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Whistle Blowing

Published on July 2016 | Categories: Types, School Work, Essays & Theses | Downloads: 14 | Comments: 0



Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility



The term whistleblower originally came from the practice of English police officers, also known as “bobbies” who would blow their whistles as their immediate reaction to the commission of a crime. The whistle would alert other law enforcement officers and the general public of danger within their area. Another version of the originality of the term believed to be coming from the act of the referee or umpire of a football game who would blow the whistle when he / she detect or seeing a foul committed by players in the game. Simply put whistle blowing is an act of correcting once a discovery of wrongdoing has been exercised.



There is no globally accepted definition for whistle blowing and among the definitions are given by Near and Miceli (1985), whistle blowing is the disclosure by a current or former organization member of illegal, inefficient or unethical practices in an organization to persons or parties who have the power or resources to take action. James (1995), defined Whistle blowing as “an attempt by an employee or former employee of an organization to disclose what he or she believes to be wrongdoings in or by the organization”. (Uys, 2000), defined whistle blowing as “the disclosure of illegal, unethical or harmful practices in the workplace to parties who might take action” while Zarinah Anwar (2003), defined whistle blowing as ”a term used to describe the disclosure of information that one reasonably believes to be evidence of contravention of any laws or regulation or information that involves mismanagement corruption or abuse of authority”.

Although numbers of definition has been given pertaining to whistle blowing, in the end, the commonly accepted definition specifies that whistle blowing is “the disclosure of information by an organization‟s members of illegal, immoral or illegitimate practices under the control of their employers that could potentially endanger or harm persons or the society as a result of their employers irresponsible action.”



A whistleblower is a person who raises a concern about wrongdoing occurring in an organization or body of people. Usually this person would be from that same organization. The Malaysian Whistleblower Act 2010, stated that “whistleblower” means any person who

Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility

makes a disclosure of Improper conduct to the enforcement agency under section 6 and Improper conduct, the subject matter of the disclosure, is defined as „any conduct which if proved, constitutes a disciplinary offence or a criminal offence‟.

The Whistleblower is a concerned citizen, who is totally inspired by the public interest, and opened to disclosing a significant wrongdoing to a person capable of investigating and facilitating correction of such wrongdoing (Senate Select Committee on Public Interest Whistle blowing 1994). Such disclosure could be done within a source in an organization or outside the organization. Vickers (1995) explains two types of whistleblower; the „watchdog‟ and „protest‟ whistleblowers. Vickers describes a „watchdog‟ whistleblower as a person or an employee who discovers any form of illegality or wrongdoing, then exposes it so as to aid financial disaster or safety, and a „protest‟ whistleblower as a person who tends to be mostly concerned about the effects of their employer‟s activities.

According to Near and Miceli (1995), whistleblower can be generally categorized into internal whistleblower and external whistleblower. i. Internal whistleblowers Is a person or an employee who report misconduct on a fellow employee or superior within their company to a source within the organization that can pass necessary judgment. This may possibly comprise of company‟s board of directors such as executive officers as well as non-executive officers, who are representatives of company‟s shareholders (Finn, 1995). Consequently, reporting wrongdoings to

colleagues cannot be classified as whistle blowing (Kings, 1999). Barnett (1992) further stated that the issue of internal whistle blowing helps organizations rectify wrongdoings before it goes public and causing damages to such company‟s reputation as well as its shareholders.

Somers and Casal, (1994), alleged that in organizations, internal whistle blowing can be examined as an expression of trustworthiness and commitment. Therefore, internal whistle blowing among employees can be encouraged by the introduction of cultural ethics (Kings 1999). One of the most interesting questions with respect to internal whistleblowers is why and under what circumstances people will either act on the spot to stop illegal and otherwise unacceptable behavior or report it. There is some reason to believe that people are more likely to take action with respect to unacceptable

Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility

behavior, within an organization, if there are complaint systems that offer not just options dictated by the planning and control organization, but a choice of options for individuals, including an option that offers near absolute confidentiality.


External whistleblowers This is a type of whistle blowing whereby a wrongful or illegal act is reported to sources outside the organization. In these cases, depending on the information's severity and nature, whistleblowers may report the wrongdoing to lawyers, the media, law enforcement or watchdog agencies, or other local, state, or federal agencies. In some cases, external whistle blowing is encouraged by offering monetary reward. When an organization is without a safe internal route, whistleblowers are left with no other choice but to disclose the wrongdoings externally to authorities or more widely. Also, employees tend to blow the whistle externally when they do not feel safe blowing the whistle within the organization. (Dehn, 1999) Most times, external whistle blowing occur when internal whistle blowing is ignored or when proper action is not taken on the report. On the other hand, some researchers argue that this type of whistle blowing brings about negative publicity about an organization as well as its brand name and reputation. This negative impact causes shareholders and potential shareholders loose confident in the organization. (Barnett, 1992 and Binikos, 2006).



Westin (1981), stated some of the problems in whistle blowing as follows: i. The problems of ineffectual performing employees are likely to blow the whistle in order to keep away from been sanctioned. ii. The issues some whistleblowers are protesting about are not the unlawful /wrongdoings activities, but social policies by management that employees sees as foolish. iii. The unclear of legal definitions of what comprises of a safe products, unacceptable treatments of employees or products dangerous to health. iv. Employees who blow the whistle can be chosen in some ways that would be unacceptably disturbing, in spite of the merits of their complaints.


Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility



Barnett (1992) and Ponemon (1994) perceived that organizations response to whistle blowing in different ways. The following organization response towards Whistle blowing has been described by (Baker and Dawood 2004) as:  The credibility of the whistleblower might be challenged by the organisation and hence can reduce the attention received from the public  The unlawful activity can be acknowledged, and the whistleblower rewarded for his good conduct.  The whistleblower can be isolated from other employees so as to avoid the flow of information.  A specific individual might be selected to classify who is responsible for what, and also to receive complaints on wrongdoings.  The organization can respond to whistle blowing by punishing the whistleblower as an example to other potential whistleblower. Near and Miceli (1985) who refers organisational response towards Whistle blowing as it were like an incorporated and consistent response to the whistleblower by all members of an organization but Miceli and Near (1992) later contradicted their earlier argument in their further research where they concluded that most whistleblowers encounter diverse responses within their organizations. These responses could be a shot-term response or long-term response summarized in the diagram below: Short-Term and Long-Term Responses/Outcomes of Whistle blowing


Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility



Whistle-blowing is essentially an ethical work. Hence, it involves both costs for some and benefits for other. Besides, given the principle of loyal agency and maintaining confidentiality in the matters of organization by the agent, i.e. employee, on the one hand, and internally prescribed procedure, wherever exists, to deal with wrongdoings in the organization, on the other, underline the need for and necessity of whistle-blowing in the organization. In order to study whistle-blowing from an ethics viewpoint, one obviously needs to know what is meant by „ethics.‟ Some treat „ethics‟ and „morality‟ as synonymous. Others consider morality as a special form of ethics: the word „morality‟ has by now taken on a more distinctive content, and I am going to suggest that morality should be understood as a particular development of the ethical, one that has a special significance in modern Western culture.

It peculiarly emphasizes certain ethical notions rather than others, developing in particular a certain notion of obligation, and it has some peculiar presuppositions. In view of these features it is also, I believe, something we should treat with a special skepticism. (Williams, 1985). Whistle blowing is a conflicting subject in terms of employee‟s loyalty. Whistle blowing entails an ethical dilemma as the individual considering becoming a whistleblower is torn between two competing loyalties that is loyalty to the corporation and loyalty to society or the law or some higher morality. It is often assumed that employees have a vow to protect the dealings of the organization.

Ravishankar (2010) stated that an arbitrator in a 1972 case told an employee that it is wrong to bite the hand that feeds you. The major obstacle in justifying whistle-blowing is the relationship between the employees and loyalty to the organization. Acknowledging the enormous damage whistle blowing does and will cause to both individual, i.e. whistle blower and organization, it is opposed by some. They oppose whistle blowing mainly on the grounds of loyalty and confidentiality. According to them, as per the Law of Agency, an employee is the agent of his/her employer / organization. According to Powell (1965), “an agent is a person who is authorized to act for a person (called „principal‟) and has agreed so to act, and who has power to affect the legal relations of his principal with a third party.” In nutshell, the employee has to work just like a loyal agent. Since whistle-blowing violates the law of agency, i.e., loyalty, hence it is condemned. Whistle blowing by violating the law of agency seems to some as disloyalty, i.e., “to bite the hand that feeds one.”

Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility

James Roche, the former Chairman of the Board of General Motors Corporation, enthusiastically condemned whistle blowing by saying “Since critics are now busy eroding another support of free enterprises the loyalty of a management team, with its unifying valued co-operation. Some of the enemies of business now encourage an employee to be disloyal to the enterprise. They want to create suspicion and disharmony and pry into the proprietary interests of the business. This may be whistle blowing … but it is another tactic of spreading disunity …. Whistle blowing is not courageous and not deserving of gratitude and protection; it is corrosive and impermissible (Roche 1971).” A more mild statement of typical condemnation of whistle blowing along the same lines of Roche comes from Sissela Bok as quoted by Boatright (2003), “Furthermore, the whistle-blower hopes to stop the game, but since he is neither referee nor coach, his act is seen as a violation of loyalty. In holding his position, he has assumed certain obligations to his colleagues and clients. He may even have subscribed to a loyalty oath or a promise of confidentiality. Loyalty to colleagues and clients comes to be pitted against loyalty to the public interest, to those who may be injured unless the revelation is made.” Milton Friedman (1962) has made a manager‟s responsibility to the stockholders, i.e. owners commandingly clear. He says, “In a free-enterprise, private property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while confirming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.” Although the Law of Agency stated that the employees have obligation of loyalty toward their organization, one has to remember that obligation is not without limitation. The limitation is to obey all reasonable directives of the principal, i.e. employer-organization. For example, an employee is hired as an agent with a purpose to sell life insurance policies on commission. Then, it would be ludicrous to assume that the agent has also committed himself to washing dogs, cleaning vehicles, or doing anything else that happened to give his principal pleasure.

The whistleblower in a sense challenges this relationship by accusing the employer of having his or her responsibility put aside, and the employer in turn claims that the employee is doing precisely that by revealing confidential matters, true or not. The law says that revealing the truth is socially valuable and that both parties have a responsibility to do so, while revealing

Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility

false information on either side is to be punished. Loyalty to moral principles is higher than the loyalty to persons. It does not prevent a loyal agent to be a whistle blower. In fact, many whistle blowers are often loyal employees who make whistle-blowing with a belief that they are doing a job in the best interests of the company. The likelihood of voice increases with the degree of loyalty. One of the considerations that needed to be taken into account is whistle blowing is not something to be done without sufficient justification. But at the same time, it is not something that can never be justified. The major justification forwarded in favor of whistle blower is that employee has obligation not only toward the employer organization, but to the society as well.

Duska (1990) expresses his disagreement with the opponents of whistle blowing in the same vein in these words: “Isn‟t time it to stop viewing corporate machinations as games. The activities not only affect the players but everyone … the appeal to loyalty though understandable is misleading; in the moral sphere competition is not the prevailing virtue …. Whistle-blowing is not only permissible but expected when company is harming society. The issue is not of disloyalty to the company, but of whether the whistle-blower has an obligation o society and if blowing the whistle will bring retaliation.” The condemnation of whistleblowing at the personal, often high, cost of the whistle-blower is also not justified. If the whistle-blower follows the principle of universal ethic, the last „deontological‟ stage of one‟s moral development (Kohelberg 1981), it is good even at one‟s personal sacrifice. This is also justifiable based on the utilitarian approach of ethics, i.e. „the greatest good for greatest number.‟ Chakraborty (1986) also in the similar vein justifies and supports whistle-blowing even at the high self-sacrifice of whistle-blower. He says whistle-blowing is justifiable in business where individuals in organization undertake intense effort at great deprivation to themselves by yielding immense social benefits.

Usually, the employees choose to whistle blow as the last resort. This is in recognition of the potential costs that are associated with whistle blowing. Some of these costs include loss of jobs, difficulty in getting a new job and loss of faith in others such as the government or the judicial system. Some may experience name-calling like traitors and troublemakers. Whistle blower may face heavy financial burden as a result of loss of job or they may have to bear the legal cost if whistle blowing is unsuccessful. Given these costs, why would one be interested to whistle blow in the first place. Whistle blowing is justified on moral grounds. All employees have the moral duty to the public safety that must supersede loyalty to their

Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility

organization. They should voice out their concerns for the sake of fellow employees in terms of safety and health considerations, for the sake of stockholders and for the sake of the company wishing to maintain its public image and do the right thing. Whistle blowing is often justified to champion the right to have freedom of speech, to champion public‟s right to information and to recognize public‟s right to participate in important decisions concerning public interest.

Society recognizes that there is a need for whistle blowing, the need to expose corruption and wrongdoing, and legal structures has been developed to encourage and protect the whistleblower, showing that society recognizes this as a socially valuable act. Inherent in any discussion of the matter is a comparison and conflict of responsibilities, both the employer and the employee has responsibilities to themselves, the organization, and society, as well as to each other.



Whistle blowing is a useful internal tool to control against wrongdoings in an organizations. It should supplement the external measures like regulation, competition, litigation and shaming of offenders through media exposures. It is undeniably true that it takes a lot of courage to whistle blow due to the costs involved as mentioned earlier. Unless the whistle blower is protected, it is very difficult to encourage employee to open up. Many perceived that there are only slim chances to success in bringing the offenders to justice and resulting in most of them choosing to be a free rider, expecting others to blow the whistle.

This is a real problem that needs to be addressed. For all intents and purposes, employees have to place the society above them. What if the managers‟ actions put the society‟s interest at stake? What if the public‟s health and safety are at stake? Blowing the whistle should be carried out for moral reasons. To encourage employees to speak up against immoral organizations and managers, the law must protect them. For example, whistleblowers must be able to resume their career after blowing the whistle. They must be confident that follow-up actions will be taken against the potential offenders.

It is a general knowledge that Western countries are accepting whistle blowing more compared to the Asian countries. This is due to their culture where it is widely known that it is part of their culture to speak up. On the other hand, the Asian are known as a employees

Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility

who are loyal to their employers where they would rather expressed their unhappiness in closed-doors then to declare them openly in the public. However, the trends has recently appears to be changing where more and more employees are voicing out their concerns and demanding for an investigations to be done. For example, in Malaysia, „thestar‟ online has reported that Penang Chief Minister, Lim Guan Eng, under the “i” (integrity) reward scheme has awarded a Mr. Yusuf Musa RM10, 000, a souvenir and a certificate for exposing RM500,000 misappropriation of bail money at the Penang Syariah Court. He had managed to detect a fraudulent withdrawals from a fixed deposit account and prevented further misappropriation from taking place. He becomes the first person to receive such award from the state government.



8.1 Companies Act 1965 (Act 125) and Capital Markets and Services Act 2007 (Act 671) The Malaysian Parliament has from time to time introduced legal protection for whistleblowers in an attempt to counter malpractices and fraud of companies. Such protection is found in the Companies Act 1965 (Act 125) (CA), Capital Markets and Services Act 2007 (Act 671) (CMSA) and the newly enacted Whistleblower Protection Act 2010 (Act 711) (WPA,). The protection provided in these three legislations will be discussed in turn.

Section 368B (1) CA states that an officer of a company who in the course of performance of his duties has reasonable belief on any matter which may or will constitute breach of the CA or its regulations or a serious offence of fraud or dishonesty35 has been, is being or likely to be committed against the company or by other officers of the company may report the matter to the Registrar of company. The definition of officer refers to any director, secretary or employee of the company, receiver and manager appointed under a power contained in any instrument or any liquidator appointed in a voluntary winding up. Section 368B (2) CA expressly prohibits the company from removing, discharging, discriminating or interfering with the livelihood or employment of the officer who makes a „protected disclosure‟.

Furthermore, such officer shall not be liable to be sued in any court (for instance, breach of confidentiality agreement or defamation) or be subject to any tribunal process including disciplinary action due to the „protected disclosure‟ if he is acting in good faith and in the intended performance of his duties as an officer of the company. Any person who breaches

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s.368B (2) or (3) shall be guilty of an offence and is liable to pay fine, subject to imprisonment or both. The protection of whistleblowers as provided in the CMSA is largely similar to s.368B CA. Section 321 CMSA applies to disclosure of information made by a chief executive, any officer responsible for preparing or approving financial statements or financial information, an internal auditor or a secretary of a listed corporation.

Information disclosed should involved breach or non-performance of any requirement or provision of securities law or breach of rules of the stock exchange or any matter which may adversely affects to a material extent the financial position of listed corporations. Disclosure of information must be made to the Securities Commission in relation to matters involving breach of securities law, and to the relevant stock exchange for breach of rules of the stock exchange. The protection is only available for those who have in the course of the performance of their duties reasonable belief that there has been a breach of law regarding matters as mentioned earlier. A breach of s.321 (1) or (2) amounts to an offence. Section 367(1) CMSA 2007 states that where a corporation is liable for breach of any provision in CMSA 2007 or its regulations, its chief executive, director, an officer or a representative of the body corporate is deemed to have committed the offence


Evaluation of the whistleblower protection provisions in CA 1965 and CMSA 2007

The scope of protection found in CA and CMSA is limited and inadequate. First, the protection for a whistleblower is only applicable if he forms a reasonable belief in the course of performance of his duties. It is questionable whether an officer who learns about the circumstances amounting to a wrongdoing outside office hours may be entitled to protection under the CA and CMSA. Besides, from the wordings of both s.368B CA and s.321 CMSA, it appears that an employee is only protected if he reports the wrongdoing committed by his employer or its officers. As such, an officer of one company who is aware of the wrongdoing of another company would not be protected if he reports the wrongdoing to the Registrar of Company, Securities Commission or the stock exchange.

It is possible for employees of one business entity to learn about the wrongdoing of another company as there may be some relationship between them such as between an auditor firm and its client company or between a parent and its subsidiary company. Secondly, there is also no provision in CA 1965 and CMSA 2007 protecting the anonymity of the whistleblower. Thirdly, it is not expressly provided in the CA 1965 and CMSA 2007 as to

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GMUL 5063 Law, Ethics & Social Responsibility

whether the officer who makes a „protected disclosure‟ is entitled to any civil law remedies such as damages. Fourthly, there is no duty imposed on the Registrar of Companies, Securities Commission and the stock exchange to investigate the matter highlighted by the officer. This is important as it would instill confidence on officers of companies if their complaint is taken seriously and is investigated. Otherwise, if a person realizes that the relevant body may not investigate his complaint, he may be discouraged to blow the whistle. This is due to the fact that his whistle-blowing would subject himself to the possibility of reprisal by his employer but yet the wrongdoing of his employer remains hidden from the public.

In addition, there is also no clear guideline offered to the officers to lodge a complaint in the event that they suffer any reprisal in the course of their employment as a result of their „protected disclosure‟. As a result, the protection of whistleblowers based on CA and CMSA is clearly inadequate and lacks the necessary clarity to create assurance that individuals would be protected if they spill the beans on their employer‟s wrongdoing. So far, both s.368B CA and s.321 CMSA have not received any judicial treatment as there is no reported case on these two provisions.


Whistleblower protection ACT 2010

With the enactment of the WPA, the officers of a company or any other person who provides information as to the misfeasance or wrongdoing of any company or its directors are entitled to wider protection under the this Act. The WPA applies generally to whistleblowers who disclose information relating to the wrongdoings in the private or public sector. The enactment of the WPA is part of the efforts taken by Malaysia to fulfill its obligations under the United Nation Convention against Corruption. The WPA came into force on 15 December 2010. Section 6 (1) WPA states that the whistleblower protection is only available to a person who makes a disclosure of improper conduct to any enforcement agency based on his reasonable belief that any person has engaged, is engaging or is preparing to engage in improper conduct. Section 2 WPA defines „improper conduct‟ to mean any conduct which amounts to a disciplinary offence or criminal offence. The scope of „improper conduct‟ is wide and clearly includes any breach of the CA, CMSA, other securities law or listing rules and the code of ethics relating to auditors. However, the protection afforded by WPA is only limited to a

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disclosure made to an enforcement agency. This includes any ministry, department, agency or other body set up by the Federal Government or State Government conferred with investigation and enforcement powers. The five main enforcement agency involved in the implementation of the WPA includes the Police, Customs, Road Transport Department, Malaysian Anti- Corruption Commission and the Immigration Department.

Arguably, the Company Commission of Malaysia, the Securities Commission and the stock exchange fall within the definition of „enforcement agency‟. This inclusion is necessary as following the discussion above, the protection afforded to whistleblowers under the CA and CMSA is inadequate compared to the protection granted under the WPA as explained below. The enforcement agency under the WPA is given a number of powers including the power to receive disclosure of improper conduct, to implement and enforce the provisions of the WPA. The coordination of all the enforcement agencies would fall within the responsibility of the Legal Affairs Division of the Prime Minister‟s Department.

Section 6 (2) (a) WPA allows disclosure of improper conduct to be made even if the person making the disclosure is not able to identify a particular person involved in the misconduct. Disclosure of improper conduct which occurs prior to the commencement of the WPA is also included. Disclosure of improper conduct can be made in writing or orally. A whistleblower who makes a disclosure in accordance with s.6 WPA would be conferred with whistleblower protection under s.7 (1) WPA such as: (a) protection of confidential information; (b) immunity from civil and criminal action; and (c) protection against detrimental action. The term „confidential information‟ used in the WPA refers to information about the

identity, occupation, residential and work address of the whistleblower and the person complained of by the whistleblower, information disclosed by the whistleblower and any information if disclosed may cause detriment to others.

According to s.8 (1) WPA, the whistleblower is entitled to full anonymity of any information about himself and the alleged improper conduct that he provided to the enforcement agency. Any person who makes disclosure of „confidential information‟ to others unless allowed by the WPA would be guilty of an offence. Section 9 WPA states that a whistleblower should

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GMUL 5063 Law, Ethics & Social Responsibility

not be subject to any civil or criminal liability, including disciplinary action as a result of the disclosure of improper conduct. It must be remembered that an employee owes a number of duties to his employer such as duty of loyalty, duty to act in the interest of the employer and duty of confidence. Any disclosure of information relating to the employer may amount to a breach of these duties.

The protection afforded by s.9 is important as the defenses provided by the common law for these breach of duties are very narrow. Section 10 WPA deals with the protection of a whistleblower against detrimental action. „Detrimental action‟ has been defined as any action causing injury, loss, damage, intimidation, harassment, interference with the lawful employment or livelihood of any person and a threat to take any of the actions as stated earlier. It is important to take note that the protection found in s.10 is available to persons related or associated to the whistleblower. But it is not expressly provided in the WPA as to who can be considered to be related to or associated with the whistleblower. Section 10 (1) prohibits any detrimental action to be taken against the whistleblower as a result of disclosure of improper conduct.

Section 10 (5) WPA states that no person acting on behalf of any public or private body shall terminate a contract, withhold payment that is due under a contract or refuse to enter into a subsequent contract solely for the reason that the party to the contract or its employee or employer has made a disclosure of improper conduct to any enforcement agency relating to the public or private body. This section is applicable to a situation where an employee of the supplier of a private body makes a disclosure of the improper conduct of the private body to the enforcement agency. As a consequence, the private body terminates any contract with the supplier. Arguably, if the employee suffers any retaliation by the supplier as a result of the disclosure of an improper conduct of the supplier‟s client or creditor, the employee may rely on the protection under s.10 (1) as it does not limit that the disclosure of improper conduct must relate to the person taking the detrimental action. A whistleblower may complain to any enforcement agency if he or any person related to or associated with him suffers from any detrimental action in breach of s.10 (1). A person is deemed to have taken a detrimental action against a whistleblower if; i. the reason behind his action is due to the disclosure of improper conduct or his belief that the whistleblower has made or intends to make disclosure of improper conduct61 or

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he incites or permits another person to take or threaten to take detrimental action against the whistleblower due to the disclosure of improper conduct.

In any proceedings, the burden lies with the defendant to prove that the detrimental action taken or intended to be taken against the whistleblower or any person related to or associated with him is not in reprisal for a disclosure of improper conduct.

Nonetheless, the whistleblower protection under the WPA may be revoked by the enforcement agency in six circumstances under s.11 (1) WPA as follows: (a) The whistleblower himself has participated in the improper conduct disclosed. (b) The whistleblower willfully made in his disclosure of improper conduct a material statement which he knew or believed to be false or did not believe it to be true.64 (c) The disclosure of improper conduct is frivolous or vexatious. (d) The disclosure of improper conduct principally involves questioning the merits of government policy, including policy of a public body. (e) The disclosure of improper conduct is made solely or substantially with the motive of avoiding dismissal or other disciplinary action or (f) The whistleblower, in the course of making the disclosure or providing further information commits an offence under the WPA.

The enforcement agency must give a written notice to the whistleblower if the whistleblower protection is revoked. Any whistleblower aggrieved by the enforcement agency‟s decision to revoke his protection may refer the decision to a court for determination. Section 12 WPA imposes a duty on the enforcement agency to conduct an investigation and prepare a report as to the finding of the investigation and the recommendations to be taken. The enforcement agency has to inform the whistleblower if the disclosure of improper conduct is not substantiated and where the Public Prosecutor decides not to prosecute. If the improper conduct constitutes a disciplinary offence, s.13 (1) (b) requires the enforcement agency to make recommendation to the appropriate disciplinary authority or to the employer to initiate disciplinary proceedings or other appropriate steps against those who had committed any improper conduct.

The appropriate authority and employer shall inform the enforcement agency as to the steps taken to give effect to the former‟s finding and recommendations or the reasons for not doing so. If the enforcement agency considers that insufficient steps or no action has been taken to

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give effect to its finding and recommendations within a reasonable time, it can report the matter to the Minister. The enforcement agency must also inform the whistleblower as to the actions taken by the appropriate disciplinary authority or employer in relation to its finding and recommendations. Section 14 (1) WPA imposes a duty on the enforcement agency to investigate any complaint of detrimental action that it receives from a whistleblower.

Duties and powers of the enforcement agency in dealing with investigation, finding and recommendations of any complaint of detrimental action are similar to s.13 WPA. Section 15 (1) WPA provides that upon a request by the whistleblower that reprisal actions have been taken against him or at any time he fears that detrimental action would be taken against him, the enforcement agency may on his behalf, seek damages, injunction or any other relief as the court deems fit. Alternatively, the whistleblower may take legal action on his own to pursue the remedies as mentioned earlier.



9.1 Whistleblower Protection in England - Public Interest Disclosure Act 1998 (PIDA) The Public Interest Disclosure Act 1998 (c.23) is an Act of the Parliament of the United Kingdom that protects whistleblowers from detrimental treatment by their employer. Influenced by various financial scandals and accidents, along with the report of the Committee on Standards in Public Life, the bill was introduced to Parliament by Richard Shepherd and given government support, on the condition that it become an amendment to the Employment Rights Act 1996. After receiving the Royal Assent on 2 July 1998, the Act came into force on 2 July 1999. It protects employees who make disclosures of certain types of information, including evidence of illegal activity or damage to the environment, from retribution from their employers, such as dismissal or being passed over for promotion. In cases where such retribution takes place the employee may bring a case before an employment tribunal, which can award compensation.

As a result of the Act, many more employers have instituted internal whistleblowing procedures, although only 38 percent of individuals surveyed worked for a company with such procedures in place. The Act has been criticised for failing to force employers to institute such a policy, containing no provisions preventing the "blacklisting" of employees


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who make such disclosures, and failing to protect the employee from libel proceedings should his allegation turn out to be false.


Whistleblower Protection in United States of America

9.2.1 The Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 (often shortened to SOX) is legislation enacted in response to the high-profile Enron and WorldCom financial scandals to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise. The act is administered by the Securities and Exchange Commission (SEC), which sets deadlines for compliance and publishes rules on requirements. Sarbanes-Oxley is not a set of business practices and does not specify how a business should store records; rather, it defines which records are to be stored and for how long.

9.2.2 Whistleblower Protection Act of 1989 The Whistleblower Protection Act of 1989 is a United States federal law that protects federal whistleblowers who work for the government and report agency misconduct. A federal agency violates the Whistleblower Protection Act if agency authorities take (or threaten to take) retaliatory personnel action against any employee or applicant because of disclosure of information by that employee or applicant. Whistleblowers may file complaints that they believe reasonably evidences a violation of a law, rule or regulation; gross mismanagement; gross waste of funds; an abuse of authority; or a substantial and specific danger to public health or safety. 9.2.3 „Qui Tam‟ Qui Tam is a lawsuit brought by a private citizen (popularly called a "whistle blower") against a person or company who is believed to have violated the law in the performance of a contract with the government or in violation of a government regulation, when there is a statute which provides for a penalty for such violations. Qui tam suits are brought for "the government as well as the plaintiff." In a qui tam action the plaintiff (the person bringing the suit) will be entitled to a percentage of the recovery of the penalty (which may include large amounts for breach of contract) as a reward for exposing the wrongdoing and recovering funds for the government. Sometimes the federal or state government will intervene and become a party to the suit in order to guarantee success and be part of any negotiations and


Moral & Ethical Issues Surrounding Whistle Blowing

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conduct of the case. This type of action is generally based on significant violations which involve fraudulent or criminal acts, and not technical violations and/or errors.


Whistleblower Protection in Australia

9.3.1 Queensland Whistleblowers Protection Act 1994 The Act was introduced to provide protection for those who speak out about any wrongdoing in the public sector, commonly known as 'blowing the whistle'. This whistleblowing is referred to in the Act as making a public interest disclosure (PID). The Act outlines who can make a PID, what they can disclose who they can disclose it to and the protections to disclosers. A person does not have to be a public sector employee to make a PID about either a danger to the health or safety of a person with a disability, or to the environment, or a reprisal against a person because a PID has been made. However, the right to make a PID about official misconduct, maladministration, a substantial waste of public funds and a danger to public health or safety is restricted to public sector employees only. Even if a report of wrongdoing is not a PID, employees must still be protected from reprisal, and organizations are required to assess and deal with allegations using appropriate mechanisms, such as complaint handling or workplace health and safety policies, where necessary.




Fernandes v. Netcom Consultants (UK) ET May 18, 2000 (2200060/2000).

Netcom Consultants was started operations in 1993, and it has business in Sweden, Singapore, and also throughout Asia and Africa (through Millicom, they sit on sit with operators in Asia and Africa).The company has since than, rapidly expanded, with its founder shareholders remaining active directors in the business. The company specialises in offering different services also provide solutions to financial and media sector such as consultants in network, technologies, billing, and services developments. Due to the wide use of internet, the company is highly developed and has become wider in its activities to other sectors, thereby, making it gain a strong telecom market position.

The Whistleblower i.e. the Scandal The case between Fernandes, the Chief Financial Officer (CFO) for the UK arm of Netcom, and Netcom Consultants took place over 1999 &2000, when Fernandes found himself in a

Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility

very complex and difficult situation of morals and ethics. The problem started when the UK Chief Executive Officer of Netcom (CEO) Mr Stephen Woodhouse started giving his payment claims to the CFO without receipts, of which Mr Fernandes (CFO) was the person accountable for the monies been spent by the CEO either through the company‟s credit card or by cash. The CEO claimed that the receipts were all kept in a large box which would be handed in to the CFO later, which he never did. In 1997, when this action by the CEO persisted, the CFO could not handle it anymore, so he decided to fax a letter to the US contact, raising concerns about the large sum of money claimed to have been spent by the CEO without receipts, where he was told to turn a blind eyes. In 1999, the CEO‟s expenses increased to about £371,000, all without receipts. It was later realised that the CEO has been using the money to pay for his personal expenses, thereby putting his own satisfaction above that of others. Thereafter, fernandes decided to put into practice his moral duty, by blowing the whistle on Woodhouse‟s actions as a result of cashflow problems which led to the nonpayment of corporation tax in the organization. Fenandes put in writing his concerns to the US board members, Luxembourg as well as his UK team members as he could not keep it anymore. Some weeks after his disclosure, Fernandes was interrogated and was released from employment with no form of compensation, on the basis of his refusal to pay the corporation tax and the misuse of unauthorized sum of £317,000 by the CEO. Mr Woodhouse, despite his deceitfulness, was allowed to retain his position.

Result/ Outcome Fernandes was totally supported by the courts and eventually succeeded under the Public Disclosure Act 1998 (PIDA) claims, as one of their duty is to give legal protection to employees who are been dismissed from work as a result of blowing the whistle against his employer/organisation. At the age of 58, Fernandes won the case of interim relief. At this age, he was unable to secure a job and thereby, awarded the sum of £293, 441 as compensation. The CEO later resigned from work and left the organisation (Mason, 2000 and Eaglesham, 2000)


Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility


Enron Vs Sharron Watkins

Enron was one of the world‟s largest energy, commodities and Services Company. It was formed in July 1985, in Houston, Texas. This company was formed by the merger of Houston Natural Gas and InterNorth of Omaha, Nebraska in 1985. In 1999, Enron had expanded into diverse fields such as the purchase of power plant, the building of retail or wholesale business around the world, which enables the company provide financial and risk management services to customers worldwide, and also the launching of a web based commodity site, well known as Enron Online, thus making it an e-commerce company. As a result of this expansion, the company successfully recorded revenue of a revenue of $100 billion in 2000, thereby making it the seventh-largest company on the fortune 500, and the sixth largest energy company in the world. The Whistleblowers‟ Story (Enron‟s Scandal) Sherron Watkins the former vice president of Enron Corporation in spite of the company‟s rapid growth and success knew all was not well with the organisation‟s account, as she suspected an overstatement of the company‟s key assets. In 1996, Ms Watkins made her concern known to Mr Festow, Enron‟s Chief Financial Officer (CFO) and the company‟s auditor Arthur Anderson, but she was ignored and told off for intruding into accounting matters when she was in the finance department. In October 2001, Watkins realized that the CFO had set up a series of companies to do business with Enron such as the LJM and other off-the-books partnership in an attempt to inflate their profits and a means to put out of sight Enron‟s growing losses of the company at the detriment of the company‟s shareholders. Later, Watkins realized the level of fraud going on in the organisation, so decided to blow the whistle on the company‟s dangerous financial deals, by sending a memo to the CEO Ken Lay of gross misconduct as regards to accounting irregularities within the organisation. The CEO promised to look into the matter, where he discovered nothing wrong with the company‟s accounts. When the CFO heard of Watkins word of warning to the CEO, he tried to dismiss her. In November, Enron admitted to have overstated its profit dating back to 1997 by $600 million.

Result/Outcome In December, the Enron was filed for bankruptcy, its value which was at $80 billion some time ago, became a penny stock. Enron‟s employees were made redundant as well as pensioners.

Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility

Watkins kept her job until November 2002 when she left the job to become a corporate governance consultant. She stayed longer in the company then CFO who ought to be fired, but resigned, and the company‟s auditors who did not quit, but waited to be fired. Watkins was praised for the part she played in revealing the greed and dishonesty of the once seventh largest company in America. She also received several awards for her excellent display of ethics at work place, and was named Times Person of the year 2002.


Jeffrey Wigand Vs Brown & Williamson Tobacco

Brown & Williamson Tobacco Corporation a subsidiary of British America Tobacco plc and the third largest manufacturer of cigarettes in the United States was founded in 1894 in the Tobacco Heart of Winston-Salem, North Carolina and incorporated in 1906. The company has oversees operation in Japan and South Korea, and it possesses about 16% of the US cigarette market. It also put on the market several mixed brands of cigarette, as well as special line of tobacco products such as; Kite and Sir Walter Raleigh Bloodhound.

The Whistleblower (Jeffrey Wigand) Jeffery Wigand popularly known as “the insider” started work with Brown & Williamson in 1988 as the company‟s head of research and development, with a primary project of developing a new, to put into competitive market cigarettes that are healthy. During the course of his assignment, Wigand discovered the company has been deceiving consumers about the Tobacco rhythm “increased biological activity” which was a form of code for cancer and diseases, and also the highly addictive nature of nicotine used to improve flavour of cigarette, causes cancer. As a result of his discovery, in 1992, Wigand refused the usage of these deadly flavours in cigarettes, but he was told the removal of the flavour would affect sales, and was asked to mind his business.In 1993, Wigand was fired and was to face lawsuit on the basis of breaking his agreement of confidentiality which is not disclose any of the company‟s policy. After his dismissal, Wigand decided to blow the whistle publicly. He testified about the illegality going on in the tobacco company, by telling the public of the harmed caused by nicotine in cigarettes it is causing to smokers. In addition, he disclosed that the Thomas Sandefur (CEO) lied under oath by telling the congress nicotine was not addictive (Esperon 2005).


Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility

Result / Outcome Wigan lost everything for going public. He lost his wife as she filed for divorce, lost his kids to the wife, lost his privacy, and his reputation was damaged. It took him time to heal, but he had to start all over again. Also, his testimony has brought about $206 billion settlement between the tobacco company and 46 US states for the costs of treating sick smokers. At the present, has been given so many awards and public recognition for his achievement in revealing helpful information about tobacco‟s illegality, which was detrimental to public‟s health. Harry Templeton Vs Maxwell “The Maxwell Saga”


Robert Maxwell was an international legend who owned several UK‟s national newspapers, which includes the Mirror Group of Newspapers and the Maxwell Corporate Communication (MCC). Maxwell Corporate Communication (MCC) established in 1987, was incorporated as British printing corporation in1964, with over 14,000 employees and over 15 publishing business in more than 15 countries. The Company has interests in providing information for publishing electronic services in school and college publishing, language instruction, and reference book and professional publishing. This company was the tenth largest media and publishing company in British.

The Scandal Harry Templeton had worked for 14 years in Glasgow for the Mirror Group title – The Daily Record and The Sunday Mail, as a printer operating the presses owned by Robert Maxwell‟s Mirror Group. Robert Maxwell was disqualified by many as well as Templeton on his bid to take-over Leasco Data Processing Equipments of the United States. His was criticised on the basis of manipulation of profits by the Department of Trade and Industry (DTI) reported in Pergamon Press Ltd. But Maxwell who had carefully surrounded himself by well- connected politicians, bankers, financiers and accountants aggressively took over to become the CEO of Mirror Group of Newspapers (MGN) and Maxwell Corporation Communications (MCC). But this company was built on millions of debt and fraud loaned from employees‟ pension fund. Afterwards, Templeton was appointed as one of the company‟s board of trustees of the Mirror Group Pension Scheme. After Templeton‟s appointment, he began to discover some unusual movement of pension‟s monies run by the Maxwell‟s businesses; and he became the

Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility

only trustee challenging Maxwell‟s misuse of pension funds assets to support the share price of his own company. A meeting was held with Maxwell by Templeton and other Scottish delegates to make aware of their concerns where Maxwell denied every request on the misuse of pension‟s fund. This led to Templeton dismissal in 1988, and Maxwell vowed Templeton would never get any printing job again. Maxwell was allowed to go on with his preferred evil path until his death in 1991. After his death, it was later discovered that he had embezzled the sum of £458 million from various pension funds (Calland and Dehn 2004)

Outcome/ Result This Scandal led to the unfortunate death of many pensioners as they were worrying about the ability to manage financially when pension payments they relied upon were either suspended or stopped completely, many pensioners suffered, while a few received compensation. Shareholders and employees were not left out in the disaster, as they also suffered financial problems. The company was insolvent and will be liquidated to pay £2.5 billion in debt. This was also reported as one of the largest UK‟s fraud cases. Templeton is now the Scottish Director of Public Concern at Work and continues to support of Whistle blowing. (Calland and Dehn 2004 and PCaW).


Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility

CONCLUSION There is no denying the fact that whistle-blowers do a great service to the society at their great risk and cost, even at the loss of life. Hence, whistle-blowers need to be protected to ensure the good governance of organizations. The fact is that while trying to protect whistleblowers, we are actually trying to protect ourselves. Many employees may be afraid to speak out even when legal protection exists. But, its very existence will deter government and corporate wrongdoings to a considerable extent and, in turn, will ensure good governance. Organizations should develop formal whistle blowing policies as a way to create the conditions necessary for the effective management of whistle blowing. These policies should provide standard guidelines within which organizations respond to the ethical or moral concerns of their employees. Whistle blowing policies should have the following components as a minimum: (i) A clear statement that employees who are aware of possible wrongdoing within the organization have a responsibility to disclose that information to appropriate parties inside the organization; (ii) The designation of specific individuals or groups outside the chain of command as complaint recipients; (iii) A guarantee that employees who in good faith disclose perceived wrongdoing to the designated parties inside the organization will be protected from adverse employment consequences; and (iv) The establishment of a fair and impartial investigative process. To succeeds; policies must have the commitment of top management and must be adequately communicated to employees.


Moral & Ethical Issues Surrounding Whistle Blowing

GMUL 5063 Law, Ethics & Social Responsibility


Laws of Malaysia Act 599: Consumer Protection Act 1999. Incorporating all amendments up to 1 January

Johor Baru M.S. (2008). Consumer Claims Tribunal: The problem is collect. New Straits Times (Letters Section)

Abd. Karim, J. & Wan Talaat, W. I. A. (2011). Instituting Consumer Claims For Defective Product Against Manufacturers Under The Malaysian Law. International Journal of Humanities and Social Science Vol. 1 No. 15 Mohd shafi, M. I. (2010). Strenthening Consumer Protection In Malaysia. Hiq Training And Consultancy

Sothi Rachagan, S. & Nair, S. (2008). Consumer Protection Law in Malaysia

Consumers Need to Know Their Rights : http://www.malaysiandigest.com/features/28604consumers-need-to-know-their-rights.html

Singh, D. (2009). Tribunal for Consumer Claims Loosing its Credibility. National Consumer Complaints Centre (NCCC)


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