Chapter 7
Blowing the
Whistle
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not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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
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not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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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
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not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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What is Whistle-Blowing?
Whistle-blower
• Employee who discovers corporate misconduct and chooses to
bring it to the attention of others
Internal whistle-blowing
• Employee discovering corporate misconduct and bringing it to the
attention of his or her supervisor
External whistle-blowing
• When an employee discovers corporate misconduct and chooses
to bring it to the attention of law enforcement agencies and/or
the media
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not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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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
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not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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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
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not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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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
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not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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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
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not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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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
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not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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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 whistleblowers existed only through legislation that did
not offer any safeguards against retaliation
aimed at them
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not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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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
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not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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Sarbanes-Oxley Act of 2002
• Takes an integrated approach of whistleblowing by:
• Prohibiting retaliation against whistle-blowers
• Encouraging the act of whistle-blowing itself
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not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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Dodd-Frank Wall Street Reform
and Protection Act
• Introduced a new reward program for whistleblowers 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
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not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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Addressing the Needs of WhistleBlowers
• Well-defined process to document how whistleblower 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
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not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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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
© 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may
not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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