SOX and Whistleblowing

Authors

Terry Morehead Dworkin, Indiana University-BloomingtonFollow

Abstract

The language of the Sarbanes-Oxley Act ("SOX") leaves no doubt that Congress intended whistleblowing to be an integral part of its enforcement mechanisms. The Act attempts to encourage and protect whistleblowers in a variety of ways, including providing for anonymous whistleblowing, establishing criminal penalties for retaliation against whistleblowers, and clearly defining whistleblowing channels. Unfortunately, these provisions give the illusion of protection for whistleblowers without effectively providing it. There is increasing evidence that virtually no whistleblower who has suffered retaliation and pursued remedies under SOX has been successful. Additionally, social science research and studies of whistleblowing laws indicate that SOX is unlikely to increase reports. This Article compares the SOX whistleblowing provisions with other state and federal whistleblowing statutes, discusses the shortcomings of the SOX provisions, and explains why SOX needs to be revised in order to help ensure the integrity of the markets. Recommended revisions include significantly rewarding whistleblowers that come forward with novel and relevant information. Experience with the False Claims Act and equivalent state statutes show such incentive legislation to be the only truly effective legislative model. The Article goes on to discuss various ways to create an incentive reward fund. While some of the current law as well as some of the suggested revisions potentially put SOX in conflict with privacy and whistleblowing laws of European countries, the conflicts can be eliminated through judicious use of exemptions and/or through judicial interpretation.

Recommended Citation

Terry M. Dworkin, SOX and Whistleblowing, 105 Mich. L. Rev. 1757 (2007).
Available at: https://repository.law.umich.edu/mlr/vol105/iss8/5