Whistle Blowing

Author: Yana A. Apostolova St. Clair, Esq.

Whistle Blowing

To stay on track some executives might be tempted to use a ‘shortcut’, which may turn out to be an illegal way of doing business. The fight for saving costs and profit maximization is exhaustive and when temptation overpowers individuals' integrity and values, whistleblowing might  be the only way out of legal troubles.

The whistleblowing dilemma: Large organizations can easily abuse their power at the public’s expense and since courts are passive institutions, they often act as a bystander to a negligent or criminal act, unless someone brings it to their attention. Whistleblowing is a major factor in preventing and revealing white collar crime, but it is not an easy decision to make, and the higher on the hierarchical ladder one is, the more difficult the decision could be. The organizational aspect of the corporate crime makes whistleblowing an ethical duty for employees, because it can protect the involuntary involvement of those who are unknowingly participating, and thus will save the reputation of innocent people.

A whistleblow can cause significant losses from the supply management chain to the corporate stock’s value, but a non-disclosed wrongdoing would sooner rather than later pile up evidence for the criminal courts, thus destroying the company’s reputation regardless. Since the different ethical theories may lead to different approaches, each individual should evaluate their own merits and the firm’s prospective. Society’s benefits should not be at the shareholders’ expense, and when the future of many is at stake, this could give more courage to an employee to blow the whistle.

According to the Path-Goal theory employees are more likely to prefer participative leadership, because they have control over the work environment. The Reformulated Theory of Jamie Dimon, the CEO of J. P. Morgan, also supports empowerment at work, by the involvement of intrinsic motivation. According to such shared leadership, lower level employees can be engaged in leader behavior as long as there is sufficient motivation present. The more involved in decision making the employees are, the faster the problems could be resolved. A cheaper resolution will save not only corporate money, but the firm’s reputation and goodwill.

The law has been a key means of controlling corporate misdeeds, but since it is limited and does not always serve the purpose of restoring investors’ confidence after the latest corporate scandal, in 2001 the Sarbanes-Oxley Act (SOA) was introduced. According to SOA, every public company has to disclose whether it has adopted a code of ethics for senior financial officers, and to timely announce any changes made to the code. Although some critics argue that such a code could be used to mislead the public with bogus ethical assurances, it is a step in the right direction for minimizing unethical conduct at work.

Since it is widely accepted that whistleblowing is a moral obligation and an ethical duty for employees, there should be a reliable system in place for its protection. The additions to SOA providing safeguards for whistleblowers are an attempt in this direction. The amendment to the Whistleblower Protection Act which was intended as a protection for national security and science-based agency whistleblowers, is another improvement aiding the legal system.

Some corporations provide ethical training for employees. Availing 'avenues for reporting' to employees is another way potential wrongdoings can be curbed and dealt with. If more companies encourage employee participation in the decision making process this would increase creativity, expand the pool of collective ideas, and should make whistle blowing a rare and unnecessary event. 

Further, knowing that under the respondeat superior doctrine corporations may face liability for a multitude of offenses, and understanding the consequences of a potential whistle blowing which would definitely damage the company’s reputation, may stop a wrongdoer early on.

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