1. 1 Lecture 2: Whistle-Blowing Please refer to “Ethics and the Conduct of Business” by John R. Boatright BBA 361 BBA 361 Business Ethics & Corporate Governance

2. 2 What is Whistle-blowers? -People who expose some wrong doing in a corporate, often at great personal risk. Risk/Price??? Retaliation: -Poor evaluations, demotion, outright dismissal, career disruption, financial hardship resulted from job dislocation and legal expenses, severe emotional strain, being crowded out…

3. 3 A proper definition of Whistle-Blowing I -A disclosure of information in which the action takes place within an organization, while the employees have obligations to maintain confidentiality; -Necessarily involves the release of non- public information; -Information should be evidence of significant misconduct on the part of an organization/members.

4. 4 A proper definition of Whistle-Blowing II -Information must be released outside normal channels of communication, i.e. internal/external whistle blowing: *report to immediate superiors *submit suspicions of misconduct to CEO with assurance of confidentiality *ombudsman- designated official handling employee complaints

5. 5 A proper definition of Whistle-Blowing III -To whom the whistle is blown: information must be revealed in ways that can reasonably be expected to bring about a desired change. - The release of information must be something which is done voluntarily. - It must be undertaken as moral protest: motive must be to correct some wrong and not to seek revenge or personal advancement.

6. 6 Ethical Justification of Whistle-Blowing I Three concerns: 1. Whether it will create suspicion, disharmony and conflict 2. Does a person who blow the whistle have a greater obligation to the public or to the organization? 3. Violation of loyalty?

7. 7 Ethical Justification of Whistle-Blowing II The Loyal Agent Argument I: Are Whistle-Blowers Disloyal Agents ? Apparently:  Employee is an agent of an employer.  Agent: act in the interests of employer. Employee / agent has an obligation to work as directed, to protect confidential information, and to be loyal.  E.g. Lawyers agree for a fee to represent clients; employees are hired with understanding that they will work for the benefit of an employer.  A lawyer who sells out a client—clearly a violation of legal profession’s code of ethics.

8. 8 Ethical Justification of Whistle-Blowing II The Loyal Agent Argument II: Are Whistle-Blowers Disloyal Agents ? Justification:  Obligation is not without limits. It can be justified.  An agent has an obligation to obey all reasonable directives of the principal (employer), but not obligated to do anything illegal/immoral, even instructed by employer.  An agent are not obligated to keep confidential any information about the commission of a crime. “If the confidential information is to the effect that the principal is committing or is about to commit a crime, the agent is under no duty not to reveal it.”

9. 9 Ethical Justification of Whistle-Blowing II The Loyal Agent Argument II: Are Whistle-Blowers Disloyal Agents ? Justification:  Obligations of an agent are confined to the needs of the relationship. Conclusion: Obligations that employees have as agents of a company are of great moral importance, but they have limits. The agency relationship does not require employees to involve in illegal/immoral activities.

10. 10 Developing a Whistle-Blowing Policy Benefits of an effective policy:  Learn about problems early and take corrective action before problems become public  Affirm a company’s commitment to good ethics and creating an ethical corporate climate  Help employees perceive what is wrong doing in organization Dangers of such policy:  Create an environment of mistrust and intimidation  Over-caution towards work, due to the possibility of accusations

11. 11 Developing a Whistle-Blowing Policy Components of an effective Whistle-Blowing Policy 1) An effectively communicated statement of responsibility  Employees have responsibility to report all concerns about serious unethical or illegal conduct through appropriate internal channel. 2. Clearly defined procedure for reporting  Employees should be notified a procedure that allows them to report in a confidential manner, and specify the persons to whom reports are to be made, i.e. hotline, anonymous, report to direct supervisor etc.

12. 12 Developing a Whistle-Blowing Policy Components of an effective Whistle-Blowing Policy 3) Well-trained personnel to receive and investigate report  Skills of personnel are very important, need to maintain confidentiality, and conduct fair and thorough investigation  Need to be well-trained and have sufficient authority 4) Commitment to take appropriate action  Employees must be ensured by both word and deed that suspected wrongdoing will not be ignored and misused.  Reporting employees will be informed about the outcome of an investigation and the action taken. 5) A guarantee against retaliation  Assure that employees will not suffer retaliation for making reports in good faith.

13. 13 CAN ONE PERSON MAKE A DIFFERENCE? Edward Everett Hale wrote: I am only one. But still I am one. I cannot do everything, But still I can do something; And because I cannot do everything I will not refuse to do the something that I can do.