Ghillyer6e PPT Ch07

Chapter 7
Blowing the
Whistle
Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Learning Outcomes
• Explain the term whistle-blower, and distinguish between
internal and external whistle-blowing.
• Understand the different motivations of a whistle-blower.
• Evaluate the possible consequences of ignoring the concerns
of a whistle-blower.
• Recommend how to build internal policies to address the
needs of whistle-blowers.
• Analyze the possible risks involved in becoming a whistle-
blower.
What is Whistle-Blowing?
Whistle-blower
• Employee who discovers corporate misconduct and chooses to bring it to
the attention of others.
Internal whistle-blowing
• Employee discovering corporate misconduct and bringing it to the

attention of his or her supervisor.
External whistle-blowing
• Employee discovering corporate misconduct and choosing to bring it to

the attention of law enforcement agencies and/or the media.
Ethics of Whistle-Blowing 1
• Whistle-blowers may be applauded as models of honor and

integrity.
• Discovery of illegal activities before the situation is revealed in
the media could potentially save organizations millions of
dollars.
• Discovery of potential harm to consumers offers
immeasurable benefit to the general public.
Ethics of Whistle-Blowing 2
In contrast to perceptions of whistle-blowers being brave and

praiseworthy, they are considered to:
• Be motivated by money or personal egos.

• Have breached the trust and loyalty they owe to their employers.
When is Whistle-Blowing Ethical? 1
• When the company, through a product or decision, will cause

serious and considerable harm to the public or break existing
laws.
• When the employee identifies a serious threat of harm.
• When the employee’s immediate supervisor does not act, the
employee should exhaust the internal procedures and chain
of command to the board of directors.
When is Whistle-Blowing Ethical? 2
Employee must have documented evidence that:
• His or her view of the situation is accurate.

• The firm’s practice, product, or policy threatens the public or product user.
Employee must have valid reasons to believe that revealing the

wrongdoing to the public will result in the changes necessary to
remedy the situation.
Civil False Claims Act
• Whistle-blowers who expose fraudulent behavior against the
government are entitled to between 10 and 30 percent of the
amount recovered.
• Strengthened to make it easier and safer for whistle-blowers
to come forward.
• Qui Tam lawsuits: Brought on behalf of the federal
government by a whistle-blower under the False Claims Act of
1863.
When is Whistle-Blowing Unethical?
• Motivated by financial gain or media attention.
• Employee is carrying out a vendetta against the company.
Duty to Respond
• Employees are becoming increasingly willing to respond to
any questionable behavior they observe in the workplace.
• Responding to whistle-blowers means addressing their
concerns and not firing them.
• Prior to 2002, legal protection for whistle-blowers existed only
through legislation that did not offer any safeguards against
retaliation aimed at them.
The Whistleblower Protection Act of 1989
• Addressed the issue of retaliation against federal employees.
• Imposed specific performance deadlines in processing
whistle-blower complaints.
• Guaranteed anonymity of the whistle-blower.
• Required prompt payment of any portion of the settlement
entitled to the whistle-blower.
Sarbanes-Oxley Act of 2002
Takes an integrated approach of whistle-blowing by:
• Prohibiting retaliation against whistle-blowers.

• Encouraging the act of whistle-blowing itself.
Dodd-Frank Wall Street Reform and Protection Act
Introduced a new reward program for whistle-blowers who
report securities law violations to:
• Securities and Exchange Commission (S E C).

• Commodity Futures Trading Commission (CFTC).
Legislation stipulates that if more than $1 million is collected, the

whistle-blower is entitled to:
• Between 10 and 30 percent of collected amount.

• Clear entitlement to job and confidentiality protection.
Addressing the Needs of Whistle-Blowers
• Well-defined process to document how whistle-blower
complaints are handled.
• Whistle-blower hotline: Telephone line by which employees
can leave messages to alert a company of suspected
misconduct without revealing their identity.
• Prompt and thorough investigation of all complaints.
• Detailed report of all investigations.
Whistle Blowing as a Last Resort
Unceasing media attention and the terminal damage should be
considered a catalyst for the organization to take remedial steps.
Unfortunately, executives prefer to:
• Bury the information.

• Discredit the evidence.
• Tie their employees in restrictive confidentiality agreements.

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Chapter 7

• Employee discovering corporate misconduct and bringing it to the

• Employee discovering corporate misconduct and choosing to bring it to

• Whistle-blowers may be applauded as models of honor and

In contrast to perceptions of whistle-blowers being brave and

• Be motivated by money or personal egos.

• When the company, through a product or decision, will cause

Employee must have documented evidence that:

• His or her view of the situation is accurate.

Employee must have valid reasons to believe that revealing the

• Prohibiting retaliation against whistle-blowers.

• Securities and Exchange Commission (S E C).

Legislation stipulates that if more than $1 million is collected, the

• Between 10 and 30 percent of collected amount.

Unfortunately, executives prefer to:

• Bury the information.

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