1. Chapter 7
Blowing the Whistle

2. Learning Objectives
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

3. Learning Objectives (continued)
Recommend how to build internal policies to address the needs of whistle-blowers
Analyze the possible risks involved in becoming a whistle-blower

4. What is Whistle-Blowing?
Employee who discovers corporate misconduct and chooses to bring it to the attention of others
Whistle-blower
Employee discovering corporate misconduct and bringing it to the attention of his or her supervisor
Internal whistle-blowing
When an employee discovers corporate misconduct and chooses to bring it to the attention of law enforcement agencies and/or the media
External whistle-blowing

5. Ethics of Whistle-Blowing
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

6. Ethics of Whistle-Blowing (continued)
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

7. When is Whistle-Blowing Ethical?
When the company, through a product or decision, will cause 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

8. When is Whistle-Blowing Ethical? (continued)
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

9. When is Whistle-Blowing Unethical?
Motivated by financial gain or media attention
Employee is carrying out a vendetta against the company
Qui tam lawsuit: Brought on behalf of the federal government by a whistle-blower under the False Claims Act of 1863

10. 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

11. The Whistleblower Protection Act
Addressed the issue of retaliation against federal employees
Imposed specific performance deadlines in processing complaints
Guaranteed anonymity of the whistle-blower
Required prompt payment of any portion of the settlement entitled to the whistle-blower

12. 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

13. 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 (SEC)
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

14. 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 to suspected misconduct without revealing their identity
Prompt and thorough investigation of all complaints
Detailed report of all investigations

15. 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