WHISTLE BLOWING

PRESENTING BY

R. AYYAPPAN (07 MBA 020)

K.A GOPINATH (07 MBA 039)
M. KARTHIK (07 MBA050)
J. KARUNANIDHI (07 MBA 053)
S. MAHENDRAN (07 MBA 059)
MOHAMED NAUFAL (07 MBA 063)
WHISTLE BLOWINGGGGGGGGGG

An exploration into what makes some employees blow the whistle

against wrong practices and corruption in the organization, how it
impacts the organization and the whistle blower, and what
organizations can do to create an environment which helps
employees to prevent organizationally and socially undesirable
practices.

Whistle Blower
 An individuals who report unethical practices by their employer to
outsiders.
 Encouraging Internal Whistleblowing in
Organizations
 TIME MAGAZINE CASE:
When Time magazine editors named WorldCom's Cynthia Cooper and Enron's
Sherron Watkins two of their People of the Year for 2002,
they were acknowledging the importance of internal whistleblowers—
employees who bring wrong doing at their own organizations to the attention
of superiors.

 At WorldCom, Cooper pushed forward with an

internal audit, alerting the Board of Directors
Auditing Committee to problems, despite being
asked by the company's CFO to postpone her
investigation.
 (Encouraging Internal Whistleblowing in Organizations.
Continuation…………….)

 According to Fortune magazine, "If Cooper had been a good soldier,

the whole incredible mess might have been concealed forever." At
Enron, accountant Sherron Watkins outlined the company's problems
in a memo to then-CEO Kenneth Lay.

 But by the time Watkins and Cooper blew the whistle, much damage
had already been done, and the shareholders and employees were the
ultimate losers.

 So the question is, How does an organization create a culture that

encourages employees to ask questions early—to point out issues and
show courage in confronting unethical or illegal practices?

 And then how can a company ensure that timely action is taken? In
other words, how does an organization encourage internal whistle
blowing?
Attitudes Toward Whistle blowing

 These questions must be answered in the context of

conflicting cultural norms, which make it likely that
whistleblowers will encounter hostility and alienation.

 As Terance Miethe explains in his book, Whistle blowing at

Work, many people see the whistleblower as a "snitch," or a "a
lowlife who betrays a sacred trust largely for personal gain."

 This attitude was illustrated by an arbitrator in a 1972 case,

who told the employee that you cannot "bite the hand that
feeds you and insist on staying on for the banquet.

 " Among others, Peter Drucker, the famed management guru

and anti-whistleblower, viewed whistleblowing as "informing,"
(Attitudes Toward Whistleblowing continuation…………)

 illustrating yet another instance of the animus whistleblowers

have to expect from advocates of loyalty to the organization
first.

 On the flip side, whistleblowers such as Frank Serpico and

Karen Silkwood are seen as "saviors" who ultimately helped
create important changes in organizations.

 This approach to whistleblowers as guardians of public

accountability is often taken by consumer advocates such as
Ralph Nader.

 Given this dichotomy, whistleblowers may well encounter

difficulties when they appeal internally or go public with
information that may damage their companies.
The legal situation

 Does the law side with the whistleblower or with the employer?
English law has an implied common law duty not to misuse
confidential information belonging to the employer and this duty
may continue after the employment has finished.

 Since there are practical problems in taking legal action against ex-
employees, the employer's best option is to seek from employees an
express restraint clause.

 An exception is made when disclosure is in the public interest. In

the 1968 case of Initial Services Ltd. vs Putterill, Putterill had
resigned as sales manager and then handed to the Daily Mail
documents providing details of an unlawful price protection ring
involving the employers and of price rises attributed to
employment tax in order to disguise higher profits.
(The legal situation continuation……………..)

 Lord Denning held that the public interest exception to the duty
of confidence extended to '...any misconduct of such a nature that
it ought to be disclosed to others...

 The exception should extend to crimes, frauds and misdeeds, both

those actually committed as well as those in contemplation.‘

 The only legislation to support whistleblowing concerns oil rigs -

The Offshore Safety (Protection against victimisation) Act 1992.

 Offshore workers dismissed for raising valid concerns could now

make a complaint of unfair dismissal to an industrial tribunal.
A code of ethics for whistleblowers

Norman Bowie lists his requirements of justifiable acts of

whistleblowing:

 1. The whistleblowing stems from the moral motive of

preventing unnecessary harm to others.

 2. The whistleblower has used all the available internal

procedures for rectifying the problem before making
public disclosure. (This may be precluded under certain
special circumstances.)

 3. The whistle blower has ‘evidence that would persuade a

reasonable person’.
 (A code of ethics for whistleblowers
continuation………………)

 4. The whistleblower perceives serious danger from The

violation.

 5. The whistleblower acts in accordance with

responsibilities for ‘avoiding and/ or exposing moral
Violations’.

 6. The whistleblower’s action has reasonable chance of

success.
To Prevent Whistleblowing, Encourage
Whistleblowing

 As the preceding sections illustrate, whistleblowing to an

external entity, such as the media or government agencies, has
been a hazardous activity, both for the individual and the
organization.

 The ambivalent attitude toward whistleblowers ensures that,

even with legal protection, they may face retaliation in subtle
ways: being shunned by co-workers, being closely supervised,
or just feeling alienated.
(To Prevent Whistleblowing, Encourage
Whistleblowing continuation…………….)

 So, the question is, How do organizations encourage

internal whistleblowing—that is, to an authority
within the organization—to preclude external
whistleblowing and the resulting damage to an
organization?

 This section provides some best practices for

encouraging employees to bring unethical or illegal
practices to the forefront and addressing them
before they become fatal to an organization.
 The objectives of an internal whistleblowing
program are

 To encourage employees to bring ethical and legal

violations they are aware of to an internal authority so that
action can be taken immediately to resolve the problem

 To minimize the organization's exposure to the damage that

can occur when employees circumvent internal
mechanisms

 To let employees know the organization is serious about

adherence to codes of conduct
The barriers to a successful internal
whistleblowing program……………
 A lack of trust in the internal system

 Unwillingness of employees to be "snitches"

 Misguided union solidarity

 Belief that management is not held to the same standard

 Fear of retaliation

 Fear of alienation from peers

(The barriers to a successful internal whistleblowing
continuation………………)

 Although companies should seek to remove these

barriers, it is also important to acknowledge that some
whistleblowers have less-than-honorable motives.
 What if the whistleblower is retaliating against a
supervisor with false accusations?
 What if the whistleblower is bringing genuine problems
to the fore but is also a subpar employee?
 In that case, does the whistleblower get a free pass just
because he or she exposed an issue?
 (The barriers to a successful internal
whistleblowing continuation………………)

 What should be done when it becomes clear that

encouraging employees to bypass the proper channels is
undermining management decision making?
 What if whistleblowers participated in the very actions
they are now exposing, perhaps as a means of escaping
the consequences of their participation?
 What if there is reason to suspect a whistleblower is
targeting a specific employee because of his or her race,
gender, or ethnicity?
 These are just a few of the issues to be considered in
creating a whistleblowing culture.
Steps for Creating a Whistleblowing Culture

Create a Policy

 A policy about reporting illegal or unethical practices should

include

 Formal mechanisms for reporting violations, such as hotlines

and mailboxes

 Clear communications about the process of voicing concerns,

such as a specific chain of command, or the identification of a
specific person in the organization, such as an ombudsman or
a human resources professional
(Steps for Creating a Whistleblowing Culture
continuation…………….)

 Clear communications about bans on retaliation In

addition, a clear connection should exist between
an organization's code of ethics and performance
measures.

 For example, in the performance review process,

employees can be held accountable not only for
meeting their goals and objectives but also for
doing so in accordance with the stated values or
business standards of the company.
(Steps for Creating a Whistleblowing Culture
continuation…………….)

Get Endorsement From Top Management

 Top management, starting with the CEO, should
demonstrate a strong commitment to encourage
whistle blowing.

 This message must be communicated by line

managers at all levels, who are trained continuously
in creating an open-door policy regarding
employee complaints.
(Steps for Creating a Whistleblowing Culture
continuation…………….)

Publicize the Organization's Commitment

 To create a culture of openness and honesty, it is
important that employees hear about the policy regularly.

 Top management should make every effort to talk about

the commitment to ethical behavior in memos,
newsletters, and speeches to company personnel.

 Publicly acknowledging and rewarding employees who

pinpoint ethical issues is one way to send the message
that management is serious about addressing issues
before they become endemic.
(Steps for Creating a Whistleblowing Culture
continuation…………….)

Investigate and Follow Up

 Managers should be required to investigate all
allegations promptly and thoroughly, and report the
origins and the results of the investigation to a higher
authority.

 For example, at IBM, a long-standing open-door policy

requires that any complaint received must be
investigated within a certain number of hours.

 Inaction is the best way to create cynicism about the

seriousness of an organization's ethics policy.
(Steps for Creating a Whistleblowing Culture
continuation…………….)

Assess the Organization's Internal

Whistleblowing System

 Find out employees' opinions about the organization's

culture vis-à-vis its commitment to ethics and values.
 For example, Sears conducts an annual employee survey
related to ethics. Some questions are:
 Do you believe unethical issues are tolerated here?
 Do you know how to report an ethical issue?
 Less than half of privately held businesses support
whistleblowing

 Less than half (45 per cent) of privately held businesses

(PHBs) globally have measures in place to accommodate
potential whistleblowers, according to the Grant Thornton
International Business Report.

 Regionally, Latin America has the highest percentage (68

per cent) of businesses with support for whistleblowers,
while with 29 per cent of businesses reporting positively, East
Asia (excluding mainland China) has the lowest percentage.
 Percentage of business providing support to potential
whistleblowers – regional comparision

 Latin America 68

 NAFTA 56

 All Business 45

 EU 42

 East Asia 29

 Source : Grant Thomson IBR 2008

 Brazilian PHBs are the top country to accommodate
whistleblowing (85 per cent) followed by
Scandinavian economies Denmark and Sweden
(both 71 per cent).

 Greek businesses come at the bottom of the table

which just 18 per cent of PHBs dealing with
whistleblowing, closely followed by three East Asian
economies Taiwan (18 per cent), Hong Kong (20 per
cent) and Japan (22 per cent).
 Alex MacBeath, global leader- privately held
business services says, "Whistleblowing can be an
invaluable way to alert management to poor
business practice within the workplace.

 Often whistleblowing can be the only way that

information about issues such as rule breaking,
criminal activity, cover-ups and fraud can be
brought to management's attention before serious
damage is suffered.
 "Privately held businesses can greatly benefit from
introducing measures to accommodate potential
whistleblowers within their organisation.

 Without sufficient measures in place,

whistleblowers can be victimised as informants or
traitors rather than a valuable early warning system
which can save lives, money and reputations.

 The other, and perhaps greater and more prevalent,

risk is that they remain quiet or leave the
organisation and the underlying issues remain
undetected."
 Percentage of business providing support to potential whistleblowers – top and bottom five countries

 Brazil 85

 Denmark 71

 Sweden 71

 Botswana 69

 Philipines 67

 All Business 45

 Russia 22

 Japan 22

 Hongkong 20

 Taiwan 18

 Greece 18
Source : Grant Thomson IBR 2008
 ILLEGAL
ACTIVITY

CONCERENED
INDIVIDUALS RUMOURS
OR GROUPS

STAKE HOLDERS

WHISTLE
ORGANIZATIONAL
BLOWING RESPONSE
Managing Whistle Blowing
Corporate ethics policy

Importance for ethics pronounced in

recruitment and training

Linkage of ethics and governance to

performance and feedback

Institutionalization - ethics officers,

teams

Audit teams - internal and external

Mechanisms to aid anonymous

reporting - email, telephone numbers.
Questions to ask before Blowing the Whistle

 Is this the only method ot resolve my concerns?

 Do I have the appropriate documentation and evidence

to prove my case?

 What is my motivation for expressing concern over

employee or company activities?

 Am I prepared to deal with the matter on both a

personal and professional level?
Conclusion

 Given the prevalence of corporate misconduct in the

recent past, whistleblowing incidents have been on
the rise.

 A 2002 article in Business Week called 2002 the

"Year of the Whistleblower" and quoted Stephen
Meagher, a former federal prosecutor who
represents whistleblowers, as saying that "the
business of whistleblowing is booming.
 " This trend is likely to be bolstered by the provisions of
the Sarbanes-Oxley Act, which for the first time,
accords legal protections to whistleblowers in publicly
traded companies.

 This means organizations will have to institute rigorous

policies to allow employees to bring unethical and
illegal practices to the forefront.
 Companies will have to train managers and
executives on how to encourage openness, not
unlike the sexual harassment training of a decade
ago.

 Putting processes in place will not be quick, but it

is certainly necessary given the increased public
scrutiny of corporate behavior.