Organizations, governments, and the public expect the management of organizations always to act ethically. Ethics in this context means doing the right thing at all times, even when there is an incentive for contrary behavior (Morris & Mintz, 2019). The incentive for contrary behavior may be the making of better profits or the hiding of negative information. To ensure that management acts ethically, the law requires organizations to keep careful accounting records and avail them for regular audit. However, this system is not foolproof, hence the necessity for whistleblowing. Whistleblowers are employees who expose unethical behavior in companies. Such unethical behavior includes the misappropriation of company property, tax evasion, or activities that endanger the lives of the public (Morris & Mintz, 2019). Whistleblowers often risk their jobs, careers, and in some cases, their lives by sharing details of unethical behavior with relevant authorities to publish them to the general public.
Concept Overview
Regulation and oversight is a complex balancing act between costs, debilitation of activities, and the need for regulation. First, it takes a high level of expertise and time to monitor the activities of organizations, hence the need to limit the amount of oversight (Gao & Brink, 2017). Secondly, inordinate oversight and monitoring can interfere with the activities of an organization. However, there is still a need to ensure that organizations follow the law and act ethically. The need to limit oversight because of costs and mitigation of interference provides loopholes that organizations can exploit to undertake and hide unethical behavior. Whereas an organization can hide unethical behavior from external regulators, employees within the company, more so at management levels such as accountants and legal officers, will typically be aware of the unethical behavior (Gao & Brink, 2017). Whistleblowing happens when such management staff exposes the unethical conduct within the companies to authorities or regulators.
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Whistleblower Laws
In the US, the initial concept of whistleblowing and whistleblower protection laws was in the public sector. Early laws that protected and regulated whistleblowing in the public sector include the Whistleblower Protection Act of 1989 (Ballan, 2017). This law provides for the protection of government officials who inform on the unethical behavior in the departments or agencies they work in. In the private sector, the government mainly relied on auditors to ensure ethical behavior. However, in the early 20 th century, several significant scandals rocked corporations such as Enron and WorldCom (Agrawal & Cooper, 2017). Investigations realized that managers and auditors had colluded in unethical conduct. These scandals led to the expansion of whistleblower protection laws to the corporate sector, through laws such as the Sarbanes–Oxley Act of 2002 (Near & Miceli, 2016).
Above whistleblower protection, some regulators also provide for whistleblower rewards in areas such as tax evasion, securities fraud, and labor relations. For example, the Commodity Futures Trading Commission pain Ted Siedle about US$ 30 million for whistleblowing in the JPMorgan Chase scandal (McLannahan, 2019). Such incentives are essential since they make up for the risks that whistleblowers take. However, from an ethical perspective, providing incentives for whistleblowers is questionable as it delves into the motive of telling on a company. Ethics relates to doing the right thing, which raises philosophical questions about only electing to do the right thing for pecuniary benefit.
Six Pillars of Character Evaluation
The concept of whistleblowing aligns itself and is relevant to the six pillars of character outlined by the Josephson Institute of Ethics. Whistleblowing is only necessary due to the lack of trustworthiness in organizational management. Similarly, in exposing unethical behavior is an expression of trustworthiness. Secondly, whistleblowers show respect to the public by exposing acts by organizations that take advantage of public gullibility. For example, when whistleblowers expose falsehoods in unethical advertising, it reflects respect to the public. Further, whistleblowers tend to push organizations to take responsibility for their actions. By its very nature, whistleblowing prevents companies from covering up unethical behavior. Typically, cover-ups are a dereliction of responsibility (Near & Miceli, 2016). On the other hand, whistleblowing ensures fairness, more so regarding organizations where the public had an interest. The ability to hide critical information foments unfairness, an issue that whistleblowing can remedy.
Similarly, whistleblowers show caring for the public, and their actions protect the public from exploitation. For example, Ted Siedle exposed fraudulent activities involving large corporations, which would have swindled money from shareholders. Protecting the public from government or corporate overreach reflects caring. Finally, regarding citizenship, whistleblowing seeks to ensure that corporations act as good social citizens. Good social citizens follow the law because they have an obligation to as opposed to only following the law to avoid getting caught. Effective whistleblowing can ensure universal adherence to the law and ethical provisions.
References
Agrawal, A., & Cooper, T. (2017). Corporate governance consequences of accounting scandals: Evidence from top management, CFO and auditor turnover. Quarterly Journal of Finance , 7 (01), 1650014.
Ballan, E. J. (2017). Protecting Whistleblowing (and Not Just Whistleblowers). Mich. L. Rev. , 116 , 475.
Gao, L., & Brink, A. G. (2017). Whistleblowing studies in accounting research: A review of experimental studies on the determinants of whistleblowing. Journal of Accounting Literature , 38 , 1-13.
McLannahan, B. (2019, March 5). Best way to encourage whistleblowers? Reward them. Retrieved from https://www.ft.com/content/cac4c994-3f24-11e9-9bee-efab61506f44
Morris, R., & Mintz, S. (2019). Ethical Obligations and Decision Making in Accounting: Text and Cases (5th ed., pp. 1-29). McGraw-Hill
Near, J. P., & Miceli, M. P. (2016). After the wrongdoing: What managers should know about whistleblowing. Business Horizons , 59 (1), 105-114.
