Whistle Blowing Research Paper

Pages: 5 (1529 words)  ·  Bibliography Sources: 5  ·  File: .docx  ·  Level: College Senior  ·  Topic: Business

Whistle blowing is a business ethics concept that has enjoyed a surge in media attention following corporate scandals such as those suffered by ENRON and WorldCom. The wrongdoing in these corporations was brought to light by conscientious employees who reported such wrongdoing to the appropriate officials. In general, whistle blowing can therefore be defined as making a disclosure of suspected wrongdoing in the interest of the public being served by the corporation. This is particularly important in cases where large corporations such as banks or financial advice companies are attempting to ensure their continued wealth even in difficult times such as the recent economic crisis.

Usually a whistleblower's first course of action is to inform the employer of possible wrongdoing within the company. If this is not possible, or if the employer is the perpetrator of suspect activity, a regulator can be approached. While an employee is usually protected by law when disclosing suspect activities, it is important to be familiar with the conditions of whistle blowing. These conditions ensure that employees do not make false accusations simply on the grounds of a grudge or other personal issues. Even though investigation will prove the company's innocence in such cases, any type of whistle blowing can severely damage the reputation of a company. Legislation is therefore in place not only to protect employees, but also the companies involved (CIPD, 2010).

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According to Business Link (2010), there are several considerations an employee must take into account when considering whistle blowing. The first question I whether the suspected wrongdoing is eligible for disclosure. Categories that are eligible include a criminal offence, a miscarriage of justice, environmental damage, legal breaches, health and safety violations, or covering up any of these matters.

Research Paper on Whistle Blowing Assignment

A further important consideration is the fact that the suspicion of wrongdoing does not need to be correct when following whistle blowing procedure. The suspicion must however prove reasonable under the circumstances at the time. Whistle blowing procedures can occur either internally, where disclosures are made to an employer when wrongdoing by a fellow employee is suspected, or externally, when disclosures are made to external officials concerned with the matters in question.

Because of the sensitive nature of whistle blowing, it is important that businesses have an official whistle blowing procedure that employees can follow consistently when suspecting coworkers and employers of unethical practices. This will safeguard both the business and employees against unethical practices or incorrect whistle blowing. Such a plan will also protect employees from detriments such as dismissal, withholding a pay raise, or other forms of discrimination as a result of whistle blowing.

In cases where whistle blowers have been unfairly dismissed, remedies can be implemented either by financial settlement or by reinstatement. BBC News (2003) for example reports of the Coca-Cola company, which dismissed Matthew Whitley for whistle blowing. Mr. Whitley was a finance manager at the company, who made two whistle blowing claims. Firstly, he alleged that the company had inflated its earnings reports, and secondly, he claimed that managers who knew that frozen drinks machines could cause metal residue in Coke's products did nothing to remedy this problem. In other words, Coca-Cola products bought from such machines could lead to serious public health risks.

Despite Coca-Cola's defence that the allegations were "frivolous," the case led to a U.S. Department of Justice probe. Also, they remedied the situation by settling out of court and agreed to cooperate with the Department of Justice during its investigations.

During times of global turmoil and war, whistle blowing could extend globally, where governments sometimes succumb to the temptation of bending the truth for the purpose of warfare victory. Phil Haines (2004) for example describes the case of the United Kingdom government, where the Prime Minister's Office was accused of "glamorizing" information that would later be used as a reason for going to war with Iraq. The whistleblower was Dr. David Kelly, an expert on weapons of mass destruction. In an anonymous discussion with a BBC reporter, Dr. Kelly voiced his concern that the Prime Minister's advisors had exaggerated the threat of Iraq's alleged weapons of mass destruction to service the political ends of the government.

The effects of this were unfortunate; a government investigation revealed Dr. Kelly as the whistleblower. The result was an attempt to destroy Dr. Kelly's professional reputation, which eventually led to his suicide. This brought home to the entire country the lack of legislation at the time to protect those who provide information in the public interest.

A study in the United States at the time (Haines, 2004) found that whistleblowers could expect precious little for their efforts. The study for example found that all whistleblowers who voiced concerns were fired, of whom most were unable to find employment elsewhere; 17% lost their homes, 54% were harassed at work before their dismissal; 15% were divorced; 80% suffered resulting physical ailments; 90% suffered emotionally; and 10% attempted suicide. These figures increased the pressure upon governments to implement legal protection measures for whistleblowers, as they are acting in the interest of the public.

In Great Britain, workers are usually protected by the Public Interest Disclosure Act of 1998 (CIPD, 2010), although in Dr. Kelly's case this did not appear to apply. In the United States, the Sarbanes-Oxley Act of 2002 included provisions for the encouragement and protection of whistleblowers. Requirements for whistle blowing "hotlines" were also included to help protect the anonymity of those who disclose information. By their nature, such hotlines would then also prevent workplace harassment or unfair dismissal as a result of disclosing information. It is interesting that, in both countries, these pieces of legislation were implemented before the clear violations suffered by Dr. Kelly and the subjects of the research cited by Haines.

Nevertheless, authors such as Michael Connor (2010) emphasize both the need and effectiveness of whistleblowers in serving the public good. Connor cites a paper written by Accounting Professors Robert Bowen and Shiva Rajgopal to indicate that whistle blowing is effective in preventing misconduct by companies in terms of both economic consequences and governance.

According to the author, companies against which whistle blowing allegations were made experienced almost immediately negative financial consequences. Average stock prices for such companies are reported to fall 2.8% within five days of the allegation becoming public. When "earnings management" is at the center of the allegations, average stock could diminish up to 7.3% in value.

In addition to the general reputation damage suffered by such companies, the economic consequences of whistle blowing allegations are sufficient deterrents to business misconduct, or indeed they should be. Although some companies, like Coca-Cola in the case mentioned above, claim that whistle blowing allegations are often the result of misjudgment, trivial or frivolous complaints, the research indicates that this is not so.

Connor cites Brown and Rajgopal's findings to indicate that the majority of whistle blowing allegations are well-substantiated by actual wrongdoing. Furthermore, firms are protected from frivolous claims by the legislation, concomitantly with the protection enjoyed by whistleblowers themselves.

Furthermore, the researchers found that whistle blowing led to an increase n earnings restatements, shareholder lawsuits and poor stock return performance. Further interesting findings include that whistle blowing results in improvements in governance efficiency, while high-growth companies with strong stock performance tend to attract a higher volume of whistle blowing. In such cases, whistle blowing therefore serves as a valuable regulator of above-board practices with relation to company growth and stock performance.

In today's business world, and particularly in the light of scandals such as ENRON and the British Government issue, improving regulations for the implementation of whistle blowing criteria and procedures is vitally important in the business world. Business ethics are important in terms of ensuring that corporations function in the interest of the public good, and that employees are treated fairly. In… [END OF PREVIEW] . . . READ MORE

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