Whistle-blowers. Reasons, Outcomes and Company Loyalty - Research Paper Example

?In Recent Years, Major American Corporations Such As Enron, World Come, Duck Power, Mattel, Goldman Sachs and J. P. Morgan Chase Have Defrauded Their Investors and Cheated Their Customers. We Know this Because Some Employees Have “Blown the Whistle” Table of Contents Introduction 3 Whistleblower 4 Reasons for Whistle Blowing 5 Outcomes of Whistle Blowing 6 Company Loyalty and Whistle Blowing 7 Conclusion and Recommendations 8 References 10 Introduction Whistle-blowers are persons who play the leading role to leak the confidential or secret information of an organisation’s malpractices or unethical conducts of the Government or other business organisations to the public at large. Whistle-blowing can act as a corrective measure for management leading towards dramatic positive changes within the organisational culture. Whistle blowers generally inform the world about the unethical practices going on inside the organisation which would seek the interest of public. According to the professional ethics, an employee is expected to give more importance to the collegial loyalty; however, the code of ethics often consider the loyalty towards the public and society to be more important and emphasises more on the professionals’ moral responsibilities. The United States Code of ethics for the government employees directs them to “expose corruption wherever uncovered” and to “put loyalty to the highest moral principles and to country above loyalty to persons, party, or government” (Bok, S. “Whistle-blowing and Professional Responsibility”: 70) The objective of this project is to explain the corporate ethics along with the importance and responsibilities related with whistle blowing taking the Enron case into consideration. A few recommendations will also be suggested in this project about the responsibilities of a whistle blower and what can be the outcomes of whistle blowing. Whistleblower A whistle blower is the employee who reveals the malpractices going on in his/her organisation by disclosing the organisational secrets to the public. Notably, this kind of disclosers can be made by employees of a particular organisation not necessarily to the public, but also to the higher authorities and the concerned governmental institutions as well. Any kind of leakage of secret information generally harms an organisation and may possibly result in the termination of the employee (Bok, S. “Whistle Blowing and Professional Responsibility”). Current practices have revealed various such instances of whistle blowing among which Enron’s case has been one of the milestones in corporate history. Enron is a large-sized Houston-based company which deals in energy commodities. This company employed around 21,000 of individuals and was amongst the world’s leading companies of natural gas, electricity, paper and pulp and communications, which was known to claim revenues of $111 billion in the year 2000 (Scribd Inc, “Business Ethics Case”). However, the company became insolvent by 2001 and intended to save billions which it owed to its investors, though by unethical means. In such situation, Sherron Watkins, the ex-vice president of the company uncovered the miserable situation in front of public after her strategies to consult with the higher authorities concerning the matter failed. In the case of Enron, Sherron Watkins understood her responsibilities towards the innocent investors who trusted the company and found her moral ethics to be more important than the corporate ethics (The Buffalo News, “Enron Whistle-Blower Says Case Shows Need for Better Safeguards”). Reasons for Whistle Blowing Organisations, in the modern day context are often witnessed to conduct malpractices which in turn are quite likely to hamper the community welfare or the interests of its stakeholders to a large extent. Knowing the malpractices of the management, when an employee perceives his/her moral responsibilities toward the society as more important than his/her company loyalty, the individual decides to blow the whistle. Hence, the malpractices discouraging community welfare are the sole reasons for whistle blowing. In addition, the feeling of being mistreated can hurt the employees’ perceived values and can also influence them to blow the whistle following any of the wrong doings of the company. Additionally, the reward that the government sometimes present to the whistle blowers can also be a strong motivating factor of whistle blowing. This reward encourages the employees to go against the management and blow a whistle which harms the organisation but may be in strong favour of the society. Moreover, even the most loyal of the employees can find their self interest to collide with that of the organisational interest which in turn is quite likely to motivate them to blow the whistle (American Society of Civil Engineers, Whistle-Blowing). In the case of Enron, the company was practicing certain unethical accounting practices which were against the proper moral standards. The vice president of Enron for corporate development, Ms. Sherron Watkins was concerned about these malpractices in the company. She stated her concern in a letter which was wrote to the Enron’s chief Mr. Kenneth Lay. She raised the fact that such kind of malpractices could destroy the company’s integrity and also the company itself. However, the management did not seem to take any kind of corrective measures in this respect. Thus, driven by the moral responsibilities, Ms. Watkins raised the issue in public and thus had to play the role of whistle blower in Enron. With regards to the Enron case, there are a few other reasons for whistle blowing such as the culture of the company. The higher officials of Enron were also engaged in the malpractices going on in the organisation as a result of which Ms. Watkins did not get any response from the higher officials. This kind of organisational environment also compelled her to blow the whistle in public (De Vous, “Enron's Moral Lessons”). Outcomes of Whistle Blowing The most common outcome of whistle blowing is the termination of that employee by whom the whistle was blown. Whistle blowing brings out many positive changes within the organisation resulting in investigations to identify the malpractices and wrongdoings of the management. Whistle blowing can deliberate the employees from the mistreatment of the management as well. The result of whistle blowing depends on the nature of the wrong doing that are being reported by the employees in the organisation. It is worth mentioning that the government entertains only the whistle blowing which are in favour of the public welfare. In case of this kind of whistle blowing, the company cannot terminate the employee at that very moment. However, it has been observed that the employee himself/herself decides to quit the job after whistle blowing in many instances. Whistle blowing brings about visible changes in the organisation and prevents them from performing malpractices inside the organisation and mistreating the employees. Furthermore, the act of whistle blowing encourages other employees to protest against the mistreatments and malpractices and make them more concerned about their moral responsibilities (Smith, R. & Brown, A. J. “The Good, The Bad and the Ugly: Whistle Blowing Outcomes”). In the case of Enron, Ms. Watkins, the whistle blower, was given a reward of $1.1million by International Rescue Committee (IRC) as the information regarding company’s malpractice which Ms. Watkins revealed about the company was beneficial to the public. Whistle blowing proved to be profitable for the stakeholders who had invested in Enron, since the company was about to save billions owed to them by fraudulent. In response to some of the whistle blowing instances such as in Enron and WorldCom, Congress approved Sarbanes-Oxley Act (SOX) in July 2002, thus bringing changes within the business environment. According to this particular regime, it was unlawful to take any kind of negative actions against the employees who disclosed any questionable accounting or auditing matters (Bowen & Et. Al. “Whistle-Blowing: Target Firm Characteristics and Economic Consequences”). Company Loyalty and Whistle Blowing At times, the employees tend to disclose the non-public information of the organisation to the public, with an intention of satisfying their personal rancour against the management, which is not justifiable as a reason for whistle blowing. Before blowing a whistle, an employee should make it sure that he/she is doing it for the public interest and not for the personal interest. Whistle blowing is justified only when it is done from a moral motive. However, doing this can have some serious outcomes such as, the exposure of the employee as a whistle-blower. It can be stated that more the serious the wrong doing is, the more the whistle-blower or the whistle blowing is being justified. Justification of whistle blowing can also be measured taking the time factor into consideration (Shaw, W. H. & Barry, V. E. “Moral Issues in Business”). At times, the self-interest and the loyalty towards the company can be regarded as more important than the moral responsibilities toward the community as perceived by an individual employee. In such situations, the employee(s) is likely to decide on avoiding whistle blowing. However, when an employee gives more importance to the public interest than the organisational interest, he makes himself exposed to the charges of being disloyal to the organisation (Shaw, W. H. & Barry, V. E. “Moral Issues in Business”). In case of Enron’s whistle blower, Ms. Watkins, it can be stated that she tried her best to resolve the issue by first informing the top management with due consideration to her responsibility to seek information from the co workers before blowing the whistle in public (Bowen & Et. Al. “Whistle-Blowing: Target Firm Characteristics and Economic Consequences”). Conclusion and Recommendations When an employee joins an organisation, he/she agrees to be under the purview of certain obligations toward the organisation and to abide by its rules and regulations. The act of whistle blowing can be considered as an act of partially breaking the rule of the organisation and protesting against it. Hence, before blowing a whistle, the particular employee should be sure enough that the facts which he is going to reveal would serve the public interest. With due consideration to the employees’ perceived company loyalty, it is advisable to the employees, who intend to blow the whistle against the misdeeds of the management, that he/she should seek for adequate information and evidences before revealing the information in the public to convince anyone that the activities of the organisation are unlawful and immoral. Often the employees working in an organisation face a complex situation where their personal interests and organisational interests collide with each other. Moreover, whatever the matter is, the perspective of the employer and the employee seem to differ most of times. Blowing a whistle in this kind of a situation is not justified because it is most likely that in such situations, employees generally give more importance to their personal interests taking actions accordingly. In this regards, for companies such as Enron, it is advisable that they should not allow such kinds of malpractices in the organisation and should try to resolve such ethical issue within its culture at the primary level (Bowen & Et. Al. “Whistle-Blowing: Target Firm Characteristics and Economic Consequences”). References American Society of Civil Engineers. “Whistle-Blowing.” April 12, 2012. A Professional Responsibility, 2011. Bok, Sissela. Whistle-blowing and Professional Responsibility Broadview Press, 2000: 70-76. Bowen, Robert M. & Et. Al. “Whistle-Blowing: Target Firm Characteristics and Economic Consequences”. April 12, 2012. New York University, 2007. BuffaloNews.com. “Enron Whistle-Blower Says Case Shows Need for Better Safeguards”. April 12, 2012. The Buffalo News, 2011. De Vous, Phillip W. “Enron's Moral Lessons”. April 12, 2012. Acton Institute, 2012. Smith, Rodney & Brown, A. J. “The Good, the Bad and the Ugly: Whistleblowing Outcomes”. April 12, 2012. Whistle Blowing, 2002. Shaw, William H. & Barry, Vincent E., Moral Issues in Business Thomas/Wadsworth, 2003: 386-410. Scribd, “Business Ethics Case”. April 12, 2012. Scribd Inc, 2012. Read More