Whistle Blowing Refers to Denunciation of Fraud Essay

Pages: 7 (1972 words)  ·  Bibliography Sources: 7  ·  File: .docx  ·  Level: College Senior  ·  Topic: Business

Whistle blowing refers to denunciation of fraud or wrongdoing in a company by the company's employee. It is defined as "the disclosure by organization members (former or current) of illegal, immoral, or illegitimate practices under the control of their employers, to persons or organizations that may be able to effect action" (Near & Miceli, 1996, p. 4). Kim Emigh the woman who first blew the whistle for auditing malpractice at WorldCom will forever be seen a symbol of integrity, courage and a threat. Integrity because people like Kim Emigh has the ability to risk their jobs and question various operating practices at their organizations (Malone, 2002). Courage for the very same reason and threat because employees who have the capacity to take on a large firm can be seen as more of a liability than an asset.

It is a positive force if seen in the light of the errors and potential fraud that it can discover. Whistle blowing is not something everyone is capable of but those who have the courage should also be ethical enough to understand their purpose for exposing the firm must be noble and not simply a way to seek public attention or get a raise. In other words, a lot depends on the motives of the whistle blower but it can be both a positive and negative force. Positive because it can expose fraud and negative because it can lead to the person losing his or her job, the company mistrusting or distrusting other employees and thus may start operating under much thicker wraps.

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I personally believe that a whistle blower must go public only after he or she has already spoken to the senior management and as the result of this lost their jobs or saw no change in the organizational practices. Whistle blowing must not be abused because it can cause problems for the company and its other employees.


Essay on Whistle Blowing Refers to Denunciation of Fraud Assignment

Corporate culture plays an important role in ethical behavior or lack of it thereof. This is evident from the case of Enron as it is a documented fact that corporate culture at Enron reportedly pushed its employees towards unethical behavior. This is because it was a dog- eat-dog culture at Enron and at times, the senior management wanted to see results by hook or crook. It "encouraged risky behavior, if not breaking the rules." (Ferrell, p.321) but corporate culture goes deeper than joining some ethical programs or providing ethical training because Enron had a written ethical code and was also a member of the Better Business Bureau.

Corporate culture is deeply rooted in a company's soul and if its not part of the natural culture and the type of people hired. It can only be changed by using a proper method of change such as providing training to diverse set of employees, by adopting a leadership style that brings out the best ethical behavior and a commitment to ethical code of the company. Michael Capellas for example adopted the transactional leadership style to introduce better ethical decision making at WorldCom. He did this by "creating a corporate ethics offices, enhancing the code of ethics, and launching new financial reporting and ethics training initiatives for employees." (Ferrell and Peterson. p.76)


Ethical training doesn't mean that employees are taught the difference between right and wrong. Every employee already is well aware of what is right and what is not, ethical training only helps reinforce those time-tested values and teach them ways to bring a problem to the notice of human resource personnel or senior management. While everyone might know the speed limit in a residential area, people will still be pulled over for speeding. Why does that happen? What will happen if the person is not caught? If not caught, the person will continue to do the same thing and this violation can spread like an epidemic. For this reason, speeding is considered violation of the traffic law and the person is sent to driving school for further training. The same purpose is served by ethical training, which sets a speed limit, determines the repercussions of violating ethical code and also sets an ethical standard for the firm.

But training must not be a substitute for real deep-rooted values that become part of the organizational culture. The culture must be ethical or else no amount of ethical would work and produce desired results.

"The results imply ethical training should include a focus on becoming aware of and overcoming biases in decision-making…Ethics training alone, however, does not seem to have the potential to achieve a major reduction in occurrences of unethical behavior or an increase in whistle-blowing. Changes in thinking do not necessarily translate into changes in action. For example, the correlation between expressed intent to blow the whistle and actually doing it is rather low…" (Decker, 2007)


Corporations are no longer capitalist machineries instead they are seen as socially responsible entities capacity of moral conduct and accountable for their behavior to employees, investors, suppliers and the community on the whole. "Because companies are chartered as citizens of a state and/or nation, they generally have the same rights and responsibilities as individuals. Through legislation and precedents, society holds companies accountable for the conduct of their employees as well as for their decisions and the consequences of those decisions." (Ferrell et al. p. 207)

Because companies make decisions that affect the community at large, it is important that they are held responsible for the consequences of their decisions and hence they are seen as moral agents. But since they are not human beings capable of thinking on their own, it is essential to have ethical laws in place, which must be obeyed in order to create a more moral and ethically upright entity of business. This leads to a positive impact on the society and corporations become more than just profit making machines. An example of this would be a company who seeks to invest in community building projects while it is making profits as well. In other words, when a company tries to do the right thing by investing in the society, by promoting transparency in operations, by adhering to ethical code etc., it is considered a socially responsible firm that can be seen as a moral agent.


A company chooses to understand and improve its ethical conduct because in the long run it leads to better financial health, better reputation and hence more business. This is a very simple thing to understand because ethically speaking a firm must be transparent in its operations and have channels for anonymous reporting of misconduct. In other words, transparency and accountability must be incorporated in the company policy to indicate the company's serious interest in promoting a moral and ethical sound culture. This is important because as we have seen from collapse of big companies, unethical practices lead not only to financial problems for a company, it also results in serious lawsuits, bankruptcies and hurts the interests of numerous stakeholders.

In the case of Enron for example, we saw how it was misreporting its financial picture with the help of its auditing firm, Arthur Anderson (Ferrell & Peterson, p.138). That led to major problems not only for the company but its numerous stakeholders, some of who lost all their savings in Enron shares. The company collapsed, its senior management faced lawsuits and imprisonment and its thousands of employees lost their jobs. This was major loss to the society and the community and also had a terrible impact on the U.S. economy. For this reason, it's very important for firms to have strict ethical standards and also adhere by the same.


Integrity is not something that should be part of financial operations alone; a company must also exhibit ethical behavior in non-financial areas. To measure financial ethics, we have laws like Sarbanes-Oxley Act but to measure non-financial integrity, we have models such as Six Sigma, Balanced Scorecard and Triple Bottom line that help a firm achieve a standard in non-financial performance like quality control, minimization of errors and defects and higher efficiency etc. Six Sigma focuses on delivering "world class performance, reliability and value to the end customer." (Ferrell p.238) Balance scorecard also checks performance of a company's strategic planning and management system. The scorecard enables a company to become aware of its vision and translate it into an effective strategy. Triple Bottom line refers to the three pillars of a successful company i.e. people, planet, profit and hence the model captures the values that translates into economic, ecological and social success.


Price discrimination refers to variation in prices of commodities by the same seller. Price discrimination requires market segmentation but it is only permissible when those buying at a discount do not in turn become resellers and sell to the higher-paying customer at a tiny discount. For example if a shampoo is sold in the market at a certain price but is available at the departmental store… [END OF PREVIEW] . . . READ MORE

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