ETHICS IN BUSINESS

Instructor: Ms Xuân Vương

I. WHISTLE-BLOWING: Definition
§ The release of information by a member or former member of an organization that is evidence
of illegal and/or immoral conduct in the organization or conduct in the organization that is not
in the public interest.
à The act of exposing an employer’s wrongdoing to outsiders (external to the company) such as
the media or government regulatory agencies.
à Also used for internal reporting of misconduct to management, especially through anonymous
reporting mechanisms, often called hotlines.
§ Whistle-blower laws have provisions against retaliation and are enforced by a number of
government agencies.
 Seven points of Whistle-blowing
First, blowing the whistle is something that can be done only by a member of an organization.

Second, there must be information.

Third, the information is generally evidence of some significant kind of misconduct on the part of an
organization or some of its members.

Fourth, the information must be released outside normal channels of communication.

Fifth, a definition of whistle-blowing also needs to take into account to whom the whistle is blown.

Sixth, the release of information must be done voluntarily, as opposed to being legally required.

Seventh, whistle-blowing must be undertaken as a moral protest.

 The voluntary release of nonpublic information, as a moral protest, by a
member or former member of an organization outside the normal channels
of communication to an appropriate audience about illegal and/or immoral
conduct in the organization or conduct in the organization that is opposed in
some significant way to the public interest.
What constitutes whistle-blowing?
DISCUSSION
What questions should you ask yourself before
you become a whistle-blower?
II. WHISTLE-BLOWING: Justification
§ The main stumbling block in justifying whistle-blowing is the duty of loyalty that
employees have to the organization of which they are a part.
§ An obligation of loyalty to an organization is more complex, involving questions
about the basis of such an obligation and the concept of loyalty itself.
§ Whistle-blowing should be the last rather than the first resort. It is justified only
when there are no morally preferable alternatives.
§ Insofar as whistle-blowing is justified because of some good to the public, it is
important to blow the whistle only when there is a reasonable chance of achieving
that good .
II. 1. Loyal Agent Argument
§ An agent is a person who is engaged to act in the interests of another person
(called a principal) and is authorized to act on that person’s behalf.
§ Employees are considered agents of an employer in that they are hired to work for
the benefit of the employer: they have an obligation to work as directed, to protect
confidential information, and to be loyal.
§ Agents are employed to carry out tasks that principals are not willing or able to
carry out for themselves.
§ The main obligation of an agent is to act in the interest of the principal
à The ethical basis of the duty of agents is a contractual obligation or an
understood agreement to act in the interests of another person.
Limits to agency duties
§ First, the law of agency does not impose an absolute obligation on employees to
do whatever they are told.
à Employees are not obligated as agents to do anything illegal or immoral — even
if specifically instructed by a superior to do so
§ Second, the obligations of an agent are confined to the needs of the relationship.
à The duty of confidentiality is justified by the legitimate right of an employer to
maintain the secrecy of certain vital information.
è The agency relation does not require employees to engage in illegal or immoral
activities or to give over their whole life to an employer.
II. 2. Meaning of Loyalty
§ Whistle-blowing is not necessarily incompatible with loyalty; and, indeed, in some
circumstances, loyalty may require employees to blow the whistle on wrongdoing in
their own organization.
§ Examples:
Ø Loyalty means merely following orders and not “rocking the boat”
à whistle-blowers are disloyal employees.
Ø Loyalty means a commitment to the true interests or goals of the organization
à whistle-blowers are often very loyal employees.
Exit, Voice, and Loyalty
§ Hirschman: Members of organizations and people who deal with organizations
(i.e. customers of a firm) can respond to dissatisfaction either by:
Ø leaving the organization and having no further dealings with it (exit)
Ø speakingup and making the dissatisfaction known in the hope of bringing about
change (voice)
§ Loyalty is a factor that keeps people from exiting an organization; but, at the same
time, it activates the voice option.
§ According to Hirschman, those who exercise the voice option are often the most loyal
and are convinced that by speaking up they can get the organization back on the right
track
II.3. Conditions for Justification
ANALYZING THE SITUATION
Decide whether to blow the whistle by asking
those questions:
§ Is the situation of sufficient moral importance to
justify whistle-blowing?
§ Do you have all the facts and have you properly
understood their significance?
§ Have all internal channels and steps short of
whistle-blowing been exhausted?
TAKING ACTION
Decide the most effective course of action for a
determined whistle-blower by asking those
questions:
§ To whom should the information be revealed?
§ How much information should be revealed?
§ Should the information be revealed anonymously
or accompanied by the identity of the whistle-
blower?
§ What is my responsibility in view of my role in the
organization?
III. WHISTLE-BLOWING: Rights
§ Legal protection for whistle-blowing is provided by an extremely complex
patchwork of state and federal laws, supplemented by precedents from case
law and private agreements, such as labor contracts and company personnel
policies.
§ Most laws prohibit retaliatory action against employees for certain specified
activities, along with a prescribed remedy for wrongful retaliation, usually
reinstatement with some compensation.
Legal Protections for
Whistle-Blowers
 Arguments against Protection
• A law recognizing whistle-blowing
as a right is open to abuse.
• Legislation to protect whistle-
blowers would encroach on the
traditional right of employers to
conduct business as they see fit.
• If whistle-blowing were protected
by law, what should be the legal
remedy for employees who are
unjustly dismissed.
Arguments for Protection
• The main argument in defense of a
law to protect whistle-blowers is a
utilitarian one that rests on the
contribution whistle-blowers make
to society.
• A second argument for providing
legal protection for whistle-blowers
appeals to the First Amendment
right of freedom of speech.
IV. WHISTLE-BLOWING: Developing a Policy
§ An effective whistle-blowing policy can have the added benefit of affirming a
company’s commitment to good ethics and creating an ethical corporate climate.
§ Whistle-blowing policies benefit employees by providing them with a channel of
communication for responding to perceived wrongdoing in the organization.
§ Employees are likely to welcome an opportunity to express their legitimate
concerns without the risk of going public with damaging information.
§ Whistle-blowing policies involve some dangers. Encouraging employees to report
on each other can create an environment of mistrust and intimidation, especially if
people feel vulnerable to the possibility of false accusations.
Components of a Whistle-blowing Policy

1. An Effectively Communicated Statement of Responsibility

2. A Clearly Defined Procedure for Reporting

3. Well-Trained Personnel to Receive and Investigate Reports

4. A Commitment to Take Appropriate Action

5. A Guarantee against Retaliation

Questions to Ask Before Engaging in External Whistle-Blowing
Outcomes for Internal Whistle-Blowers Reporting Misconduct
Reasons why Employees do not Report Observed Misconduct
CASE STUDY ANALYSIS:
Edward J. Snowden: Traitor or Hero?
1. What values are in conflict in this case? What
harm did Snowden cause? What benefits did his
actions bring?
2. Do you agree that Snowden’s actions were
ethically justified even if legally prohibited? Why
or why not?.
3. If you were in Snowden’s position, what would
you have done and why?
4. Would you change your position if you knew
that Snowden’s leak would lead to a loss of life
among CIA operatives? What about if it would
save lives?