In contrast to the exit system the relationship

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In contrast to the exit system, the relationship between employees and employer in the voice- system is more long-term. The financial benefit of whistle-blowing should therefore be less relevant than in an exit system. Moreover, financial rewards work as extrinsic incentives and could destroy the intrinsic motivation to blow the whistle (Fleischer and Schmolke, 2012, p. 364). Increasing disloyalty and denunciation might be expected (Miceli and Near, 1994; Schmidt, 2005). For this reason, reward programs are associated with former regimes in Ger- many and portray whistle-blowers as those who foul their own nest. 15 The approach is additionally criticised for the fact that it especially motivates employees to blow the whistle externally (Lobel, 2009). All efforts that aim to encourage internal whistle- blowing and prevent external whistle-blowing are undermined by financial rewards (Buchert, 2013). For this reason the approach is not seen as legitimate in voice systems because it con- tradicts the duty of loyalty. The organization might counteract these financial incentives by increasing the benefits of in- ternal whistle-blowing so that they exceed the benefits of external whistle-blowing. It is hardly conceivable that an organization would be able to pay rewards similar to those of the courts, despite the fact that US American organizations do just this (Callahan and Dworkin, 15 For a negative association of whistle-blowing see Schmolke, 2012, pp. 229-230.
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28 1992, p. 273; Pope and Lee, 2013). But non-financial rewards might also play an important role. Non-financial rewards seem to be especially beneficial for employees in voice systems, who have a higher duty of loyalty and a long-term commitment to the organization. Internal rewards ensure on the one hand that the employee remains loyal to the organization and on the other hand that the employee will fear less retaliation compared to the case of external whistle-blowing (Callahan and Dworkin, 1992, p. 335). 4.3 Consistency of whistle-blowing regulation The approaches mentioned above have different consequences in the particular corporate gov- ernance systems. As mentioned in chapter three the consistency of a corporate governance system depends on what is considered to be legitimate within the norms and the values of the underlying corporate governance system. In contrast to exit systems, regulation in voice sys- tems has to support the duty of loyalty and the co-determination rights of employees. Any regulation that encourages external whistle-blowing is therefore not legitimate in voice sys- tems. Employees should be motivated to blow the whistle internally in order to comply with the duty of loyalty and to strengthen the co-determination rights. However, the problem of unsuccessful internal reports persists. Regulation should therefore motivate management to implement whistle-blowing systems that work effectively so that internal whistle-blowing is perceived to be the superior option for action.
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