Whistleblowing and executive compensation structures in the prevention of accounting fraud
Abstract
Objective: This article aims to analyze the effect of the executive compensation structure, composed of restricted shares, on the managers' whistleblowing intention in cases of accounting fraud.
Methodology: An experiment was conducted with 95 accounting professionals, with an effective employment bond. Research participants were divided into two groups, a control group (variable compensation based on unrestricted shares) and a treatment group (variable compensation based on restricted shares). The data collection instrument used was a structured questionnaire, and the data were treated with non-parametric tests.
Gap: Absence of studies from the perspective of the Agency Theory, in Brazil, that analyze the remuneration structure as an ally to the requirements for the effectiveness of the reporting channels, in the prevention and detection of accounting fraud.
Relevance: The form of restricted remuneration contributes to the reduction of agency conflicts, being an essential control component in the whistleblowing systems, as it encourages the executive to report behavioral problems and identified fraud.
Impact: The results indicate that organizations (public or private) should encourage the institutionalization of whistleblowing in Brazil to prevent and identify cases of fraud and corruption, especially since the findings show that motivational factors predictive of reporting such as ethical culture, moral perception and materiality of the offense are associated with the respondent's level of education and age.
Results and contributions: The results reveal that managers are more likely to report when their compensation structures are composed of restricted actions, with statistically significant differences between the averages of the groups. Managers may be reluctant to report illegalities when their remuneration is linked to actions without short-term restrictions, as the disclosure of whistleblowing affects the market value and the entity's image, reducing its liquidation value.
Keywords: Executive Compensation; Restricted Actions; Whistleblowing; Whistleblowing Channels; Fraud.
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References
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