obligation to take into account the impact of what they do on those likely to be

affected by their decisions, that is to say on their stakeholders. In this respect,

managers are no different from anyone else. As managers, however, managers have
a moral obligation only to maximize profits for investors.
Some critics, such as political philosopher Charles Blattberg, say stakeholder theory
is problematic. They claim that the interests of various stakeholders cannot be
balanced against each other.
This is because stakeholders represent such a large and diverse group. You can’t
please every stakeholder. One or more stakeholders will have to take a backseat to
other, more dominant ones, which is likely to create discord. This will disrupt the
benefits associated with stakeholder theory.
Also, who will wield the most influence? Some stakeholders might find that they’re
not impacting decisions as much as another group. The different power levels and
spheres of influence can be a problem. Even those with seemingly more influence
might not feel that they’re getting what they want. Hence stakeholder management
comes into play and a stakeholder prioritising strategy needs to be worked out and
“communicated” effectively and periodically.
Shareholder theory, however, fails a crucial test, a test of internal, prescriptive
coherence. Understanding the nature of that failure lies at the root of finding a sound
normative foundation for stakeholder theory. Typically, shareholder theories accept
that managers have this as their central obligation. However, also typically,
shareholder theorists accept that managers have a responsibility to pursue their
goals and objectives within the constraints of law and conventional morality.
Setting aside the issue of conventional morality for the moment, this assumption
raises a significant question. How does shareholder theory justify the proposition
that managers should work within the constraints of law? To put this another way,
what is the answer of shareholder theory to the question: “what policy should
govern a corporation’s approach to fulfilling its legal obligations?” The obvious
answer is that failure to work within the constraints of law generates risks. Further,
taking the risks associated with breaking the law is inconsistent with the fiduciary
responsibilities entailed by the obligation to maximize shareholder wealth.
Corporation should obey the law if breaking the law generates risks that are
incompatible with their fiduciary obligations.

G. Whistleblower Policy
1. Whistleblower Law in India and the US and Europe

a. Why do people blow the whistle?

i. Primarily for moral reasons---to make the world a better place to live in, for public
health, safety, justice and altruism. It is not out vendetta or to make money.
ii. Take the case of Eric Benarzi, former Deutsche Bank employee, who exposed the
wrongdoing of inflating the Bank’s net worth. Benarzi won USD 8.5 m from the SEC as
Whistleblower bounty, but he refused the award, because he felt that the SEC had not punished
the erring employees enough.
iii. They like to rise above the loyalty to their superiors\friends\group\tribe for the greater
good.
iv. The increasing inequality of income globally and therefore a sense of injustice has led
to perceptible increase in the number of whistle blowers. This is aided by social media, easier
access to public data, like the RTI Act in India and the increased interest in investigative
journalism globally.
v. Also, with the overall increase in absolute wealth globally (and therefore a reduction in
absolute poverty), people are more willing to look beyond their “in-group” and speak up for
justice. This is a global phenomenon.
2. Robots can be the future whistle blowers, because they don’t have loyalties.
3. Whistle blower Protection and the Truth: July 1978, the US Congress passes the US’
first Whistleblower Protection Law. And July 16th is National Whistleblower’s Day in the US.
Since 2000, in the US, the Supreme Court has backed the Whistleblower. In 1978, there was
only one country with a Whistleblower Law, now there are 30 countries. Who is a
whistleblower? They are individuals who use freedom of speech to challenge abuses of power
to betray the public trust. They also serve another important function—they warn the public in
advance of disasters coming their way. In the Holland, they are called the “bell-ringers”, in
Germany, they are called the “lighthouse keepers”, in Africa, they are called “public sentinels”,
because they are defending the people. They are the opposite of the “mythical monkeys”—it is
the duty of an ethically sensitive person to see evil, hear what the evil-doer is saying and speak
to the world of the evil being perpetrated.
4. Whistleblowing is like “committing the truth” and is treated like “committing a crime”.
So there can be a big price to pay. But you will do this only when you are the cross-roads of
your life; when the crime is unbearable for you to live with. The case of Cathy Harris, the
Customs Inspector Whistleblower—profiling African American women for drug-trafficking.
With no evidence—purely on suspicion and racial bias, or for sexual harassment or even to
earn overtime. After full luggage check, they go for full body search-then ultra sound and
questioning for 4 days in the Customs offices and govt hospitals, during which time they ae not
allowed to inform their families about their whereabouts—they just vanish into thin air for four
agonising days and then they reappear, maybe with an apology from the Authorities. Harris
blows the whistle on this practice and the truth comes out and the Supreme Court reduces the
inspection from 4 days to 2 hours!
5. In 2000, 5000 gallons of nuclear waste couldn’t be accounted for from the Hansford
Nuclear Waste dump, where all of America’s nuclear waste is dumped, including plutonium,
to which if you are exposed for a certain amount of time, you are maimed for life or even killed.
A whistleblower brought out the truth—that it was not 5000 gallons, but 440 billion gallons
and that it was dumped over the years in the Columbia River, that supplies water to the entire
northwest of the US and Canada. Divers were sent into the river to check for radiation and sure
enough the waters were radioactive!! Billions of dollars were spent to clean up the river and
now it’s safe. Whistleblowers change the course of history—that is the point being made. Even
in the corporate world.
6. They need protection from all kinds of pressures like:
• Isolation by the top management/peer group out of fear of the top management and
selfish interests.
• Retaliation: Informal investigation, Internal Inquiry, Days in court, financial pressures,
peer pressures, bribery, loss of job, death threats.
• Hostile Witnesses and an apathetic public
• From the Law
7. Whistleblower Policy in India
a. Employees who reveal fraud, corruption or mismanagement to the senior management
are called internal whistleblowers. Employees who report fraud or corruption to the media,
public or law authorities are external whistleblowers. Indian whistleblowers are protected
under the Whistleblower Protection Act India.
b. Draft Rule 12.5 of the Companies Act, 2013 and Section 177(9) makes it compulsory
for listed companies, companies accepting deposits from public and companies borrowing
more than Rs. 50 crore from banks or public financial institutions to have a whistleblowing
policy and establish a vigil mechanism for directors and employees to report their genuine
concerns. A vigil committee has to be set up to ensure the vigil mechanism in the company and
whistleblower policy is effectively implemented in the company.
c. Additionally, the Securities and Exchange Board of India (SEBI) amended the
Principles of Corporate Governance in 2003. Clause 49 of the Listing Agreement now includes
the formulation of a Whistleblower policy in Indian companies. A company may establish a
mechanism for employees to report concerns regarding unethical behavior, actual or suspected
fraud or violation of the company’s code of conduct or ethics policy. However, it is currently
not mandatory for companies to have a whistleblowing policy in place.
d. In India, whistleblowers are protected by the Whistle Blowers Protection Act, 2014.
The law provides for the protection of their identity and also has strict norms to prevent their
victimization. For instance, an organization cannot initiate proceedings against a whistleblower
pending a probe into allegations. The same sections have been adopted in the Companies Act,
which applies to listed companies, and are a part of the Securities and Exchange Board of
India’s governance norms. All listed and public sector firms need to have a whistleblower
policy that outlines procedures and recourses available to complainants.
e. Whistleblowing may sometimes be used to settle personal vendettas or manipulate the
stock market. To prevent this from occurring, the audit committee that investigates the
allegations will examine them for their merit. If a complaint is proven to be frivolous, the
complainant can face a jail term of up to two years.
f. India has a poor track record in dealing with insider trading. To improve success rates,
the market regulator recently introduced a tipping mechanism. Sebi will award up to ₹1 crore
for information and successful action against insider traders. It has also created a “cooperate
and confidentiality" mechanism. This means that if someone guilty of violating securities law
is willing to assist in the larger probe, the person will be given exemption from penal action
and their identity will be kept confidential.
g. A whistleblower in India is protected under Indian law, but it is not as effective as it is
in the US, where a separate entity takes care of such incidences. “It is incumbent upon the
Directors (usually the top management) of a company to investigate complaints of wrongdoing
by the erring top management, which usually defeats the purpose, primarily because of lack of
appropriate legislation.” The Companies Act, 2013 makes it mandatory for entities listed on
the stock exchanges to set up an audit committee to investigate whistleblower complaints. It
also provides safeguards against their victimisation, but it does not provide a mechanism to
protect them. The safeguards are entirely dependent on the policies drafted by the companies
themselves.
h. The Whistle-Blowers Protection Act, 2014, notified on May 12, 2014, has not been
implemented so far. In a recent clarification, the Ministry of Personnel, Public Grievances and
Pensions said the law may require further amendments before being introduced. The Act
pertains to government and public sector enterprises, to provide a mechanism to investigate
alleged corruption and misuse of power by public servants, and also protect anyone who
exposes alleged wrongdoing in government bodies, projects and offices.
8. Whistleblower Policy in the US
• The False Claims Act of 1986, which protects the whistleblower from legal action.
Spectacular success after 34 years, where 85% of the claims from corporates for tax evasion,
misappropriation, insider trading etc comes from whistleblower activity and not independent
investigatons by SEC and others.
• 42% of all fraud cases in the US are brought to light by whisltleblowers. A great weapon
against corruption.
• The office of the Whistleblower Protection Program enforces protections for employees
who suffer retaliation for engaging in protected activities under more than 20 federal laws. The
investigation of complaints of retaliation against employees is conducted by investigators in
OSHA’s (Occupational Safety and Health Administration). The investigators are neutral fact-
finders; they do not work for either the complainant or respondent (employer).
9. Whistleblower policies in Europe and OECD countries: DEFINITION OF
WHISTLEBLOWER PROTECTION
“Legal protection from discriminatory or disciplinary action for employees who disclose to the
competent authorities in good faith and on reasonable grounds wrongdoing of whatever kind
in the context of their workplace”. More OECD countries have put in place dedicated
whistleblower protection laws in the past five years than in the previous quarter century.
Among respondents to the 2014 OECD Survey, 84% have enacted a dedicated whistleblower
protection law or legal provision(s) related specifically to protected reporting or prevention of
retaliation against whistleblowers in the public sector. However, these laws have usually been
reactive and scandal-driven instead of forward looking. Ad hoc protection through fragmented
provisions continues to be the norm, which risks providing less comprehensive protection than
a dedicated whistleblower protection law that has more ability to clarify and streamline the
processes for disclosing wrongdoing and provide remedies for victims of retaliation.
86% of companies surveyed for the 2015 OECD Survey on Business Integrity and Corporate
Governance had a mechanism to report suspected instances of serious corporate misconduct,
but over one-third of these either did not have a written policy of protecting whistleblowers
from reprisals or did not know if such a policy existed.
An effective whistleblower protection system depends on clear and effective communication.
Informing both employers and employees about their rights and responsibilities and the
resources available to them is crucial for creating an environment of trust, professionalism and
collegiality that supports the tenets of integrity in both the workplace and society.
10. LEGAL PROTECTION FOR WHISTLEBLOWERS IN OECD COUNTRIES
At the national level, protection for whistleblowers may originate either from comprehensive
and dedicated laws on whistleblower protection, or from specific provisions in different laws
and/or sectoral laws. Of the 32 OECD countries that responded to the 2014 OECD Survey on
Public Sector Whistleblower Protection, 27 reported a dedicated whistleblower protection law
or legal provision(s) that calls for
the protection of whistleblowers under certain circumstances (not always for reporting of
corruption offences), with 13 having passed a dedicated law that protects public sector
whistleblowers.
In some countries, these laws also provide protection to private sector whistleblowers. The
majority of OECD countries that provide legal protection to whistleblowers do so through
provisions found in one or more laws, such as anti-corruption laws, competition laws, company
laws, employment laws, public servants laws and criminal codes. However, the degree of
protection afforded within the provisions of these laws varies and is less comprehensive than
the protection provided for within dedicated laws, which often provide more clarity and
streamline the processes and mechanisms involved in disclosing a wrongdoing.
11. Whistleblower Process
Most people who perceive that there is some wrongdoing often do not know the specific law
that would apply,” says Bellace. “As a result, they don’t actually have a good grasp of whether
unlawful wrongdoing or probable wrongdoing has occurred. Moreover, and this has happened
in some cases, they begin to access material that they might not have the right to access. So, I
find these three points problematic from an employee’s vantage point. And even if you do
know the law and do have proof, there will be a considerable period of time before you can
have your position validated, and you may be without your job during that period of time.
That’s a difficult proposition.”
Prep for XLRI Lectures on AI and HE – Module D

1. Introduction to a future world of AI and HE: Robots make ever more

accurate predictions about what books we enjoy or where to vacation next; drive cars
more safely than we do; make predictions about health before our brains sound alarms;
offer solid advice on what jobs to accept, where to live, what kind of pet to adopt, if it
is sensible for us to be parents and whether it is wise to stay with the person we are
currently with – based on a myriad of data from people relevantly like us. Internet
advertisement catering towards our preferences by assessing what we have ordered or
clicked on before is a mere shadow of what is to come.
Future machines might be composed and networked in ways that no longer permit easy
switch-off. More importantly, they might display emotions and behavior to express
attachment: they might even worry about being turned off, and be anxious to do
something about it. Or future machines might be cyborgs, partly composed of organic
parts, while humans are modified with non-organic parts for enhancement.

Distinctions between humans and non-humans might erode. Ideas about personhood
might alter once it becomes possible to upload and store a digitalized brain on a
computer, much as nowadays we can store human embryos.
Any rights to security and privacy are potentially undermined not only through drones
or robot soldiers, but also through increasing legibility and traceability of individuals
in a world of electronically recorded human activities and presences. The amount of
data available about people will likely increase enormously, especially once biometric
sensors can monitor human health.
There will be challenges to civil and political rights arising from the sheer existence of
these data and from the fact that these data might well be privately owned, but not by
those whose data they are. Leading companies in the AI sector are more powerful than
oil companies ever were, and this is presumably just the beginning of their ascension.
AI and inequality, and the connection between that topic and human rights. To begin
with, we should heed Thomas Piketty’s warning that capitalism left to its own devices
in times of peace generates ever increasing economic inequality. Those who own the
economy benefit from it more than those who just work there. Over time life chances
will ever more depend on social status at birth.
We also see more and more how those who either produce technology or know how to
use technology to magnify impact can command higher and higher wages. AI will only
reinforce these tendencies, making it ever easier for leaders across all segments to
magnify their impact. That in turn makes producers of AI ever more highly priced
providers of technology. More recently, we have learned from Walter Scheidel that,
historically, substantial decreases in inequality have only occurred in response to
calamities such as epidemics, social breakdowns, natural disasters or war. Otherwise it
is hard to muster effective political will for change.

2. Should AGI\AMA be allowed?: Is it OK to throw the switch that saves five lives
by directing a runaway trolley onto a side track, where it will kill one person who would
have been safe? Well, . . . Deontology says it’s wrong to allow preventable deaths;
Utilitarianism says fewer deaths is better; Virtue ethics says the virtuous person can
make hard choices.
Since none of the ethical traditions will singly satisfy the whole world, some scientists
are proposing a secular “AI Safety Engineering” field. A common theme in AI safety
research is the possibility of keeping a superintelligent agent in a sealed hardware so as
to prevent it from doing any harm to humankind. Such ideas originate with scientific
visionaries such as Eric Drexler who has suggested confining transhuman machines so
that their outputs could be studied and used safely.

Similarly, Nick Bostrom, a futurologist, has proposed [9] an idea for an Oracle AI
(OAI), which would be only capable of answering questions. Finally, in 2010 David
Chalmers proposed the idea of a “leakproof” singularity [12]. He suggested that for
safety reasons, AI systems first be restricted to simulated virtual worlds until their
behavioral tendencies could be fully understood under the controlled conditions.
Similarly we argue that certain types of artificial intelligence research fall under
the category of dangerous technologies and should be restricted.
Classical AI research in which a computer is taught to automate human behavior in a
particular domain such as mail sorting or spellchecking documents is certainly ethical
and does not present an existential risk problem to humanity. On the other hand, we
argue that Artificial General Intelligence (AGI) research should be considered
unethical. This follows logically from a number of observations. First, true AGIs will
be capable of universal problem solving and recursive self-improvement.
Consequently, they have potential of outcompeting humans in any domain essentially
making humankind unnecessary and so subject to extinction. Additionally, a truly AGI
system may possess a type of consciousness comparable to the human type making
robot suffering a real possibility and any experiments with AGI unethical for that reason
as well.
A similar argument was presented by Ted Kazynsky in his famous manifesto [26]: “It
might be argued that the human race would never be foolish enough to hand over all
the power to the machines. But we are suggesting neither that the human race would
voluntarily turn power over to the machines nor that the machines would wilfully seize
power. What we do suggest is that the human race might easily permit itself to drift into
a position of such dependence on the machines that it would have no practical choice
but to accept all of the machines decisions. As society and the problems that face it
 become more and more complex and machines become more and more intelligent,
people will let machines make more of their decision for them, simply because
machine-made decisions will bring better result than man-made ones. Eventually a
stage may be reached at which the decisions necessary to keep the system running will
be so complex that human beings will be incapable of making them intelligently. At
that stage the machines will be in effective control. People won't be able to just turn the
machines off, because they will be so dependent on them that turning them off would
amount to suicide. ” ( Kaczynski, T.: Industrial Society and Its Future. The New York
Times (September19, 1995)

Algorithms can do anything that can be coded, as long as they have access to data they

need, at the required speed, and are put into a design frame that allows for execution of

the tasks thus determined. In all these domains, progress has been enormous. The

effectiveness of algorithms is increasingly enhanced through “Big Data:” availability of

an enormous amount of data on all human activity and other processes in the world

which allow a particular type of AI known as “machine learning” to draw inferences

about what happens next by detecting patterns. Algorithms do better than humans

wherever tested, even though human biases are perpetuated in them: any system

designed by humans reflects human bias, and algorithms rely on data capturing the

past, thus automating the status quo if we fail to prevent them. But algorithms are

noise-free: unlike human subjects, they arrive at the same decision on the same problem

when presented with it twice.

An important question arises: How should machines be constrained, such that they act
morally acceptable towards humans? This question concerns Machine Ethics – the search
for formal, unambiguous, algorithmizable and implementable behavioral constraints for
systems, so as to enable them to exhibit morally acceptable behavior. After pointing out
why this is important, we will argue that there is one feasible supplement for Machine
Ethics: Machine Explainability – the ability of an autonomous system to explain its actions
and to argue for them in a way comprehensible for humans. Responsibility, transparency,
auditability, incorruptibility, predictability, and a tendency to not make innocent victims
scream with helpless frustration: all criteria that apply to humans performing social
functions; all criteria that must be considered in an algorithm intended to replace human
judgment of social functions; all criteria that may not appear in a journal of machine
learning considering how an algorithm scales up to more computers. This list of criteria is
by no means exhaustive, but it serves as a small sample of what an increasingly
computerized society should be thinking about. A rock has no moral status: we may crush
it, pulverize it, or subject it to any treatment we like without any concern for the rock itself.
A human person, on the other hand, must be treated not only as a means but also as an end,
that is, a human person has moral status.

While it is fairly consensual that present-day AI systems lack moral status, it is unclear
exactly what attributes ground moral status. Two criteria are commonly proposed as being
importantly linked to moral status, either separately or in combination: sentience and
sapience (or personhood). These may be characterized roughly as follows:

Sentience: the capacity for phenomenal experience or qualia, such as the capacity to feel
pain and suffer

Sapience: a set of capacities associated with higher intelligence, such as self- awareness
and being a reason-responsive agent.

Superintelligence

Good (1965) set forth the classic hypothesis concerning superintelligence: that an AI
sufficiently intelligent to understand its own design could redesign itself or create a
successor system, more intelligent, which could then redesign itself yet again to become
even more intelligent, and so on in a positive feedback cycle. Good called this the
“intelligence explosion.”

Kurzweil (2005) holds that “intelligence is inherently impossible to control,” and that
despite any human attempts at taking precautions, by definition . . . intelligent entities have
the cleverness to easily overcome such barriers.” . Yet it does not follow that the AI must
want to rewrite itself to a hostile form. This presents us with perhaps the ultimate challenge
of machine ethics: How do

you build an AI which, when it executes, becomes more ethical than you? If we are serious
about developing advanced AI, this is a challenge that we must