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Eastern Nazarene College
MM540- Human Resource Management
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Whistleblower is defined as someone who exposes any kind of information that is deemed illegal, unethical or not correct within an organization that is public or private. Whistleblowers have been around since 1863 when President Abraham Lincoln signed into law the Federal False Claims Act, which was designed to protect the United States from purchases of fake gunpowder during the civil war (Mondy & Martocchio 2016). Since the late 80’s many attempts have been made to pass legislation regarding business ethics, it has been tricky because many feel that you cannot mandate ethics laws but that through them people will have a better understanding of what is right and wrong. The four acts are 1. Procurement Integrity Act of 1998. This act is for the protection of businesses or government in which they enter into a contract for goods and services through a bid or proposal process to ensure that they obtain a fair market value for goods and services. This act came to be because of the reports filed that the military had contracts for $500 toilet seats and a $5000 hammer. 2. Federal Sentencing Guidelines for Organizational Act 1992. This came to be to introduce ethics training programs and put in place a system to report unacceptable conduct in an anonymous fashion and developing codes of ethic 3. Corporate and Auditing, Accountability, Responsibility and Transparency Act of 2002. Known as the Sarbanes-Oxley Act to eliminate or at least reduce conflict of interest and increase penalties. The act contains language addressing broad employee whistleblower protections. 4. Dodd-Frank Wall Street Consumer Protection Act 2010. This act came into play because of the worst financial crisis since the great depression, which resulted in loss of eight million jobs, failed businesses, and a drop in the housing market and wiped out saving accounts of many workers (Mondy ; Martocchio 2016). The term “Whistleblower” was first used in 1963 by publicity about Otto Otopeka, who had provided classified documents Running header: WHISTLEBLOWER 3 about security risks in the new United States administration to the chief counsel of the Senate Subcommittee on Internal Security. The term itself originated in England because the Bobbies or police officers would blow their whistle when they noticed a crime being committed to alert other police to criminal acts and the public of the dangers that existed (Hersh 2002, 243-262).
Most people were unaware of whistle blowing until the big case of Enron scandal in 2001 which led to bankruptcy of the corporation the company and the dissolution of their partners Arthur Anderson, one of the top five accounting and auditing firms in the world. Top executives that worked for the energy company out of Texas were using accounting loopholes to hide billions of dollars in debt from failed transactions, deals and projects. They deceived the Board of Directors along with the auditing committee on the high risk accounting practices and put pressure on Arthur Anderson to ignore the issues which led to the largest corporate bankruptcy in United States history until WorldCom went under the next year. Out of this came a new act which U.S. Securities and Exchange Commission introduced the Sarbanes-Oxley Act 2002 which increased the penalties for destroying, altering or fabricating in federal investigations or for attempting to defraud shareholders.
Whistle blowing has an equivocal effect considering that it brings positive and negative implications to organizational and society. By understanding the pros and cons of whistle blowing, whistleblowers can try to get rid of the negative implications and take advantage of the positive implications to benefit the organization and society. A whistleblower maybe consider a hero or martyr if they provide positive implications to the organization and society, it may also be deemed as a traitor as it brings negative implications to the organization and society. One positive pro is that employees will feel valued because they have the power to change unethical Running header: WHISTLEBLOWER 4 behavior in the workplace or organization which will enhance their work lives and provide a sense of satisfaction in environment of the organization. Whistle blowing can improve employees’ morale in an organization if it has proved to be successful. Additionally, whistle blowing can preserve goodwill of an organization and avoidance of damage claims. Often once the public learns of the wrongdoing of an organization, they will vocally voice their concerns along with boycott the products or services that the organization has to offer. In the Enron case if the auditor from Arthur Anderson blew the whistle earlier the employees would not have had to lose their pensions and the investors would not have lost all of their monies, this is an example to show how important the role of a whistleblower can have a positive outcome to ensure the safety and well-being of human society. In cases like these it is beneficial if the whistleblower comes forward in a timely manner to reduce or avoid the public outcry, companies might be able to correct the issues greater damage before it gets out to the public.
Diving into the negative or cons of whistleblowing can bring negative impact to organization as it test the authority structure. Companies and managers alike believe that employees should require loyalty and follow the chain of command and a whistle blower may jeopardizes and weaken the structure of the chain. If a person does decide to come forward there are often consequences that can come along with those actions. Frequently the whistleblower may face many negative effects such as subject to retaliation, loss of employment, defamation of character, face on-the-job harassment or unfair discipline. When looking back at the Enron scandal Sherron Watkins an executive for the company alerted Kenneth Lay the CEO of the wrongdoing and was demoted from an executive to a normal officer in the company eventually contributed to resigning from the company. Employers consider this act as betrayal Running header: WHISTLEBLOWER 5 as the workers reveal the secrets of the organization (Alford, 2001). Despite whistle blowers taking the responsibility of revealing of misconducts in any given organization, they are faced by challenges and unfair treatment from their colleagues and as well owners of the organization. It remains the role of the government to ensure that these individuals are protected from their employers and workmates (Neill, 2005). Organizations tend to view whistle blowing negatively as we have discussed and will in many cases face the retaliation such as job duties being taken away, management might question their mental health, competency and honesty and the worse is the management might continuously seek ways to entrap him or her by giving impossible tasks which may force them to resign. Internal Reporting refers to any time that a member of an organization tells someone else about an illegal or immoral practice, if the telling is done in the hope that someone will do something to change the practice. In the great majority of cases, employees tell someone within the organization and don’t want to cause any bad publicity for the organization—this is sometimes called internal whistle blowing or internal reporting. When organizations handicap or discourage internal reporting, bad practices typically get worse, until someone often motivated by conscience feels they must notify the press, or a government agency. This is known as external whistle blowing, and it can mean serious problems for the organization. From an ethical systems stand point internal reporting is vital to the health of organizations. Companies that don’t make it easy for their employees to report small problems internally are likely to find themselves facing much larger problems externally. But there’s a common problem in organizations: people who speak up, even internally, are sometimes seen as traitors, or as people who are “not team players.”
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Mark Twain once said, “Always do right. This will gratify some people and astonish the rest” This is important because whether a person decides to blow the whistle or not companies and organizations must create an ethical culture within the work environment. Saying your company has an ethical culture and actually having a written policy are two different things. As we learned with Enron the policy was quite long and detailed however there was no accountability in how the company audited nor did they examine it or review it on an annual basis. Ethical accountability has to start at the top of an organization with the board of directors, CEO or president and continue to work its way down to mid management, supervisors and employees. It is important that when building the ethical culture you have to make sure it will survive and flourish even when changes are made in leadership (Mondy ; Martocchio 2016).
The dynamics of the roles and relationships regarding job titles plays an important factor when one is deciding to come forward and blow the whistle. It should be noted that when someone becomes a whistleblower that the relationship that existed is almost automatically ruined with the wrongdoer whether you are colleagues or in a supervisor- subordinate relationship. Going forward organizations need to enforce the regulations so employees feel comfortable coming forward and are not in fear of retaliation. Employers must establish a set of code of ethics, which are clear, concise and easily available for employees. In conclusion, whistle blowing is about reporting or publicizing wrongdoing. There are many pros and cons as to whether you should report what you no but regulations have to be in place and enforced to protect the safety and security of the whistleblower.