How Whistleblowers Keep Companies Honest


The NewCo Daily: Today’s Top Stories

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“Whistleblower” is a peculiarly American term for someone who sees something wrong happening in an organization and calls foul. The problem with the sports metaphor is that, on the athletic field, the person blowing the whistle is empowered — a referee or umpire. In business, however, whistleblowers are usually vulnerable employees who face retribution and blackballing.

Government regulators at agencies like the Securities and Exchange Commission and the Occupational Safety and Health Administration have programs in place to encourage whistleblowers to step forward and reward and protect them. Businesses typically resent that and charge that it encourages fraud. But a new study by a business professor at the University of Iowa shows that whistleblowing has a clear and valuable deterrent effect (Gretchen Morgenson in The New York Times).

In the period after a complaint, firms that had the whistle blown on them “are significantly more likely to experience a decrease in the incidence of accounting irregularities and a decrease in tax aggressiveness, compared with control firms,” the study found. As business in general and, especially, corporate accounting grow more complex, regulators can barely begin to understand what’s going on at a company without the insight of insiders. We need whistleblowers if we want to have any hope of catching the next Enron or Bernie Madoff. In fact, given concerns over public corruption and self-dealing in the Trump era, we’re going to need all the whistleblowers we can get — and they’ll need our help.

Uber’s Dangerous Self-Driving Game

Last week Uber started testing its self-driving cars in San Francisco without obtaining the permits California requires. Despite protests from regulators and widely publicized incidents like cars running red lights captured on video, the company says it plans to continue flouting the state (Recode). Because its self-driving cars always have a driver at the wheel ready to take over, Uber argues, its system is more like Tesla’s autopilot than like the autonomous vehicles Google and other companies have been developing. California’s DMV disagrees.

Uber’s confrontational approach is standard procedure for the firm, which has a long history of breaking rules and then rallying its customer base to pressure government to back off. One of these days, this tactic is going to backfire. Yesterday, Uber admitted that its self-driving program doesn’t handle turns into bike lanes properly (The Guardian) and said it would fix the bug. Meanwhile, the cars remain on the road.

The Bay Area loves its bicyclists. One bad accident could send Uber’s whole project into reverse. Uber relies on investors’ cash to sustain heavy operating losses (reportedly $3 billion this year) while it builds market share, but it can’t do that forever. More diplomacy and less sharp-elbowed aggression might work better all around. But that would require Uber to shift its culture.

Silicon Valley’s Fast Track to the Pentagon

After less than two years and with a tiny (by defense-contractor standards) $30 million budget, an outfit in the Department of Defense has cut a wormhole through the byzantine procurement process and enabled speedy collaboration between tech companies and the military.

As Fred Kaplan tells the story (Technology Review), the Defense Innovation Unit Experimental (DIUx) nearly died after a false start. Then it found a kind of secret backdoor in the bureaucracy’s rules and figured out a way to work with, rather than against, the tech industry’s pace and “fail fast” ethos. From its Moffett Field office hard by the Googleplex and the heart of Silicon Valley, DUIx can move a new product from the startup that invented it to a contract with the DoD to the field in the time it might once have taken just to draw up a first Gantt chart for a defense project. There’s just one cloud on the horizon: DUIx is known as current secretary of defense Ash Carter’s baby. The new team taking over on Jan. 20 might disown it.

Flower Startups Are Budding

The flower business, like every other industry, is being disintermediated and reoriented around sustainability. A handful of startups are looking for ways to cut out multiple middlemen and connect growers with customers more directly than the floral industry’s old-fashioned supply chain allowed. Modern Farmer looks at three companies taking different approaches to the problem.

Venice Beach-based Bouqs aims to provide more value to customers and farmers alike by taking wholesalers out of the equation. Farmgirl Flowers, also in California, focuses on reducing waste and buying local by offering a single daily arrangement of whatever’s in bloom. Petal by Pedal, in New York, buys regionally and delivers by bicycle. All three companies pay attention not only to their products’ freshness but also to the welfare of the workers who grow them.

The Future of Farming Is Not Farming

Farming has always been a tough business, but the answer to farmers’ problems may lie not in better agricultural techniques but in moving into adjacent businesses. That’s Sarah Mock’s argument (NewCo Shift): U.S. agriculture doesn’t need to be more productive, but it does need better distribution and more investment to adapt to a sustainable future. Farmers who start sideline efforts — like distilleries, event hosting, or “seed to sheet” cotton products — can build more predictable income and use that capital to build better futures for their enterprises and their customers.

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