Business Ethics

Summary of Chapter Four

WHISTLE
BLOWING
CHAPTER
SUMMARY

I. INTRODUCTION
II. DEFINITION OF WHISTLE BLOWING
III. TYPES OF WHISTLE BLOWING
IV. JUSTIFICATIONS OF WHISTLE BLOWING
V. CONDITIONS FOR A JUSTIFIED WHISTLE BLOWING
VI. WHISTLE BLOWERS LEGAL PROTECTION
VII. ARGUMENTS FOR AND AGAINST LEGAL PROTECTION
VIII. DEVELOPING A COMPANY WHISTLE BLOWING POLICY
IX. CASE QUESTIONS

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 I. INTRODUCTION

The term whistle-blower was initially used to describe government employees who went
public with complaints of corruption or mismanagement but it is now applied to
employees in the private sector as well.

Whistle-blowing is ethically problematic because it involves a conflict between an

employee’s obligation to his or her company and a general obligation to the public.

Employees are required not only to do the work they are assigned but also to be loyal to
their employer, preserve the confidentiality of company information, and work in the best
interest of the company. Deciding when whistle-blowing is morally justified and when it
is not requires a balancing of many different obligations.

II. WHAT IS WHISTLE BLOWING?

Whistle-blowing is the voluntary release of non-public information, as a moral

protest, by a member or former member of an organization to an appropriate
audience outside the normal channels of communication regarding illegal and/or
immoral conduct in the organization that is opposed to the public interest.

The key points in this definition are:

1. A whistle-blower is a member or former member of an organization and not an

outsider.
2. The information that is revealed by the whistle-blower is non-public information and
not already-known facts.
3. The information concerns some significant misconduct by the organization or some of
its members.
4. The information is revealed outside of the normal channels of corporate
communication within an organization.
5. The information is revealed voluntarily and not by a legal mandate.
6. The information is revealed as a moral protest in order to correct some perceived
wrong.

III. TYPES OF WHISTLE BLOWING

1. Internal Whistle blowing : When the employee reports the wrongdoing to

someone within the organization(To the higher manager).
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 2. External Whistle blowing : When the employee reports the wrongdoing to
someone outside the organization.( To the press; police,..)

 When to blow the whistle externally:

• Serious and considerable harm to the public is involved.
• Have reported to immediate supervisor already.
• Have exhausted all channels available for correcting the issue within the
organization with no response (unless the harm is huge)
• There is documented evidence with the ability to convince an impartial party.
• There is good reason to think going public will result in changes.

IV. THE JUSTIFICATION OF WHISTLE BLOWING

Whistle-blowing puts an employee’s loyalty to the organization against his or her loyalty
to the public interest.
The justification of whistle-blowing therefore requires an understanding of the duty of loyalty
that an employee owes an employer.

 The loyal agent argument against whistle-blowing:

An employee is an agent of his or her employer. An agent is a person engaged to act in the
interest of another person, who is known as the principal. Employees are legally agents of
their employers. As agents, they are obligated to work as directed, to protect confidential
information, and, in general, to act in the principal’s best interest.

Although the whistle- blower might appear to be a disloyal agent, the obligation of an
agent’s loyalty has limits. Whistle-blowing, therefore, is not incompatible with being a
loyal agent.

Two limits on the obligation of agents are especially important.

1. An agent has an obligation to obey only reasonable directives of the principal, and so
an agent cannot be required to do anything illegal or immoral.
2. The obligations of an agent are confined to the needs of the relationship. Thus, an
employee is not obligated to do anything that falls outside the scope of his or her
employment.

 The m eaning of loyalty:

The law of agency aside, whistle-blowing is not always an act of disloyalty in the ordinary
meaning of the word. If loyalty is viewed as a commitment to the true interests or goals of
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an organization, rather than merely the following of orders, then many whistle-blowers are
loyal employees.
Sociological studies have shown that whistle-blowers are often loyal employees who
choose to expose wrongdoing in the belief that they are doing their job and acting in the
best interest of the company.

V. CONDITIONS FOR JUSTIFIED WHISTLE BLOWING

The following questions should be considered when deciding whether or not to blow the
whistle.

1. Is the situation of sufficient moral importance to justify whistle-blowing?

How serious is the potential harm compared to the possible benefits? To what extent
is the harm predictable and direct result of the protested activity? How imminent is the
harm?
2. Do you have all the facts and have you properly understood their
significance? Whistle-blowers must support allegations with adequate evidence and
not draw conclusions about matters beyond their expertise.
3. Have all internal channels and steps short of whistle-blowing been exhausted?
Most organizations require employees to address concerns with an immediate superior
or through internal channels of communication.
4. What is the best way to blow the whistle? To whom should the information
be revealed? How much information should be revealed? Blowing the whistle in a
responsible manner avoids charges of being merely a disgruntled employee.
5. What is my responsibility in view of my role within the organization? An
employee’s position in the organization may increase or decrease an obligation to blow
the whistle.
6. What are the chances for success? An employee should only blow the whistle
when there is a reasonable chance to achieve some public good.

VI. WHISTLE BLOWERS LEGAL

PROTECTION
Only few countries have developed laws to protect whistle-blowers from the retaliation of
others, but there is increasing pressure for greater legal protection.

Some countries protect the whistle blowers of the public sector. Others extended the
protection to cover whistle blowers of the private sector.

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 VII. ARGUMENTS FOR //AND// AGAINST
WHISTLE- BLOWER PROTECTION

 Arguments for whistle-blower protection:

1) The main argument in favor of whistle-blower protection is that whistle- blowing benefits
society through the exposure of illegal activity, waste, and mismanagement, and this benefit
can be achieved only if whistle-blowers are able to come forward without fear of retaliation.
2) Giving employees greater freedom to speak out, makes it easier to enforce existing laws
and to bring out the desired changes in the firms behavior.
3) Government employees and private employers who do extensive work for the federal
government have a First Amendment right to freedom of speech and so should be protected
from retaliation for blowing the whistle. Although whistle-blowers in the private sector
do not have a legal right to free speech in employment, this might be considered a moral right
that requires legal protection.
4) Finally, some argue that employees ought to have a right to act in accordanceWith one’s
own conscience.

 Arguments against legal protection for whistle-blowers :

1) Law that recognizes whistle-blowing as a right is open to abuse. Disgruntled employees

might use whistle-blowing to protest company decisions, get back at employers, cover up
their own incompetence or even protect themselves against dismissal.
2) Legislation to protect whistle-blowers infringes on the traditional right of employers to
conduct business as they see fit, and it creates more regulation to impede the efficient
operation of business.
3) An increase in litigation increases a company’s costs and hurts the cooperative spirit
needed for working relationships.
4) Finally, it is difficult to devise an adequate legal remedy for whistle-blowers who are
dismissed.

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 VIII. DEVELOPING A WHISTLE BLOWING
POLICY
An effective whistle-blowing policy enables a company to address misconduct internally
and avoid embarrassing public disclosure.

 Components of an effective Whistle Blowing Policy :

1. An effectivel y communicated statement of responsibilit y: Employees should be

informed that they have a responsibility to report all serious unethical conducts through
the appropriate Internal Channels.
2. A clearly-defined procedure for reporting : The procedures of reporting should
be published and taught to all the employees in the company
3. Trained personnel to receive and investigate reports : that allows the employees to
report the wrongdoings in a confidential manner and to the person in charge
4. A commitment to take appropriate action: employees must be assured that their
reports will not be ignored or misused.
5. A guarantee against retaliation: The policy must assure that employees that report
about misconducts that happen in firms will not suffer Retaliation.(such as demotion,
dismissal, intimidation, discrimination, …)

 Risks of adopting a whistle blowing policy:

1. It may create Tension and conflict in the organization

2. It may contribute to an environment of mistrust and uncertainty at the workplace:
By encouraging employees to report on each others might create an environment of
mistrust and threats in the organization (especially if people feel susceptible to the
possibility of false accusations).
3. Administrative time and cost may increase: special trained personnel are needed to
receive the complaints; make the necessary investigations; make proper decisions….

 Benefits of adopting a whistle blowing policy:

1. Can identify problems internally early before they escalate.

2. May avoid public disclosure by allowing the misconduct to be solved internally.
3. Can help insure that reports are investigated, action taken, and retaliation
Prevented.
4. Is Consistent with an ethical corporate climate.

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IX. CASE QUESTIONS

Case 4.2- page 85 : A Whistle-Blower Accepts a “Deal”

Discussion Questions

1. Was the auditor offered a good “deal?” Should he have accepted? What were his
alternatives?
2. Was anyone hurt by the deal? (Consider both the short term and the long term
consequences.)
3. Was the board of directors acting responsibly in making the deal? Were they acting
responsibly when they subsequently changed the audit procedures?
4. Was the auditor actually blowing the whistle, given that he was following company
policy? What should he have done if the policy had not been in place?
5. On the whole, did the policy serve the company well? The employee? The public?

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