The whistleblower’s paradox: when professional services firms protect the wrong people
A guest essay by Josef Pilger, a former EY Global Pension and Retirement Leader with more than 30 years of international experience across governance, risk, pensions and retirement.
Key Takeaways
When the person under scrutiny is commercially powerful, the firm’s scrutiny often shifts onto the person who raised the concern.
Real protection requires independent investigations, documented conflict decisions, and looking at who benefited as well as who leaked.
Josef Pilger is a strategic advisor and industry thought leader with more than 30 years’ experience working across four continents and over 30 countries. He has advised more than 100 boards, CEOs and leadership teams of leading private and public-sector organisations in retirement, life insurance, asset management, financial advice and government.
His work centres on governance, risk and culture, strategy and growth, investments and complex transformation programmes, bringing a distinctive blend of corporate leadership and deep subject-matter expertise.
Full bio at the end of the article.
The Problem
Professional-services firms need to have a strong foundation of trust with their clients, because law firms, accounting firms, consultancies, and other expert advisers are often given access to sensitive information that outsiders never see.
They may know that a company is about to be sold, that a chief executive is about to be removed, that a government is considering a major policy change, or that a regulator is concerned. They may also know that a client is financially vulnerable, litigation is approaching, or confidential strategic decisions are under consideration.
That knowledge is part of what makes professional advisers valuable, which is why its misuse can be particularly damaging. The same access that enables an adviser to serve one client can also create opportunities to use confidential knowledge elsewhere. Information from one client can influence advice to another. A professional can use privileged access to secure business, build relationships, protect a powerful client, enhance a personal reputation or undermine a colleague — sometimes without explicitly disclosing the underlying information.
The problem is that in such situations the only person who can recognise this type of subtle misuse is usually an insider. Someone whom the person who is misusing the information feels comfortable lowering their guard with. And often this insider’s career, reputation and access depend on the same hierarchy they may need to challenge. This is the whistleblower’s paradox.
A further difficulty is that covert misuse of confidential information often occurs through hints, questions and informal warnings rather than written instructions. The prospective whistleblower may therefore have limited documentary evidence of the breach.
The risk is greatest when the people misusing confidential knowledge are commercially valuable and powerful in the organisation. Once the whistleblower speaks up, their motives, judgement and performance may be easier for the organisation to examine than the conduct they reported.
Misconduct without a paper trail
Certain abuses are straightforward to identify, such as insider trading, fraud, bribery, selling confidential data or intentionally leaking sensitive commercial information.
Misconduct, however, frequently begins in less obvious ways: a hint; an informal warning; a carefully worded suggestion; a supposedly hypothetical discussion that is not hypothetical at all; a decision influenced by confidential information that is never formally acknowledged.
The absence of an email, recording or written instruction does not establish that no misconduct occurred. Professional-services firms rely heavily on conversations, discretion and trust. Those qualities make the firms effective, but they also make subtle misconduct difficult to detect and prove.
What information barriers cannot prevent
Large professional-services firms serve diverse clients across industries, transactions and jurisdictions. One team may advise a government entity while another advises companies affected by government policy. One practice may audit a company while another seeks to sell it consulting services. Different partners may possess knowledge that could benefit colleagues commercially.
The firms will say that information barriers are in place. The fact remains that these guardrails can reduce direct disclosure and restrict access to documents, but they cannot make a senior professional unaware of what they already know.
Confidential knowledge may influence the questions a person asks, the risks they identify or the advice they give without the source ever being revealed. So the ethical issue is broader than explicit disclosure. A professional may never directly reveal the confidential information they are privy to, but still exploit it to their advantage.
When conflict management becomes costly
Conflict procedures become more difficult to apply when doing so could mean losing revenue, upsetting a major client, damaging a partner’s standing or walking away from valuable work.
Under commercial pressure, ethical interpretation can narrow. Information barriers may be treated as sufficient even where the underlying risk remains. The potential conflict may be redefined as remote, theoretical or manageable. These decisions are particularly vulnerable when they are made by people whose revenues, relationships or reputations are directly affected.
An effective compliance function must have the authority, resources and independence to reach an unwelcome conclusion — including a conclusion that costs the firm money.
When the subject of a complaint is powerful
A firm may insist that the same procedures apply to a junior employee and a top-performing partner. In practice, status and commercial importance affect how concerns are handled.
Some professionals control major client relationships, generate exceptional revenue, influence promotions, serve on leadership committees or have accumulated considerable status over decades with the firm. Colleagues and investigators may be less willing to challenge them, even without an explicit instruction to look away.
The motivations for misuse are not always financial
Confidential information can strengthen relationships, build dependencies, reward allies, damage rivals and provide access to influential people. The value of being the person who always seems to know what is about to happen may be substantial even where no payment changes hands.
A confidential fact does not have to be sold for cash to be abused. A warning to a powerful client, assistance to a colleague pursuing new business or information used to weaken an internal rival may produce commercial or personal benefits that are difficult to quantify.
A professional may describe a carefully phrased heads-up as ‘value add’ or differentiating market experience. But legitimate expertise must be separated from the unauthorised use of client-specific information. The fact that a benefit is indirect, relational or difficult to value does not make the conflict disappear.
Why these failures recur
This situation does not exist solely within one profession, one firm, one country or one scandal. The vulnerability exists wherever three conditions converge: valuable confidential knowledge, human self-interest and unequal power.
The cultures of many large global firms have historically been shaped by partnership structures, strong client loyalty, commercial achievement, personal networks, seniority, discretion and significant autonomy for powerful professionals. These characteristics can produce extraordinary performance. They can also make organisations reluctant to challenge high-status insiders or to interpret ambiguous evidence against a successful rainmaker.
Over time, loyalty to colleagues or the firm may discourage challenge. No coordinated conspiracy is required. The same result can emerge through incentives, dependence, deference and repeated decisions to give a valued insider the benefit of the doubt.
Controls that would make a difference
A whistleblowing hotline will not resolve the problem. The organisation must be able to investigate conduct that is informal, ambiguous and commercially inconvenient. At a minimum, professional-services firms should adopt the following safeguards:
Define misuse as well as disclosure. Policies should address the unauthorised use of confidential knowledge, not only the transmission of documents or explicit disclosure of facts. Training should use realistic scenarios involving hints, recusal, relationship management and advice influenced by client-specific information.
Remove investigations from the commercial chain of command. Allegations involving senior partners, major client relationships or firm leadership should be triaged and investigated by independent investigators, separate from the business line and the people involved. The investigative team’s remit should not be artificially constrained, and it should have access to the information and systems required to establish what happened.
Protect the reporter after the initial disclosure. Anti-retaliation controls should extend beyond dismissal or demotion to changes in work allocation, exclusion from meetings, adverse performance assessments, stalled promotion and reputational attacks. An independent third party should be assigned to monitor the reporter for a defined period after the complaint.
Document conflict decisions and test them retrospectively. Where a firm decides that an information barrier, consent arrangement or recusal is sufficient, the reasoning, decision-maker and commercial interests affected should be recorded. Significant decisions should be reviewed by an independent ethics or risk function and tested against later evidence.
Align investigations with conduct, regardless of seniority. A rainmaker should not receive a higher evidentiary threshold simply because disciplining them is expensive.
Examine the recipient and beneficiary, not only the source. A confidential warning normally involves both a source and a recipient. Investigations should consider who requested, accepted, acted on or benefited from the information, including clients and colleagues who may have understood why the information was sensitive.
Measure whether the system works in practice. Firms should track reporting volumes, time to resolution, substantiation rates, seniority of subjects, repeat allegations, retaliation indicators and remedial action. Independent overseers should receive the data and report meaningful themes without compromising confidentiality.
When applying the rules becomes costly
The quality of an ethical culture is not demonstrated when everyone agrees. It is demonstrated every day when someone faces an internal conflict over confidential information, and when someone makes a serious allegation against a successful, senior or powerful insider.
A credible organisation seeks the truth rather than protecting the relationship. It examines informal conversations, influence and advantage rather than searching only for written proof. It distinguishes a fair assessment of the whistleblower’s conduct from an attempt to make the whistleblower the problem. And it rewards those who raise difficult truths rather than quietly teaching everyone else what happens to people who do.
Every professional-services firm has formal values: integrity, trust, objectivity, independence, confidentiality and professionalism. But values are easy when they cost nothing. The real test comes when protecting integrity means losing money, upsetting a powerful client, disciplining a rainmaker, exposing a control failure or admitting that respected colleagues got something badly wrong.
That is when the honour system is tested. And that is when a firm discovers whether its real priority is truth or self-protection.
The most uncomfortable question remains: would the organisation rather discover serious wrongdoing — or avoid discovering it?
Who is Josef Pilger?
Josef Pilger recently retired as EY’s Global Pension and Retirement Leader, where he led teams across more than 30 countries. His career spanned more than three decades and four continents, and he has held senior fiduciary and pension trustee roles, served as European Head of Pensions for a major European bank, and acted as Chief Operating Officer of a bank-owned multi-employer pension fund. Pilger has worked with over 100 boards, CEOs and leadership teams of leading private and public-sector organisations in retirement, life insurance, asset management, financial advice and government.
Now an independent consultant and strategic adviser, Pilger focuses on governance, risk and culture, retirement reform and complex organisational change. He brings a distinctive blend of deep subject-matter expertise and an outside-in perspective shaped by Australian, European, American and Asian experience. He is the author of The Quadrillion Dollar Bridge: Closing the Retirement Funding Gap by Understanding How Humans Make Decisions and a frequent speaker and writer on pension, retirement and governance issues.
This article is part of the Big4News Expert Voices Series
Expert Voices
This section features candid interviews with whistleblowers, legal experts, and financial professionals who have direct experience with the inner workings of Deloitte, PwC, EY, and KPMG.