Chapter 7 Blowing the Whistle

Learning Objectives Explain the term whistle-blower, and distinguish between internal and external whistle-blowing Understand the different motivations of a whistle-blower Evaluate the possible consequences of ignoring the concerns of a whistle-blower

Learning Objectives (continued) Recommend how to build internal policies to address the needs of whistle-blowers Analyze the possible risks involved in becoming a whistle-blower

What is Whistle-Blowing? Employee who discovers corporate misconduct and chooses to bring it to the attention of others Whistle-blower Employee discovering corporate misconduct and bringing it to the attention of his or her supervisor Internal whistle-blowing When an employee discovers corporate misconduct and chooses to bring it to the attention of law enforcement agencies and/or the media External whistle-blowing

Ethics of Whistle-Blowing Whistle-blowers may be applauded as models of honor and integrity Discovery of illegal activities before the situation is revealed in the media could potentially save organizations millions of dollars Discovery of potential harm to consumers offers immeasurable benefit to the general public

Ethics of Whistle-Blowing (continued) In contrast to perceptions of whistle-blowers being brave and praiseworthy, they are considered to: Be motivated by money or personal egos Have breached the trust and loyalty they owe to their employers

When is Whistle-Blowing Ethical? When the company, through a product or decision, will cause considerable harm to the public or break existing laws When the employee identifies a serious threat of harm When the employee’s immediate supervisor does not act, the employee should exhaust the internal procedures and chain of command to the board of directors

When is Whistle-Blowing Ethical? (continued) Employee must have documented evidence that: His or her view of the situation is accurate The firm’s practice, product, or policy threatens the public or product user Employee must have valid reasons to believe that revealing the wrongdoing to the public will result in the changes necessary to remedy the situation

When is Whistle-Blowing Unethical? Motivated by financial gain or media attention Employee is carrying out a vendetta against the company Qui tam lawsuit: Brought on behalf of the federal government by a whistle-blower under the False Claims Act of 1863

Duty to Respond Employees are becoming increasingly willing to respond to any questionable behavior they observe in the workplace Responding to whistle-blowers means addressing their concerns and not firing them Prior to 2002, legal protection for whistle-blowers existed only through legislation that did not offer any safeguards against retaliation aimed at them

The Whistleblower Protection Act Addressed the issue of retaliation against federal employees Imposed specific performance deadlines in processing complaints Guaranteed anonymity of the whistle-blower Required prompt payment of any portion of the settlement entitled to the whistle-blower

Sarbanes-Oxley Act of 2002 Takes an integrated approach of whistle-blowing by: Prohibiting retaliation against whistle-blowers Encouraging the act of whistle-blowing itself

Dodd-Frank Wall Street Reform and Protection Act Introduced a new reward program for whistle-blowers who report securities law violations to: Securities and Exchange Commission (SEC) Commodity Futures Trading Commission (CFTC) Legislation stipulates that if more than $1 million is collected, the whistle-blower is entitled to: Between 10 and 30 percent of collected amount Clear entitlement to job and confidentiality protection

Addressing the Needs of Whistle-Blowers Well-defined process to document how whistle-blower complaints are handled Whistle-blower hotline: Telephone line by which employees can leave messages to alert a company to suspected misconduct without revealing their identity Prompt and thorough investigation of all complaints Detailed report of all investigations

Whistle Blowing as a Last Resort Unceasing media attention and the terminal damage should be considered a catalyst for the organization to take remedial steps Unfortunately, executives prefer to: Bury the information Discredit the evidence Tie their employees in restrictive confidentiality agreements