February 20, 2013
Letting the financial facts speak for themselves
Corporations who fought more regulation have weaker internal programs to detect fraud, prof says.
On the subject of financial regulation and corporate fraud, Christine Wiedman believes in letting the facts speak for themselves.
“That does restrain what I can do,” concedes Wiedman, a professor in the School of Accounting and Finance. “As academics, we like to deal with complex problems. I feel, that from a long-term academic perspective, that approach can offer an unbiased, clear view of a problem.
“As an academic, I’m not beholden to any one camp. I have no pressure to make one party or another happy.”
Recently, in collaboration with Carol Marquardt, an accounting professor at Baruch College in New York City, Wiedman examined the corporate reaction to the proposed “whistleblower-protection” provisions of the Dodd-Frank Act, introduced following the financial meltdown in the United States. The legislation would not only give protection to the corporate insiders that reported financial wrongdoing, but would also provide them with significant monetary awards for doing so.
Not surprisingly, it received a rocky reception from some corporate lobbyists. They contended that a bounty program would only obstruct their own internal programs to stop corporate fraud by allowing whistleblowers to report suspected misconduct directly to the Securities and Exchange Commission (SEC).
“We were interested in providing early evidence of the effectiveness of the proposals, so we decided to compare the firms that had opposed the legislation with those that had not,” says Wiedman. “We found strong results showing that those firms that had lobbied against the legislation had far weaker in-house programs that those that did not oppose the legislation.”
Those findings were presented to the SEC members evaluating the proposed legislation.
Wiedman is originally from Stratford and attended the University of Waterloo before going to work for a short time as chartered accountant in Toronto. She completed her doctorate at Cornell University before taking a teaching post at William and Mary University in Virginia. She returned to Canada to teach at the Richard Ivey School of Business at the University of Western Ontario, then came to Waterloo in 2006.
“I’ve always felt that shareholder protection is a critical issue, and I’ve always been interested in the mechanisms to deter fraud,” she says.