3.2.2 The Risks of Whistleblowing

Many publicly known cases—most notably the Wirecard whistleblower Pav Gill, the Theranos whistleblower Tyler Shultz, and Adam Quadroni (the whistleblower in the Graubünden construction cartel)—demonstrate that whistleblowers often tried for long periods to report wrongdoing internally before turning to external or public channels following severe reprisals such as defamation, ostracism, isolation, demotion, suspension of promotions, threats, pathologization up to forced psychiatric hospitalization, dismissal, or existentially threatening lawsuits.

It can be assumed that the degree of risk faced by whistleblowers is shaped in particular by the severity of the wrongdoing and the power position of those responsible. The more severe the wrongdoing and the higher the perpetrators are situated in the organizational hierarchy, the greater the power imbalance vis-à-vis the whistleblower – and the higher the likelihood of reprisals. Especially in cases of organizational crime or leadership crime, internal whistleblowing is typically associated with heightened risks and limited prospects of effectiveness. In such situations, external reporting channels are generally preferable.

Whereas reports by whistleblowers were often assumed to follow a tiered system of reporting (i.e. internal first, then external, cf. Vandekerckhove, 2022), this assumption has shifted in light of recent regulatory developments. Legislators, at least within the European Union, now recognize the generally high risks associated with whistleblowing and aim to make whistleblowing more effective. They therefore allow whistleblowers to choose between internal and external reporting systems and in exceptional circumstances to disclose information publicly (cf. Art. 15, Directive (EU) 2019:1937; cf. Vandekerckhove, 2022), for example to the press. Public disclosure within the European Union is permitted when a whistleblower has first reported internally or externally and no appropriate action has been taken within the required timeframe, or when the whistleblower has reasonable grounds to believe that the breach may constitute an imminent or manifest danger to the public interest, or that, in the case of internal reporting, there is a risk of retaliation or a low likelihood that the breach will be effectively addressed (cf. Art. 15, Directive (EU) 2019:1937).

It can be expected that the whistleblower’s freedom of choice within the EU between internal and external reporting channels strengthens the “competition” between these channels described by Herold (2018, p. 231-232). This, in turn, incentivizes companies to establish robust and easily accessible internal reporting systems, as it can be assumed that organizations prefer that reports are made internally first. It also increases the incentive to cultivate a supportive whistleblowing culture, since such a culture fosters trust among potential whistleblowers and thereby promotes early internal reporting.