Question

The Sarbanes-Oxley Act tries to protect whistle-blowers. Why is it not very effective?

Answer 1

How the Sarbanes-Oxley Act tries to protect whistle-blower and it is not effective:

SOX intended the criminal penalty to prevent whislt-blower firings, but what protections exist if an employee is fired anyway?

For federal government whistle-blowers covered by the Whisltblower Protection Act (WPA) and employees of publicly traded corporations 'protected" under Sarbanes-Oxley, both laws contain defined avenues for aggrieved employees to take redress against retaliation. For nonprofit employees, where the SOX federal criminialization of whistle-blower retaliation covers nonprofit settings, the avenue for redress is less clear. That is, under SOX the nonprofit employee may have to take to federal court for protection, a high bar to jump that involves great expense, risk, and exposure. For many and perhaps most potential nonprofit whistle-blowers this is an effective barrier to action. No wonder so many of them opt for anonymous reporting.

Until Sarbanes-Oxley, whistle-blowers had to navigate their standing under various state whistle-blower protection laws, innconnsistent from state to state and hardly ironnclad. The typical trigger for protection of whistle-blowers from retaliation is reporting potential wrongdoing to an agency with some jurisdiction over the activity and the whistle-blower's reasonable belief that the reported wrong doing is illegal. Whistle-blowing isn't about complaining about a dislikable boss and his crummy management. It's pointing out something that could reasonably be consisdered wrong and illegal.

Sarbanes-Oxley makes retaliation against whistle-blowers a federal crime, whether the venues are publicly traded corporations, smaller private companies, or private nonprofits. Despite occasional restrictions by Department of Labour administrative law judges and appellate courts on what gets protected in the corporate world and despite sometimes lackluster protections afforded by the Office of Special Counsel in the federal government, protected whistle-blowing is alive and well post- SOX.

Although, unlike whistle-blowing by employees in publicly traded corporations, there isn't a specifically mandated review procedure applicable to nonprofiit whistle-blowing. If nonprofit whisle-blowers are fired, they can report their allegations to the FBI and the U.S. Attorney's Office, and they can sue an employer for improper termination. The case law has yet to fully interpret which nonprofit circumstances and employee whitle-blowing Sarbanes-Oxley covers. Consequently, you might be heartened by the application of SOX whistle-blowing coverage to nonprofit work settings, but your best redress against employer retaliation might be employment law protections.

Notwithstanding SOX, WPA and various other state and federal statutes that reference whistle-blowing protections, a clearly stated whistle-blowing policy adopted and enforced by a nonprofit organization's board of directors is crucial.

Ever wonder why Deep Throat, the Watergate whistle-blower, chose dark corners of underground parking garages for his meetings with Bernstein and Woodward? It took untill nearly his death, when Deep Throat (aka Mark Felt) was suffering from Alzheimer's, for his family to believe itself secure enough to reveal his identity. Some potential nonprofit whistle-blowers may believe that despite the instituted protections like SOX and WPA they need the crannies of murky garages to expose wrong doning.