Posted by: CB | July 11, 2010

When Is Whistle-Blowing Justified and When Is It Not?

With the emergence of unethical practices found within financial reporting, environmental abuse, and moral misconduct, the nation has become abundantly familiar with a wide range of improper activity within corporate America.  However, as unethical business practices gain exposure, the nation is seeing an emergence of what seems to be an ethical revolution within the corporate society.  Through human resource development programs, firms now mandate employees to participate in ethics and conflicts of interest training.  Moreover, a number of firms have dedicated resources towards employing ethics officers to ensure the company maintains ethical behavior.  Although this emergence of ethical responsibility is changing the way corporations do business, unfortunately, there continue to be firms that continue to engage in unethical practices.  As a result of public scrutiny of unethical practices of corporations, employees who feel their employer has done something that is wrong or harmful to the public, use their right to free speech to expose the practice.  Moreover, when an employee reports alleged organization misconduct to the media, government, or high-level company officials, whistle-blowing has occurred.

Once thought as a measure of loyalty towards a firm, employees no longer keep the unethical activities of firms to themselves. Within the last ten years, whistle-blowers have exposed some of the most egregious cases of corporate wrongdoing.  Whistle blowers act as a safety net when serious crime has gone undetected by the defenses of their company.   Although, speaking out against an employer can be risky; many whistle-blowers find their charges ignored or find themselves ostracized, demoted, or even fired for daring to go public with their criticisms.  However, as a result of the protection provided to whistle-blowers by The Sarbanes-Oxley Act of 2002, the fear of employer retaliation has not discouraged employees from exposing unethical practices of their firm.     

Based on hundreds of unsubstantiated cases, opponents of whistle-blowing feel the process is dangerous to the company as it gives disgruntled workers a forum to discredit their employers.  Used as a gauge to justify whether or not whistle blowing is appropriate, three condition must be met.  Those conditions include the following:  the act would do harm to the public, the employee has reported the act to their immediate supervisor, and the employee has taking the concern through the chain of command of the firm.  If the unethical activity persists the whistle-blower should go public.

Perhaps the best example of when an employee should go public is demonstrated by C. Cooper, former vice president of internal auditing at WorldCom.  Realizing that several top executives engaged in unethical accounting practices, Cooper reported the activity to the chief financial officer who responded by ordering Cooper to delay the investigation.  Following the steps justifying whistle-blowing, Cooper reported the activity to the board of directors who took action to correct the unethical behavior.

Unfortunately, there are cases where whistle-blowing was not justified and appear to fraudulent.  After being discharged by Coca Cola, M. Whitley alleged that the company ordered trucks to drive away from the dock so the company could record phantom syrup sales as part of a scheme to inflate revenue.  Furthermore, Whitley demanded that Coca Cola pay a total 44.4 million dollars to keep the allegation quiet.  After Coke refused to pay the money, Whitley went to the press.  Though posing no harm to the public, according to the guidelines mentioned above, Whitley did not report this concern to the immediate supervisor.  Also, by demanding Coke pay 44.4 million to keep the secret quiet, moral concern is absent as Whitley seemed to be motivated by financial gain which is ironic as blackmail is unethical. 

With the globalization and the diversity of many corporations, ethical issues in business have become more complicated.  Moreover, multinational corporations operate in countries where bribery, sexual harassment, racial discrimination, and lack of concern for the environment are neither illegal nor unethical or unusual.  As a result, firms must adhere to a clear code of business ethics.  This code will ensure business and moral conduct alike is consistent among all branches rewarding employees for brining all unethical behavior to their supervisors.

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