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Whistle Blowing Session 9

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Content

Whistle
Blowing:
The Ethical
Aspects

Introduction
 Individual's association to morality and WB
 WB=Function of degree of association that individual
creates between (act of) wrongdoing and (his/her
understanding of) morality)
 Worldcom Case and Cynthia Cooper: Didn‟t accede to
her superiors‟ instructions not to waste time and dug
into deeper moral recesses (Sherron Watkins and Enron
Case)
 Cooper’s association with professional accounting
standards influenced her to WB and she later revealed
about the influence of Bible on her( treat other people
the way you want to be treated)
 Is WB compatible with Employee Loyalty?

Few Points to Ponder
 Emergence of corporation as a legal entity/person and
growing attention in the recent times as one of the
most popular topics in recent times in BE
 Shareholders Theory: Managers confining decisionmaking to economic criteria for assets use and
emergence of whistleblowers-Studies on WB show how
decision-making affects moral dilemmas and how one
responds to moral questions and dilemmas
 Corporate Misbehavior=f(individual misbehavior
channeled through organizational actions)
 Moral Competence: Responding to wrongdoings(by
reflection)

Definitions of Whistle blowing
 “Disclosure by organization members (former or
current) of illegal, immoral, or illegitimate
practices under control of employers to persons
or organizations that may be able to effect
action”
 Dissenting act of public accusation against an
organization which necessitates being disloyal
to that organization

Elements of Whistle blowing
 Act of Disclosure of damaging news
 Whistleblower
 Subject of Disclosure
 Target Organization held responsible
 Disclosure Recipient

 Outcome: Disclosure enters public domain

Salient Features of Whistle
blowing (henceforth WB)

 Difference between Information and Whistle blowing
 Hirschman‟s 3 responses to degenerative behavior in
organizations
1) Exit( distancing from a problem) 2) Loyalty (customers
and employees loyalty and choosing voicing over exit)
3) Voice(dissent voicing of extreme type is WB)
 WB caused by purposive dissent: May be driven by Moral
Obligation or by high-minded motives/emotions
 WB and Role conflict leads to ethical dilemmas
 2-fold dilemma: a) Personal versus Organizational
Conflicts b) Loyalty to Organization versus Loyalty to
Society

WB and Organizations
 Highly negative impact
 Weakening chain of command

 Threat to effectiveness
 Unsettle employees‟ confidence and ability to use
discretion
 Need for right of public to know needs to be weighed
against right of organization to maintain secrecy in
some areas

Case for Internal WB
 Internal WB can serve society‟s interests better.
How?
 Code of ethics and training on how to deal with
ethical dilemmas
 Information on steps required in communicating
ethical concerns internally
 Policy must be credible
 Whistleblower not to suffer for using internal
channels to report perceived wrongdoing
 „Ethics safety net‟: Chain of command can be
circumvented and dealt with by an impartial
organizational body

WB in India

 Clause 49: Listed Companies of the Listing agreement,
where whistle blowers policy is non-mandatory in
nature
 Listed companies may establish a mechanism to enable
disclosure of unethical behaviour, actual or suspected
fraud or violation of company‟s code of conduct or
ethics policy
 Even the RBI now has a whistle blower policy to
strengthen financial stability and enhance public
confidence in financial sector
 The Limited Liability Partnership Act, 2008:
Incorporated provisions to protect the interests of
whistle-blower and ensure that they are not subjected
to harassment termination of employment or any such
treat, to enhance transparency and promote an anticorruption tendency within the company

WB in India...cont
 The Narayana Murthy Report also suggested the
incorporation of whistle blowers policy within the
companies to enable the employees to approach the
audit committee when they observe unethical or
improper practice with informing their superiors and
also protect them from unfair termination and other
prejudicial practices
 According to a study by ASSOCHAM and E&Y WB is used
in a limited manner by India Inc for fraud prevention
 Drawbacks: Hierarchical set-ups with single nucleus of
power-Threats (monetary and non-monetary)
 Making a Case: Benefits to stakeholders-attracting right
talent-Proper handling needed for sustained value
creation

The Insider
 Should Jeffrey Wigand disclose his information?
 Is it unethical to encourage another person to
break his promise for grater social good
 Should „60 minutes‟ have succumbed to
corporate interests and aired edited version

Case Analysis
 Is nicotine boosting an ethical practice of tobacco
companies?
 Is blowing the whistle justified in this case?

 Is it ever justified? Were there alternative courses of
action?
 Unjust dismissal: Does being fired for „poor
communication skills‟ constitute unjust termination
without cause?

Utilitarian Considerations for
Wigand
Choices

Pleasure

Pain

Utility

Disclose Great Benefits to
public
Satisfies desire to
hurt Brown &
Williamson

Impact on family
benefits and
confidentiality
agreement
Face lawsuit
Damage to
tobacco industry
and employees

High Utility

Not
Family Benefits
Disclose
Tobacco Industry
and people
protected

Wigand will feel
guilty

Low Utility
Exposure to
harm public

Public hurt as
tobacco cos will
continue to act

Possible
benefits to
public greater
than costs

Motivations for Wigand
 Kantian Perspective
 Moral Duty: Must act from a duty to protect public health
 What was his intentions?
a) Anger at company for acting with impunity or
b) Good of humanity
 Would he have disclosed if he would not have been fired?
 Principle of Universality and Hyper norm of Keeping promises
1. I shouldn‟t breach contract even if I knew it forces me to
uphold false statements
2. I should breach if I knew it forces me to upheld false
statements
 Does this contradict with universal law to keep promise?
 Upholding integrity of contract= Keeping promises

Utilitarian Considerations for
Lowell Bergman
Choices

Pleasure

Pain

Utility

To Encourage

Possible
benefits to
people
Uphold
integrity of
„60 mnts‟

Impact on
Wigand‟s
family
Lawsuit
against CBS
Damage to
tobacco
industry

Low to
medium
Benefits to
public
uncertain
Costs more
evident

„60 mnts‟
and CBS to
lose credibility
Public will
never find out
truth

Medium to
high utility
Knows
pleasure but
not pain

Not encourage Wigand and
family keep
benefits
Tobacco
industry
protected

Motivations for Lowell Bergman
Moral Duty
One must act from moral duty. Motives ?
Principle of humanity: Treating people not as
means but as end
One ought not to encourage another person
to break promise even if there is a greater
social good
For greater social good one ought to
encourage other person to break promise

Rawls’ Theory of Justice as
Fairness

 1st Rule: Equal right to all with similar system of
liberty for all
 Company‟s right to privacy versus Right of
society to know truth
 2nd Rule a)Difference principle b) Attached to
all offices and positions to all under conditions
of fair equality and opportunity
 Will it make life better off for people who are
now worst off?

Recap
Should Wigand Disclose
Information?

Should Bergman
encourage Brigand to
disclose information?

Utilitarian

Disclose: Benefits> Costs
to public

Not Encourage: Knows
pleasure but not pain

Kantian

Don‟t Disclose: Violates
Universal Law to Keep
Promises

Not Encourage:
Encourage others to
break promises
unethical

Rawlsian
The Class
Stand?

Encourage: Right to
know truth

Should „60 mnts‟ have succumbed to
Corporate Interests?
Choices

Pleasure

Pain

Utility

Don‟t
agree

Public welfare
Maintain professional
integrity

Lose jobs
Lose $5.3
million
Potential
lawsuit to
Westinghouse

Medium to high:
Lots of pain by
them but public
to benefit greatly

Agree

Keep jobs
Gain $5.3 million
Avoid lawsuit
Sale to Westinghouse

Guilt
Low Utility: Lots
Damage CBS
of pain to public
NEWS reputation as a whole
Lose credibility
Public oblivious of
information

Negotiate

Maintain Integrity and
Professionalism
Increase options
available

Lose jobs
Lose $5.3
million

High Utility
Integrity and
professionalism
maintained and
more options

Few Issues to Ponder Upon
 If you were General Counsel or President of CBS
News would you be swayed by $3.9 million or
$1.4 million
 What's the value or worth of ethics?

 Is there price that can match that value?
 Is it moral for companies to produce and sell
that which is harmful ?

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