Chapter 7 Blowing the Whistle Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

7-2 What is Whistle-Blowing? Employee who discovers corporate misconduct and chooses to bring it to the attention of others Whistleblower Employee discovering corporate misconduct and bringing it to the attention of his or her supervisor, who then follows established procedures to address the misconduct within the organization 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

7-3 Ethics of Whistle-Blowing In contrast to whistle-blowers being brave and praiseworthy, they are considered to: Be motivated by money or personal egos Have breached he trust and loyalty they owe to their employers

7-4 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

7-5 When is Whistle-Blowing Ethical? 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

7-6 When is Whistle-Blowing Unethical? Motivation is the opportunity for 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

7-7 The Duty to Respond Responding to whistle-blowers means addressing their concerns and not firing them Prior to 2002 Legal protection for whistle-blowers existed only through legislation

7-8 The Whistleblower Protection Act Addressed the issue of retaliation against federal employees Imposed specific processing deadlines of complaints Guaranteed anonymity of the whistle-blower Required prompt payment of any portion of the settlement entitled to the whistle-blower

7-9 Sarbanes-Oxley Act of 2002 An integrated approach of whistle-blowing by: Prohibiting retaliation against whistle-blowers Encouraging the act of whistle-blowing itself

7-10 Dodd-Frank Wall Street Reform and Protection Act Introduced a new reward program for whistle- blowers who report securities law violations to: The Securities and Exchange Commission (SEC) The Commodity Futures Trading Commission (CFTC)

7-11 Addressing the Needs of Whistle- Blowers Well-defined process to document how such complaints are handled Whistle-blower hotline: Telephone line by which employees can leave messages to alert a company of suspected misconduct without revealing their identity Prompt and thorough investigation of all complaints Detailed report of all investigations

7-12 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