MODULE # 02

Compiled by Dipak S Gaywala

Acknowledgement: Prof. Paresh Patel
Parul Institute of Management & Research
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 ETHICS OF
WHISTLE
BLOWING.

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 DEFINITION

• The voluntary release of non-public

information as a moral protest (complaint /
objection) by a member or former member
of an organization to an audience outside the
normal channel of communication, regarding
illegal or immoral conduct that is opposed to
the public interest.

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 ROLE OF WHISTLE BLOWING

• Whistle blowing is a tool that is resorted to by

an executive or a worker when convinced that
an unethical practice is being used in the
workplace and bring it to the knowledge of the
auditors or CEO as the situation may require,
with a view to getting it rectified for the overall
good of the organizations.

• In most ethically run organizations,

whistle-lowing is encouraged and a well-laid
system.
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 GROUNDS FOR WHISTLE-BLOWING

a) Internal – to make the product safe or

change the process.
b) Governmental – faulty design, defects which
will affect the public
c) External – individual users who runs the
risk.

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 • Whistle-blower is considered a “traitor (double agent
/ spy )” or a wrecker (destroyer) of “family” by
“others”?
▪Involvement in the misconduct
▪Cowardice
▪False sense of loyalty

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 NOT ONLY MORAL BUT ALSO
OBLIGATORY

• The dilemma may be: “is it fair to bite the hands that
feeds?”
• Loyalty to society or people at large and not to an
individual or institution should be guiding principles.

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WHEN IS THE WHISTLE BLOWING IS
PERMITTED?

1. When listening to the inner voice : the motives are moral.

2. When all existing internal procedure have failed to get the
error corrected.
3. When the employee has reached the last and sixth stage of
Kohlbergh's six stage of moral evolution – the stage of
universal ethical principles.

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 WHISTLE BLOWING
• Whistle blowing is introduction to corporate reform.
It is called for to promote moral behaviour among
corporations, because of the following assumptions :

•Society gives business all infrastructure and all the

facilities expecting fulfillment of its needs
•Corporate exist so long as there is shared prosperity
•There is defense for corporation only when public
and social purpose are served.
•The concept that corporation are for the sole
purpose of profiteering is illogical.

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 WHY SHOULD A BUSINESS BE MORAL?
• In its own interest – long-term effect
• In the interest of corporate community in general.
• Because the corporations has agreed to behave
morally.
• Because it is unfair to go back on one’s agreement
and except others to keep it.
• Because it is to not proper to agree to moral
behaviour and violate it in secrete.

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 WHISTLE BLOWING
• A method to open unethical practice in an
organization.
• It is justified because the person who is aware
that unethical practice is going on and still
remain mute witness because of their job and
personal interest becomes accomplices in such
acts.

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 WHISTLE BLOWING
• Illustrated by following quotes:

•“The world is a dangerous place not because of those

who do evil, but because of those who look on and do
nothing.”
•“All that is necessary for evil to achievement is for
good man to do nothing.” – Edmund Bruke

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 CASES # 1
• As per an economic times bureau report titled, ‘insurers will
cover you with whistle-blower policies’, Mr. Malhotra (name
changed), a finance executive with an MNC operating in
India, lost his job for refusing to reimburse a bundle of false
bills forwarded by his managing director.

• He could not gather enough courage to draw the attention of

the company's board because he knew it could lead to
extended legal tussle and he did not have the resources to
sustain a legal battle with its former employer.

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 CASES # 1
• The article then goes on to mention the crowds of
such victims who remains disappointed.
• A top insurance executives adds, “people rarely come
to the save of an employee who blows the whistle”
observed a top insurance executives who were
planning to come out with an insurance scheme of
whistle-blower insurance to help such victims of false
hood.

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 CASES # 1
• In this case, management wanted to cheat.
• Responsibility to stop wrong doings and brings
ethical principles lies with management only.
• Major responsibility to success of the system, To
check and prevent wrong doing rests with the
management’s commitment to ethics and in the
exhibition of the same across the organization.

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 CASES # 2

• The daily news and analysis (DNA) described the year

2010 as the year of financial scam, involving government
ministries, the companies, the societies and the others.
• Queen of all scam – The Satyam Scandal.
• It has been claimed that satyam is the biggest fraud in
India’s corporate history and will extremely impact India’s
business scene for years by raising many question about
corporate governance.

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 CASES # 2
• B. Ramalinga Raju, founder and CEO of satyam
computers, India’s fourth largest IT services firm,
admitted on January 7, 2009 that this company has
been falsifying its accounts for years, overstating the
revenue and inflated profit by $ 1 billion.

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 CASES # 2
• Raju acknowledged that,
•Rs. 7,136 crores – non-existence cash and bank
balances and interest.
•Inflated revenue in 2008 – (Rs. 588 crore to Rs. 1700
crore)
•Actual operating margin was less than a tenth of
stated Rs. 649 crore.

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 CASES # 2
• Satyam means truth in Sanskrit.
• But was feeding its client, share holders, employees
and investors – Asatyam – untruth
• Raju was compelled to admit to the fraud following to
an aborted attempt to have satyam invest $ 1.6 billion
in Maytas properties and Maytas Infrastructure
(spelled backward of Satyam) – two firms promoted
and controlled by his family member.

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 CASES # 2
• Satyam auditor pricewaterhouseCoopers- (PwC)
issued a careless statement, claiming: “the audits
were conducted by pricewaterhouse in accordance of
applicable auditing standard and were supported by
applicable auditing evidence.”
• But the PwC claim was not justified by the
investigating regulators, such as Institute of
chartered accountants of India (ICAI) and central
bureau of investigation (CBI), India.

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 CASES # 2
• ICAI found PwC negligent in their audit responsibility.
• The ICAI branded PwC as “auditors as having been
negligent in their roles”
• When 6,000 crore out of 8000 crore were missing.
• Further the issue that PwC have received a bribes from
satyam computer to manipulate its reports.
• Both – Pwc Partner Subramani Gopalkrishnan and
satyam computer internal auditor V S Prabhakar Gupata
should be held accountable and charged for the fraud.

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 CASES # 2
• The satyam scandal also reveled the absence of
whistle-blowers in India.
• There were no whistle-blowers, the truth came out
only when the nation and shareholder questioned
Raju for the Maytas deal and he himself confessed the
crime.
• Enron case – CEO was questioned by the actions of
whistle-blowers.

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 THANK YOU

PROF. PARESH PATEL 23

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