1. Ethics and the Conduct of Business
Eighth edition
Chapter 4
Whistle-Blowing
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2. Modules Introduction: Whistle-Blowing 4.1: What Is Whistle-Blowing?
4.2: Justification of Whistle-Blowing
4.3: Right to Blow the Whistle
4.4: Developing a Policy
Conclusion: Whistle-Blowing
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3. Learning Objectives
4.1: Define the significance of whistle-blowing and the act itself according to seven criteria
4.2: Assess situations where whistle-blowing may or may not be justified, given the duties and obligations of all parties and the potential consequences of the act
4.3: Describe the characteristics and importance of laws designed to protect whistle-blowers and key points in the debate over the moral justification of these laws
4.4: Identify the importance of developing an effective whistle-blowing policy for an organization and the key components of such a policy
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4. Introduction: Whistle-Blowing
Time magazine’s persons of the year
Similarities and differences
Points to consider
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5. 4.1: What Is Whistle-Blowing?
Objective: Define the significance of whistle-blowing and the act itself according to seven criteria
What is whistle-blowing?
Criteria for whistle-blowing
4.1: What Is Whistle-Blowing?
Point 1– What is whistle-blowing?
Release of information by member/former member of organization
Evidence of illegal and/or immoral conduct in the organization
Point 2 - Criteria for whistle-blowing
Action by an individual inside an organization
Involves the release of nonpublic information/ new unknown facts
Reserved for matters of substantial importance
Information must be released outside normal channels of communication
To whom the whistle is blown
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6. Table 4.1: What Constitutes Whistle-Blowing?
Criteria
Whistle-Blowing
Not Whistle-Blowing
Who can blow the whistle?
An individual inside an organization exposes wrongdoing to the outside world.
A witness to a crime or a reporter
What kind of information is involved?
Nonpublic information that reveals new facts
Facts that are already known to the public
What is it reserved for?
Calling attention to matters of substantial importance
Exposing matters of minor importance, such as incompetent management
Who is informed and how?
External: An employee “goes public” to inform individuals or groups outside the organization.
Internal: An employee informs others within the organization by going outside normal channels of communication.
An employee follows established procedures to report wrongdoing through normal channels of communication.
What is the immediate goal?
To correct a wrong by bringing about a desired change
To pass on information about wrongdoing to a supervisor, director, or a third party
Was the person compelled to act?
The release of information is voluntary.
The testimony is legally compelled (by a court of law).
What is the motive?
To stage a moral protest.
To seek revenge or personal advancement
Who can blow the whistle?
What kind of information is involved?
Who is informed and how?
What is the immediate goal?
Was the person compelled to act?
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7. 4.2: Justification of Whistle-Blowing (1 of 2)
Objective: Assess situations where whistle-blowing may or may not be justified, given the duties and obligations of all parties and the potential consequences of the act
4.2.1: Loyal Agent Argument
Agent and principal
Limits to agency duties
4.2.2: Meaning of Loyalty
Pertinent questions
Loyalty
4.2.1: Loyal Agent Argument
Point 1– Agent and principal
Employee is called an agent
Employer is called a principal
Point 2 - Limits to agency duties
Does not impose absolute obligation on employees
Does not require employees to do anything illegal or immoral
Does not require employees to keep confidential information about the commission of a crime
4.2.2: Meaning of Loyalty
Point 1- Pertinent questions
Is whistle-blowing always an act of disloyalty?
Can it sometimes be done out of loyalty to the organization
Point 2- Loyalty
Loyalty a factor that keeps people from exiting an organization
It activates the voice option
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8. 4.2: Justification of Whistle-Blowing (2 of 2)
Objective: Assess situations where whistle-blowing may or may not be justified, given the duties and obligations of all parties and the potential consequences of the act
4.2.3: Conditions for Justification
Analyzing the situation
Taking action
Role-based responsibilities
Chances for success
4.2.3: Conditions for Justification
Point 1- Analyzing the situation
Moral importance of the situation
Availability of facts and understanding the significance
Whistle-blowing should be the last step to be considered
Point 2 - Taking action
Determine the effective course of action
Whom to inform
How much information should be revealed
Reveal information anonymously or accompanied with identity
Point 3 - Role-based responsibilities
Employee is more justified in whistle-blowing
Professionals have greater obligation (professional ethics)
Point 4 - Chances for success
Analyze the chances for success
Effective plan of action is of great concern
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9. 4.3: Right to Blow the Whistle (1 of 2)
Objective: Describe the characteristics and importance of laws designed to protect whistle-blowers and key points in the debate over the moral justification of these laws
4.3.1: Existing Legal Protection
Existing legal protection
Other federal acts with anti-retaliatory provisions
Sarbanes-Oxley Act
False Claims Act
The 2010 Wall Street Reform and Consumer Protection Act
4.3.1: Existing Legal Protection
Point 1 - Existing legal protection
Complex patchwork of state and federal laws
Federal and state employee receive much protection
Legal protection is limited and uncertain
Civil service reform act of 1978: prohibits retaliation
Merit System Protection Board (MSPB) receives and acts on complaints of retaliation
Point 2 - Other federal acts with antiretaliatory provisions
Surface Mining Act
Railway Safety Act
Surface Transportation Safety Act
Safe Drinking Water Act
Toxic Substance Control Act
Point 3 - Sarbanes-Oxley Act
First whistle-blower protection for private sector employees
Mandatory reporting procedures for employees to make confidential allegations
Point 4 - False Claims Act
Encourages individuals to report any fraud against the government
10–30% of funds awarded to whistle-blowers from recovered suit
Qui tam action whistle-blower can file legal action on behalf of government
Point 5 - The 2010 Wall Street Reform and Consumer Protection Act
Strengthens existing protection in other federal legislation
Introduces new provisions for financial markets
Awards whistle-blowers on disclosing violations to Consumer Financial Protection Bureau
Directs the Securities and Exchange Commission to create a special whistle-blower office
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10. Table 4.2: Legal Protections for Whistle-Blowers
Federal Laws
Provisions/Protections
The Sarbanes-Oxley Act of 2002
Prohibits retaliation against whistle-blowers who are private sector employees, and entitles them to compensation for retaliation
Requires all companies to have confidential reporting procedures
The National Labor Relations Act of 1935 (NLRA)
Prohibits retaliation against any employee who files a charge with the National Labor Relations Board (NLRB)
The False Claims Act
Entitles whistle-blowers to file a qui tam action against a company and receive 10–30% of the funds recovered in any suit, plus compensation for legal expenses
The 2010 Wall Street Reform and Consumer Protection Act (Dodd-Frank Bill)
Strengthens protections in other laws and enforces new provisions for financial markets
Entitles whistle-blowers to monetary awards for violations of security laws and rules enforced by the new Consumer Financial Protection Bureau
Creates a special SEC whistle-blower office
State laws
Most protect only state employees
Most specify whistle-blowing procedures and requirements for protection
Federal laws
Provisions/Protections
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11. 4.3: Right to Blow the Whistle (2 of 2)
Objective: Describe the characteristics and importance of laws designed to protect whistle-blowers and key points in the debate over the moral justification of these laws
4.3.2: Arguments against Protection
Encroach on the rights of employer
Reinstatement
4.3.3: Arguments for Protection
Contribution to the society
Freedom of speech
4.3.2: Arguments against Protection
Point 1- Encroach on the rights of employer
Affects the traditional rights of employers to conduct business efficiently
Creates informer ethos at workplace threatening the spirit of cooperation
Point 2- Reinstatement
Reinstatement may not be feasible
Dismissed employee may even sue the employer for being wrongly injured
4.3.3: Arguments for Protection
Point 1- Contribution to the society
Illegal corporate conduct
Gross waste and mismanagement
Dangers to the public brought to light
Point 2- Freedom of speech
Right to follow one’s own conscience
Speak out on moral issues
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12. 4.4: Developing a Policy 4.4.1: Benefits and Dangers
Objective: Identify the importance of developing an effective whistle-blowing policy for an organization and the key components of such a policy
4.4.1: Benefits and Dangers
Benefits and dangers
4.4.2: Components of a Policy
Clearly defined procedure for reporting
Well-trained personnel to receive and investigate reports
Commitment to take appropriate action
4.4.1: Benefits and Dangers
Point 1- Benefits and dangers
Benefit of learning about problems early and corrective actions
Effective policy creates an ethical environment
Involves danger by encouraging false accusations
4.4.2: Components of a Policy
Point 1 - Clearly defined procedure for reporting 
Whom to report
Awareness of procedure
Point 2 - Well-trained personnel to receive and investigate reports 
Maintain confidentiality
Conduct a fair and thorough investigation
Point 3 - Commitment to take appropriate action 
Reports- not to be ignored/misused
Whistle-blower informed on investigation and action taken
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13. Conclusion: Whistle-Blowing
Whistle-blowing is ethical
Under certain carefully specified conditions
When revealed in a justified manner
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