The decision whether or not to blow the whistle is one of the most difficult ethical dilemmas in today’s business environment. Although regulators and others rely on tips to discover fraud, and even offer a bounty in some cases, the number of whistle blowers who come forward is small. We believe that internal auditors are far more likely than external auditors to become aware of fraud risk indicators, especially when these are rooted in behavioral and integrity-related risk factors. This is because in-house internal auditors operate from within the organization, have a deep understanding of the industry as well as the internal control environment, and therefore, are far more attuned to behavioral and cultural episodes and changes that could communicate risk.
One factor that may affect the propensity to whistle blow is one’s psychological safety. A psychologically safe climate is one in which people feel comfortable being themselves and expressing themselves without the fear of retaliation or retribution. It is a key element of a positive and healthy organizational climate and a culture that values mutual trust and openness, leading to greater transparency and accountability. Moreover, many of the elements associated with Catholic Social Teaching promote a psychologically safe work environment, for example, human dignity and the rights of the worker, solidarity, subsidiarity, and an “other-orientation” emphasizing community, social justice and the common good.
Using a case study, we survey approximately 60 graduate accounting students to assess the effect of psychological safety on their decisions to whistle blow. We manipulate two conditions of psychological safety, high and low, through descriptions of healthy and unhealthy cultural episodes and leadership team response. We find that our study participants increase their willingness to blow the whistle internally in the setting with high psychological safety as compared to the setting with low psychological safety. Moreover, we find that low psychological safety is significantly more likely to lead to external whistleblowing. Consequently, we suggest that organizations must pay attention to nurturing psychological safety by integrating the values espoused in Catholic Social Thought.