistleblowing risks’ (2016) 3 Tijdschrift voor Compliance 130–136
[4] See Klaus Ulrich Schmolke & Verena Utikal, ‘Whistleblowing: Incentives and Situational Determinant’ (2025), Journal of Business Economics. The authors provide experimental evidence that fines for non-reporting, monetary rewards, and even simple commands significantly increase the likelihood of whistleblowing, particularly among negatively affected insiders—offering a broader behavioral lens on how enforcement incentives influence internal and external disclosures.
[5] See for example article 7-14, 19 – 21 of the EU Whistleblower Directive
[6] See for an extensive review about the EU Whistleblower Directive: Sharon Oded & Jessie Steinebach, ‘Towards an Effective Implementation of the EU Whistleblower Directive in Multinational Jurisdiction’, Compliance, Ethics & Sustainability (2023) 4, 169- 179. This article analyses the EU Whistleblower Directive and its implementation across Member States, advocating for a hybrid reporting model that balances regulatory compliance with organisational control through informed design and subtle nudging.
[7] See the recently proposed Office of the Whistleblower Bill (2025) and the speech of James Murray, Secretary to the Treasury, “20 Years of HMRC: Reflections and Looking Ahead,” which reflects on HMRC’s evolving use of reward mechanisms to encourage disclosures.
[8] For an in-depth exploration on this topic, see: Sharon Oded, “Intoxication of Force: When Enforcement Undermines Compliance” (2017), Inaugural Lecture, Erasmus Law Lectures no. 42, Eleven International Publishing 2017)
[9] See supra 4.
[10] The American Bar Association already noted back in 2019 that privilege concerns were becoming increasingly significant in government investigations, requiring careful navigation to preserve protections. See Laura Kelley Schwalbe, Angelle Smith Baugh, and Margaret M. Cassidy, “Attorney-Client Privilege in Government and Congressional Investigations: Key Considerations and Recent Developments”, Business Law Today, American Bar Association (16 January 2019).
[11] The European Commission acknowledged the challenges posed by divergent national approaches to whistleblower protection and emphasized the need for greater regulatory coherence across Member States, particularly in areas such as legal privilege, data handling, and investigative coordination, in its report on the implementation of Directive (EU) 2019/19371.