June 2019

A study published in April 2019 and conducted by researchers at George Washington University offers a quantification of the generally held understanding that effective whistleblower systems contribute to business performance.  The study, entitled Evidence on the Use and Efficacy of Internal Whistleblowing Systems, is based on analysis of a propriety dataset of nearly two million whistleblower reports submitted to over one thousand publicly traded U.S. firms.

The study found the reports can be categorized as follows:

Percentage Category
55% Human Resource issues, such as discrimination, harassment or other policy violations
16% Business integrity issues, such as illegal or unethical business practices, conflicts of interest, falsification of company records, bribery, etc.
12% Misuse of corporate assets (asset misappropriation, embezzlement, etc.)
8% Workplace safety issues
1% Accounting and financial reporting concerns
8% Other types of concerns
100% Total


The study describes the following benefits of increased hotline use:

  • Greater profitability and workforce productivity via increased Return on Assets (“ROA”)
  • Fewer material lawsuits brought against the company
  • Lower settlement costs when a lawsuit is filed
  • Fewer external whistleblower reports to regulatory agencies and other authorities

The above items are consistently positively correlated with more hotline reporting activity.  Further, increased hotline reporting activity is never correlated with negative business outcomes in the above areas. The underlying statistical analysis indicates that a 10% increase in whistleblower reports per employee is associated with a 3.1% decrease in the dollar amount of government fines and a 1.2% decrease in legal settlement amounts.

These findings support the idea that whistleblower reporting systems deter inappropriate behavior and help management identify and investigate issues earlier by providing relevant and actionable information about issues arising in the organization. By offering a secure, anonymous means of raising concerns, the systems allows reporting where the employee might otherwise fear retaliation or simply not wish to become personally associated with any future investigation.

Fulcrum Inquiry is a forensic accounting firm that performs fraud and accounting investigations. We use this experience in operating whistleblower collection mechanisms that improve governance processes for public and private businesses, as well as nonprofit organizations.