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.
(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
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
(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
(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?
 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
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
 ILLEGAL
ACTIVITY

CONCERENED
INDIVIDUALS RUMOURS
OR GROUPS

STAKE
HOLDERS

WHISTLE ORGANIZATIONA
BLOWING L 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.