Institutionalised Whistle-blowing as

an Expression of Employee Loyalty

A dissertation submitted to the University of Manchester for the

degree of Master of Science in the Faculty of Humanities

2013

Guillem Casòliva i Cabana

Manchester Business School

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List of Contents

LIST OF TABLES, FIGURES AND APPENDICES ...................................................................... 4

DECLARATION ............................................................................................................................ 5

COPYRIGHT STATEMENT .......................................................................................................... 5

ABSTRACT ................................................................................................................................... 6

1. INTRODUCTION ....................................................................................................................... 7

1.1. RESEARCH BACKGROUND ..................................................................................................... 7

1.2. JUSTIFICATION OF THE RESEARCH AND OBJECTIVES .............................................................. 7

1.3. RESEARCH QUESTIONS ......................................................................................................... 9

1.4. ORGANISATION OF THE PAPER ............................................................................................ 10

2. LITERATURE REVIEW .......................................................................................................... 11

2.1. WHISTLE-BLOWING ............................................................................................................. 11

2.1.1. Definition .................................................................................................................... 12

2.1.2. Wrongdoing ............................................................................................................... 14

2.1.3. Channels of communication ...................................................................................... 16

2.1.4. Retaliation and anonymity ......................................................................................... 17

2.1.5. Transition from a negative to positive view ............................................................... 18

2.2. EMPLOYEE LOYALTY .......................................................................................................... 19

2.2.1. Philosophical perspective .......................................................................................... 19

2.2.2. Rational Loyalty ......................................................................................................... 20

2.2.3. Organisational perspective ........................................................................................ 22

2.2.4. Cognitive Perspective ................................................................................................ 26

2.3. MODELS FOR WHISTLE-BLOWING ........................................................................................ 28

2.3.1. Theory Planned Behaviour of Whistle-blowing ......................................................... 29

2.3.2. Toward a Cognitive Model of Whistle-blowing based on Rational Loyalty ............... 29

Justice ................................................................................................................................. 30

Trust in Management........................................................................................................... 31

Team Leader Support ......................................................................................................... 31

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3. CASE SCENARIO: INDRA ..................................................................................................... 34

4. METHODOLOGY .................................................................................................................... 39

4.1. SAMPLING CHOICES ............................................................................................................ 39

4.2. DATA COLLECTION .............................................................................................................. 41

4.3. SURVEY MEASURES ............................................................................................................ 42

4.4. EXPLORATORY FACTOR ANALYSIS AND COMPUTED VARIABLES AND .................................... 45

5. RESULTS ................................................................................................................................ 48

5.1. OVERVIEW OF INDEPENDENT VARIABLES ............................................................................. 48

5.2. REGRESSIONS .................................................................................................................... 50

5.3. OTHER FINDINGS ................................................................................................................ 54

6. DISCUSSION .......................................................................................................................... 56

7. LIMITATIONS.......................................................................................................................... 60

8. CONCLUSIONS AND RECOMMENDATIONS ...................................................................... 61

9. FURTHER RESEARCH AND MANAGERIAL IMPLICATIONS ............................................. 62

10. ETHICS STATEMENT .......................................................................................................... 63

REFERENCE LIST ..................................................................................................................... 65

APPENDICES ............................................................................................................................. 72

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List of Tables, Figures and Appendices

Table 1: Summary of Rational Loyalty ............................................................22

Table 2: Summary of Loyalty studies ..............................................................25

Table 3: Organisational Commitment and Whistle-blowing intention ............25

Table 4: Survey Structure ................................................................................44

Table 5: Computed variables from the survey .................................................46

Table 6: Descriptive Statistics of Independent and Dependent Variables .....48

Table 7: Frequencies of Preparedness for Whistle-blowing ............................48

Table 8: Summary of Correlations of Whistle-blowing intention .................... 49

Table 9: Logistic Regressions of Preparedness for Whistle-blowing ..............50

Table 10: Summary of Linear Regressions of Whistle-blowing intention ........51

Table 11: Correlations with Whistle-blowing intention and Demographics......54

Figure 1: Model of Whistle-blowing and Employee Loyalty .............................33

Figure 2: Code of Ethics and Compliance Mechanism ...................................36

Figure 3: Revised Model of Whistle-blowing and Employee Loyalty ..............52

Appendix 1: Exploratory Factor Analysis Results ...........................................70

Appendix 2: Original Survey ............................................................................71

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Declaration

No portion of the work referred to in this dissertation has been submitted in

support of an application for another degree or qualification of this or any

other university or other institute of learning.

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exploitation may take place is available from the Academic Dean of Manchester

Business School.

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Abstract

The social transition from a negative view to a positive view of whistle-blowing

in the corporate realm challenges the conventional way that companies respond

to such wrongdoings. With this perspective, the topic of employee loyalty,

traditionally seen as an ineffectual way to identify potential wrongdoing,

emerges as a more complex and mainly active construct whose re-

conceptualisation make whistle-blowing, in certain situations, a requirement for

one to be considered a loyal employee.

This research embraces the definition of rational loyalty of Vandekerckhove &

Commers (2004) to attempt an explanation between employee attitude to

whistle-blowing and four organisation antecedents: commitment, trust in

management, perceived justice and team leader support. At the same time, the

novelty of this study lies in the sample from a Spanish multinational, INDRA, in

contrast to previous whistle-blowing literature which was mainly limited to

English-speaking countries and public sector companies.

The results show how team leader support and organisational commitment are

significant predictors for internal as well as external whistle-blowing. While the

high levels of these variables increase the former, the low levels increase the

latter. The relationships are target-specific in all cases. Likewise, it is possible to

conclude that the compatibility between loyalty and whistle-blowing is being

accepted among INDRA employees, although fear of retaliation continues to be

a major deterrence for employees and the level of knowledge about whistle-

blowing channels could increase.

Key words: Whistle-blowing, Whistle-blower, Wrongdoing, Reporting,

Institutionalised, Loyalty, Disloyalty, Psychological Contract, Organisational

Commitment, Trust, Justice, Supervision

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1. Introduction

1.1. Research background

A negative view on whistle-blowing which treated it as corporate disloyalty was

in vogue until the 1970´s and 1980´s (Lewis, 2001). However, extant literature

has offered a more positive and complex view on whistle-blowing exploring the

difference between external and internal channels (e.g. King, 1997; Dworkin

and Baucus, 1998), measuring whistle-blowing antecedents in terms of

personal characteristics (e.g. Sims and Keenan, 1998; Stansbury and Victor,

2009; Kaplan et al. 2009) and situational predictors (e.g. Starkey, 1998;

Goldman, 2001; Seifert, 2006), and so forth. Nevertheless, a small number of

studies have faced the challenge of addressing the historical incompatibility

between whistle-blowing and employee loyalty (Hart and Thompson, 2007).

The noted detachment is likely to come to an end as “today’s organizational

context can be characterized by complexity and decentralization. The two

concepts are interrelated, and make two organizational needs rise that are often

seen as contradicting: loyalty and institutionalized whistle-blowing”

(Vandekerckhove and Commers, 2004, p.1). Following this reasoning, our

approach to whistle-blowing in an organisational context is linked to employee

loyalty in order to reach a more heuristic understanding of the process, of its

components and the outcomes.

1.2. Justification of the Research and objectives

The main objective of this research is to explore employee loyalty through

linkages between whistle-blowing intention and various organisational factors.

The unit of study is the Spanish multinational INDRA and its 257 employees

hailing Spain and Peru. This multinational launched a new Code of Ethics in

2009 in which employee loyalty was re-conceptualised according to the trend of

institutionalised whistle-blowing. To carry out this investigation, a

quantitative methodology will be used in the form of a statistical analysis of

the results derived from an ethical survey.

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Theoretically, we will build upon the most recent studies on whistle-

blowing and the transition of loyalty concept –understanding the new one which

endorses institutionalised whistle-blowing (Vandekerckhove & Commers, 2004)

and will attempt to address the gap left by previous studies, which will

form the core contribution of this research:

1. The individual and situational antecedents of whistle-blowing have been

separated from internal-external channels in research designs, for which this

study presents some novel and important research questions: What is the link

between individual and situational antecedents of whistle-blowing and the

channels for reporting?

For instance, Dworkin and Baucus (1998) studied internal and external

channels but only related to individual antecedents such as tenure, gender or

age. A second example is the relationship between perceived organizational

justice -procedural and distributive- and whistle-blowing tested by Seifert (2006)

without including different channels. The last example is of Sims and Keenan

(1998) who only included external whistle-blowing as a dependent variable for

organizational and demographic characteristics.

This research will interpret the results to explain the mentioned gap in the

literature and take into account the changing attitudes on whistle-blowing. That

is, to empirically test a “new” concept of employee loyalty among INDRA´s

employees and to seek the relationship between whistle-blowing intention and

potential organisational antecedents such as organisational commitment, team

leader support, trust in management and perceived justice. Our goal is to

expand the knowledge about which organisation’s aspects are related to loyalty

as predictors of institutionalised whistle-blowing.

At implications level, linking internal and external whistle-blowing to

organisation’s predictors should provide guidance for management strategies

that consequently produce high rates of institutionalised whistle-blowing as well

as prevention from external whistle-blowing. Furthermore, idealistically these

findings should support the development of ethical and follow-through

programmes based on both loyalty and institutionalised whistle-blowing.

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1.3. Research Questions

INDRA is a multinational company that currently leads ahead of other

companies in training their employees in ethics, corporation detection of

wrongdoings, and has also set up particular channels for reporting such illicit

activities (INDRA website, 2013). Ethical programmes and institutionalised

channels of whistle-blowing are supposed to foster the reporting rate of

wrongdoings in the company and improve attitudes on institutionalised whistle-

blowing (Treviño and Weaver, 2001). However, the main obstacles for the

company will be summarized:

-The historically negative view of whistle-blowing as a sign of disloyalty may

create scepticism among employees towards INDRA’s organisational culture

which bridges loyalty and institutionalised whistle-blowing.

- Despite training and information, organisational obstacles (e.g. retaliation,

colleagues’ pressure, lack of information) may still leave employees reluctant to

report to their superiors.

- The reach of information and training may be uneven among employees.

Demographic (i.e. tenure, gender, age), personal and organisational factors

may also influence the results of such training and whistle-blowing intention.

As a result, the company faces a challenge of accommodating employee

responses to a “new” organisational culture based on the compatibility between

loyalty and “institutionalised” whistle-blowing (INDRA website, 2013). In line with

this necessity, the main research question is:

R1: Do high levels of organisational commitment, trust in management,

perceived justice and team leader support lead to greater internal whistle-

blowing?

All four variables are hypothesized to compose a pluralistic loyalty construct

through a positive relation with institutionalised whistle-blowing. However,

INDRA’s case raises other questions to be answered, such as:

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R2: Is the relationship between whistle-blowing intention and its potential

predictors target-specific?

R3: Does preparedness to whistle-blowing correlate positively with

organisational commitment, team leader support, justice or trust in

management?

R4: Do INDRA’s employees consider loyalty and whistle-blowing compatible?

R5: Which major obstacle in INDRA will prompt employees to blow the whistle?

R6: Do demographic factors (age, tenure, gender, position in the company and

country of origin) have any influence on whistle-blowing intentions?

1.4. Organisation of the Paper

The paper will be divided into basic parts. The first part will discuss all the

important theoretical concepts and background of the project. This section will

include a literature review on the topics of whistle-blowing and employee loyalty.

The second part of the paper will be more practically oriented. Firstly, a section

will offer a description of INDRA. Secondly, it will state all research questions

and the methodology, and thirdly it will concentrate on the analysis of results

and discuss their meanings in relation to the literature review.

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2. Literature Review

The recognition in the research literature of whistle-blowing –raising a concern

about wrongdoings within an organisation or through an independent structure

associated with it (UK committee on Standards in Public Life cited by Lewis,

2001) - began in the 1980s (Farrell & Peterson, 1982; Miceli & Near, 1985;

Graham, 1986). Before that point, “whistle-blower” was exclusively applied to

government employees who “go public” with complaints of corruption or

mismanagement in federal agencies, and since then the usage has been

increasingly expanded to similar activities in the private sector (Boatright, 2012,

p.89).

In spite of the significant number of research during last two decades, which

tried to identify the characteristics of employees in order to predict whistle-

blowing (e.g. King, 1997; Miethe, 1999; Miethe and Rothschild, 1994) and its

situational antecedents (e.g.Treviño and Weaver, 2001; Seifert, 2006), whistle-

blowing connections to employee loyalty still remained understudied, regardless

the importance of the topic in managerial studies. The only work conducted on

the subject was undertaken by Somers and Casal (1994), who explored the

relationship between whistle-blowing and loyalty – measuring organisational

commitment as the latter.

Taking into consideration the abovementioned, this chapter pursues three major

goals. First, it explores whistle-blowing specifics through the literature review

synthesis. Second, it seeks to understand the evolution of employee loyalty

from different perspectives. Thirdly, it aims to discuss theoretical models for

studying loyalty and whistle-blowing.

2.1. Whistle-blowing

According to Vandekerckhove and Commes (2004), nowadays organisations

can be defined by complexity and decentralisation. That is, organisations are a

sum of the parts whose underpinning logics may be different and lack one point

of central decision-making. It is understandable that the emergence of such

enterprises is a relatively new phenomenon. In comparison, there were smaller

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and more centralised organisations at the beginning of twentieth century, and

fewer social actors with capacity to influence businesses (Castells, 1996). At

that time nobody what could have imagined the complexities of discretionary

power and information employees deal with nowadays, as well as the severe

consequences for the individual and the organisation he or she belongs when

such empowerment results in revealing confidential information (Vinten, 1994).

This section seeks to analyse the whistleblowing concept through the

understanding of the process and its components.

2.1.1. Definition

There is no “universally accepted concept of whistle-blowing” (Lewis, 2001,

p.1), hence some scholars claim a narrow definition in which strict conditions

must be accomplished, whilst others prefer a more expansive definition. As

noted by Davis (2012), the business and management literature has had

difficulties defining whistle-blowing. We see this problem throughout the

literature: many researchers from a number of disciplines write about whistle-

blowing although, as a multidisciplinary field, there is continued confusion on

the topic in detriment of an integrated definition (Near & Micelli, 1996).

From a legal point of view, for instance, whistle-blowing is warranted if the

whistle-blower believes, in good faith, that some portion of society is

endangered by the organization’s wrongdoing (Australian Senate Select

Committee on Public Interest Whistle-blowing). For auditors, they consider

whistle-blowing whether the wrongdoing is sufficiently costly to warrant pursuit

(Sommers and Casal, 1994). On the other hand, philosophers and ethicists

view whistle-blowing as an ethical and individual act (Boatright, 2012). In front

of these divergences, Near and Micelli (1996) offer a multidisciplinary view by

agreeing that, at least, three things are required for any whistle-blowing to

occur in organisations: the wrongdoer - who has committed the alleged

wrongdoing; the whistle-blower who observed, defined and reported the

wrongdoing; and the recipient of the reported wrongdoing. Further, this basis

includes additional players such as co-workers, immediate supervisors of

whistle-blowers and the organisation’s top management team.

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Before defining whistle-blowing, it is important to understand the central position

of the whistle-blower and the three elements of the process (Sommers and

Casal, 1994). First, a rational component based on the perceived costs and

benefits to the person who has reported the wrongdoing (Near & Micel, 1987).

Second, a pro-social component involving perceived responsibility to others

(Graham, 1986). Three, a loyalty component reflects the level of commitment to

one´s organisation (Hirschmann, 1986). As a sum, whistle-blowing involves

employees facing “strong conflicting obligations” towards their organisation and

society under potential retaliation in case of reporting any wrongdoings

(Boatright, 2012, p.148).

The first time the term “whistle-blowing” is known to have been used was in the

1963 Otopeka´s case (Petersen and Farrell, 1986). Otto Otopeka was the

whistle-blower who gave classified documents to the chief counsel of the

Senate Subcommittee on Internal Security and intended for them to be made

public. Since then, the phenomenon has been seen as increasingly important

because of its public and business implications (Vinten, 1994). As a result,

many researchers focused on whistle-blowing defined by Near and Miceli’s

(1985, p.4) as follows:

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.

Many studies of nurses, managers and federal employees (e.g. King, 1997;

Kennan, 2002; Near, Rehg, Van Scotter & Miceli, 2004) were designed on this

definition thanks to its inclusive style that permits the empirical determination of

differences among whistle-blowers. This approach comprehended both whistle-

blowers who used internal (i.e. within the organisation) and external channels

(i.e. outside the organisation). Additionally, it served to distinguish whistle-

blowing from other activities such as espionage, because it stated that whistle-

blowing can be done exclusively by a member of an organisation.

Other authors also contributed their own definitions of whistle-blowing, for

instance, Jubb (1999, p. 83) added ‘‘a deliberate non obligatory act of

disclosure” and thus pointed out that whistle-blowing is a voluntary act, not a

legal requirement.

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With regard to the content, Bok (1997) differentiated the whistle-blowing

concept from sounding the alarm. While the former consisted of releasing

unknown or secret data, the latter refered to information that was already public

prior to disclosure and in which dissenters took a public stand in opposition to

an organisation to which they belonged and tried to arouse public concern.

In summary, this section attempts to explain the basis and distinctiveness of the

term whistle-blowing since its birth. Still, it seems necessary that clarification be

made of a number of controversial aspects that are impossible to fit in a single

definition, such as how to define a “wrongdoing”, the importance of internal and

external channels, the existence of retaliation, and the historical transition on

evaluating whistle-blowing.

2.1.2. Wrongdoing

In the process of blowing the whistle the content consists of illegal, immoral and

illegitimate practices according to Near and Micelli (1987). Broadly speaking,

these kinds of practices are also known as wrongdoings. In the same fashion,

Lewis proposes (2001, p.5) a definition of wrongdoing from an organisational

point of view as follows:

the contravention of any law, rule of regulation, code of practice, or professional statement, or that involves mismanagement, corruption, abuse of authority, or danger to public or worker health and safety.

Despite a definition, Near & Micelli (1996) point out the difficulty to classify a

wrongdoing that precedes whistle-blowing because its nature depends on

perception of the potential whistle-blower. While stealing pens, for example,

may appears wrong to many employees, to others it is merely a

misdemeanour, so whistle-blowing should be reserved to matters of importance

(Davis, 2012). The subjective judgment of wrongdoing is problematic because

observers must agree on what constitutes a wrongdoing before they can

agree that the whistle-blowing is valid (Near, Rehg, Van Scotter & Miceli,

2004).

As a result, different classifications of wrongdoings are found in the empirical

research. Near, Rehg, Van Scotter & Miceli (2004) use a US large military base

and determine seven categories of misconduct (i.e. stealing, waste,

mismanagement safety problems, sexual harassment, discrimination and legal

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violation). In contrast, a study on employee perceptions of misconduct in

Chilean banks (Mitchell, Lewis & Reinsch, 1992) come across seventeen

categories such as bribery, unfair trade practices, invasion of privacy and lies.

In order to explain such differences beyond employee criterion, both the type of

organisation (Kennan, 1991) and the cultural (Kennan, 2007) of the sample

seem to be the major variables in terms of perceptual influence. In this line,

Sommer and Casal (1994) offer an example which points out an organisational

bias as a limitation. In their study, the sample is of auditors, an occupational

group which performs a monitoring function with clear guidelines about what

constitutes acceptable practice, and thus it is difficult to compare their

perception of what constitutes a wrongdoing with other professional groups (i.e.

federal agents, managers, retail staff). With regard to culturally-bound

perspectives, Kennan (2007) confirms, for instance, cultural-based differences

where Chinese managers have stronger moral perceptions with respect to

minor fraud than American ones and that Chinese managers are less likely to

blow the whistle than their American counterparts

As mentioned, the results of these different studies do not converge on

unanimous classification of wrongdoing. However, the treatment of these

various perceptions still remain fundamental to understand whistle-blowing as a

predictor of both whistle-blowing process and retaliation (Regh, 2008). A more

serious perception will consequently provoke more extensive retaliation (Miceli

and Near, 1992). Accordingly to Near, Rehg, Van Scotter & Miceli, (2004) the

inclination to report increases (i.e. sexual harassment and mismanagement) or

decreases (i.e. stealing and discrimination) depending on the type of

wrongdoing.

Taking into account all these streams, it seems that reasonable people may

differ on what constitutes wrongdoing (Near and Micelli, 1996) and thus special

attention must be paid to organisational and cultural variables in the empirical

research of wrongdoing within whistle-blowing.

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2.1.3. Channels of communication

Vinten (1994) describes internal whistle-blowing as a variety where normal or

immediate channels are bypassed, although the receiver remains within the

organisation –e.g. top executives or human resources department- in contrast

to the external variety in which an employee resorts to an outside agency –e.g.

a newspaper or pressure group. When whistle-blowing is internal the employer

is given the opportunity to deal with the problem without external pressures;

instead, when it is external, the employee is seen as an adversary and public

conflict between the organisation and the individual becomes inevitable (Lewis,

2001).

A controversial point here is whether reports should be made outside normal

channels of communication. From an ethical point of view, Boatright (2012)

claims that an employee who follows established internal procedures for

reporting wrongdoing is not strictly a whistle-blower because it is an ordinary

activity. On the other hand, many organisational scholars defend the inclusion

of internal reports as whistle-blowing, for instance, in the category of

“institutionalised whistle-blowing” proposed by Vandekerckhove & Commes

(2004, p.1).

In order to empirically explore both channels, Near and Micelli research (1996)

indicates that whistle-blowers use external channels only when they do not

know about the internal channels and when they think the internal

channels will not overlook the reported wrongdoing. Following Dworkin and

Baucus study (1998) external whistleblowers are described as having less

tenure with the organization, greater evidence of wrongdoing, and tend to be

more effective in changing organizational practices.

At organisational level, whistle-blowing is more likely to take place in

companies that support internal channels of reporting wrongdoing, without

including incentives for it, and where whistle-blowers report greater value

congruence with top managers (Near and Micelli research, 1996). In terms of

response, external whistleblowers experience more extensive retaliation from

organisations than internal whistleblowers (Dworking and Baucus, 1998).

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So, the need to develop a theoretical explanation for internal and external

whistle-blowing (Dworkin and Baucus, 1998) seems to be relevant to further

research, as both channels are in interest of this paper.

2.1.4. Retaliation and anonymity

Depending on the subject matter, retaliation can embrace a diversity of

concepts. In an organisational view, O'Day (1974) describes retaliation as

management's reaction to reform. Thus retaliation would be a means for an

organization to control the whistle-blower through the exercise of power.

Organizations that perceive whistle-blowing as a threat will respond negatively

to the whistle-blower, especially if this threat is to the status quo (McClelland,

Liang and Barker, 2010). Retaliation, then, will be considered here to be the

negative actions taken towards whistle-blowers by members of the organization,

in response to the reporting of wrongdoing (Regh, 2011).

O'Day’s (1974) retaliation model includes four stages of reaction: nullification,

isolation, defamation, and expulsion. His term "intimidation rituals" describe the

reactions of middle managers to "reform-minded subordinates" (e.g., whistle-

blowers), divided into two parts, indirect and direct, which escalate at each step

of the process.

A limitation of the model lies in treating the ramifications as one entity according

to Miceli et al. (2008), who postulated that differences in the amount of

dependence on the wrongdoing may elicit different negative responses from co-

workers and management. Co-workers, supervisors, and upper management

may be differentially dependent on, or affected by, the wrongdoing and this

could result in a variety of reactions to whistle-blowing.

In dealing with confidentiality, whistle-blowers are generally employees who

reveal their identity, although it is also possible to act anonymously. Davis

(2012) considers that anonymity should not be strictly treated as whistle-blowing

because it means we do not know whether the whistle-blower is revealing what

he or she learned in the course of his work, if it was conducted through

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espionage, or if their motivation were driven by a desire to inform the public or a

personal vendetta.

However, anonymity may be understandable when someone is aware of the

severe consequences that whistle-blowers face: poor evaluations, demotion to

outright dismissal and being included in a blacklist so that they cannot obtain

jobs in the same industry (Boatright, 2012).

2.1.5. Transition from a negative to positive view

In a historical view, we can find two contradictory general patterns about

whistle-blowing in terms of justification: a negative in the past and increasingly

positive in the present (Lewis, 2001). On the one hand, a famous quotation of

James Roche, former president of General Motors, synthesizes the negative

stream as follows:

“Some critics are now busy eroding another support of free enterprise – the loyalty of a

management team, with its unifying values of cooperative work. Some of the enemies of

business now encourage an employee to be disloyal to the enterprise”

In his stream, whistle-blowers are stereotyped as troublemakers who deserved

to be punished for disloyalty (Lewis, 2001). Boatright (2012) indicates the basis

of these critiques lies in the apparent duty of loyalty that employees have to the

organisation of which they are part. In the same fashion, Cutler and Nye (cited

by Lewis, 2001) suggest this concept of loyalty can be easily associated with

the shareholder theory (Friedman, 1970s) and agent theory where employees

should act on behalf of the shareholders’ interest under any circumstance.

Conversely, as a result of the cultural business change -in which ethical

programmes and institutionalised channels of whistle-blowing have been

gaining momentum in multinationals and companies (Treviño and Weaver,

2001)- most contemporary academicians no longer see whistle-blowing as

repudiation of company loyalty, but a positive process to improve organisational

life (Vandekerckhove and Commes, 2004). To cite an example, whistle-blowing

may be considered as a self-regulation to complement standard normative

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such as laws, code of ethics and sector guides which have failed to prevent

major recent scandals (Vandekerckhove and Commes, 2004), for instance,

Libor and the discovery of horsemeat in UK supermarket chains.

To summarize positive aspects, whistle-blowing could be seen as a

transformational incentive against the “need-to-know” principle which has

governed the flow of information in many organisations (Lewis, 2001). That is to

say, many employers and managers have been only prepared to release to

their employees exactly what they need to know to do their jobs; and many

bosses need to know only good news (Lewis, 2001).

In the middle of this transition, many authors expressed critiques against the

dichotomy facing these totally positive or negative views. Bowie (1982) and Bok

(1980), for example, asserted whistle-blowing is defendable but only in certain

contexts, under particular circumstances between an employee and employer.

This controversy thus leads the discussion about the whistle-blowing

appropriateness to a more complex arena of what extent employees have

“obligation of loyalty to an organisation” (Boatright, 2012, p.93) and what we

should understand by employee loyalty.

2.2. Employee Loyalty

In spite of notable scholarly attention to the concept, loyalty and its dimensions

remain at some extent inaccurately defined (Coughlan, 2005). This section will

discuss the conceptual problems of loyalty from philosophical and

organisational perspectives in order to set up the basis for an inclusive model

for whistle-blowing and loyalty.

2.2.1. Philosophical perspective

Loyalty is typically discussed in unconditional terms throughout the

philosophical tradition: either one is loyal or one is not; loyalty is either a

moral duty or a dangerous attachment (Carbone, 1997).

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On the one hand, loyalty entails the "complete subordination of one's private

interest in favour of giving what is due, and perhaps the exclusion of

other legitimate interests" (Ladd, 1967, p. 98). Similarly, the principal agent

theory (DeGeorges,1995, cited by Boatright, 2012) states that an agent is a

person who is engaged to act in the interest of another person (called a

principal) and is authorized to act on that person´s behalf. Although this

relationship is typical of professionals such as lawyers and accountants,

employees may also be generalised to any employee since they are hired to

work for the benefit of the employer. Protection of confidential information and

loyalty, for instance, integrate the legal basis for such a contractual obligation

that consists of acting in the interest of another person-employer.

On the contrary, Duska (2012) rejects the idea of employees owing any loyalty

to the company, and reducing the employee and employer relationship to a

legal contract, because loyalty belongs to the moral sphere and is only

applicable to personal relationships.

Although this dichotomous approach may provide useful knowledge in matters

of the role of loyalty in philosophy (Gilbert, 2001), it obscures the complexity of

loyalty in the workplace (Hart and Thompson, 2007). In dealing with whistle-

blowing, these philosophical explanations would likely fall either in to complete

inadmissibility or totally justifiable categories, without nuances to distinguish

internal or external channels and so forth.

Employees must adopt a flexible attitude to assess the requirements of loyalty

as relationships and contexts evolve in the workplace; if not, it is nearly

impossible to predict behavioural or attitudinal outcomes of employee

perceptions about others’ loyalty or disloyalty (Hart and Thompson, 2007).

Departing from these considerations, a loyalty concept compatible with flexibility

in the workplace and whistle-blowing seems necessary to find.

2.2.2. Rational Loyalty

Starting with a philosophical breakthrough far from dichotomous positions, the

concept of rational loyalty has been proposed by Vandekerckhove & Commers

Page | 21

(2004) to tackle the apparent incompatibility between the concept of loyalty and

that of whistle-blowing. Their argument is that there is no such contradiction, if

loyalty is adequately conceptualized. Table 1 summarizes Rational Loyalty as

follows:

Table 1: Summary of Rational Loyalty adapted from Vandekerchkove &

Commers (2004)

Elements Description

Principles - is an attitude aimed at an object

- has an explicit external referent

- is a learned attitude

- is bilateral

Re-conceptualized

Object of loyalty

-The object of rational loyalty is not the physical aspects of the

company – buildings, executives, boards, hierarchies, colleagues – but

an explicit set of mission and value statements, goals, and code of

conduct of the organization which is judged as legitimate

Rational aspect -It indicates the need for the individual to make a deliberation whether

or not his or her acts are a contribution to the explicit mission, values

and goals of the organization he or she is loyal to.

-When an organisation’s acts differ from explicit statements, then it is a

goal-displacement and an organisational dilemma takes place.

Whistle-blowing -The concept of rational loyalty not only demands whistle-blowing from

loyal employees but, following the principle of mutuality, also demands

loyal organizations to institutionalize whistle blowing.

-Institutionalised whistle-blowing: the set of stable and standardized

interaction process, of which the procedures are knowable to all

participants, allowing potential whistleblowers to raise the matter

internally before they become external whistle blowers

In accordance with a higher interdependence between civil society and

business (e.g. CSR, ethical business), rational loyalty implies a link between

corporate values and social legitimization, taking advantage of the fact that

organizations increasingly make their goals and values public through mission

statements and reports (Vandekerckhove & Commers, 2004) Hence,

Page | 22

companies gain social legitimacy and “license to operate” amid stakeholders

(Freeman, 1984). Therefore, the proposed object of loyalty seems to be not only

compatible but coincide with the object of whistle-blowing (Vandekerckhove &

Commers, 2004). That is, a duty of loyalty to an object, which is considered as

legitimate by society, cannot contradict a duty to expose wrongdoings in order

to prevent harm to society’s well-being.

Judging by the context, institutionalised whistle-blowing may be appropriate for

two main reasons: organisations should know as soon as possible when

wrongdoing is occurring since more people have larger decision-making

authority, and as responsibility of private companies increase, the public has a

case when a wrongdoing which might affect them is occurring (Vandekerckhove

& Commers, 2004).

To sum up, rational loyalty permits a new philosophical understanding of

whistle-blowing not leading to individual dilemma but an organisational dilemma

where the focus is the rationality of individuals in detriment of moralist and

ethicist perspectives (Vandekerckhove & Commers, 2004).

2.2.3. Organisational perspective

Organisationally, the loyalty construct can be credited in part to Albert

Hirschman’s seminal work (1970), Exit, Voice, and Loyalty: Responses to

Decline in Firms, Organizations and States (1970). In accordance with this

work, exit is a voluntary termination of the relationship (Hirschman, 1970).

Employers can terminate employment contracts when employee performance

does not meet standards, and workers can quit an untrustworthy or unreliable

employer (Hirschman, 1970). Regarding the term “voice”, it refers to how

employees are able to communicate their opinions of work activities and

whether they have a say in decision-making issues within the organization

(Hirschman, 1970). Rooted in the voice concept of Hirschman, Van Dyne et al.

(2003) proposed a multidimensional construct of an employee’s voice that is

similar to whistle-blowing, describing it as pro-social voice that is not intended to

benefit the self but a behaviour based on cooperation and suggestion for

change. Nevertheless, Hirschman (1970) describes loyalty as if faced with

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deteriorating conditions in the organization, some members choose neither exit

nor voice, but to stick with the firm for a period of time before reacting to the

problem.

According to Hirschman (1970), the behaviours of exit and voice are moderated

by employee loyalty. His theory suggests that loyal people are less likely to exit

and more likely to use their voice to change the relationship or wait patiently

until the situation improves (Hirschman, 1970). The concept of loyalty by

Hirschman is predominately portrayed as an attitude that affects the use of exit

or voice, but other times loyalty is described as behaviour in which employees

act to support the organization (Minton, 1992). This dual concept of loyalty has

resulted in minor controversy among researchers, as some have

conceptualized loyalty as an attitude while others have interpreted it as a

distinct behavioural response (Saunders, 1992). Therefore, researchers and

theorists have worked to enhance or refine Hirschman’s concept of loyalty since

it is the most “elusive” of the three concepts (Vangel, 2011, p.6). Table 2

summarizes Minton’s observations (1992) about articles that share the propriety

of departure from Hirschman´s definition.

Reviewing this organisational literature, loyalty is normally conceptualized and

operationalised as a continuous variable; that is, to assess one´s loyalty through

a scale from low to high (Coughlan, 2005). In this line, Hart and Thompson

(2007, p.299) add that researchers have generally not investigated loyalty as “a

discrete construct per se”, but utilising organizational commitment

measurements such as "Organizational Commitment Questionnaire" or OCQ

(Mowday, Steers, & Porter, 1979).

To understand the changeability of concepts, it is necessary to turn to the

definition of organisational commitment proposed by Meyer and Allen (1991,

p.67, cited by Hart and Thompson, 2007): "a psychological state that

characterizes the employee's relationship with the organization, and has

implications for the decision to continue or discontinue membership in the

organization". In this view, commitment content is notably close to traditional

conceptualizations of organisational loyalty, which are based on attachment and

devotion to the organization (Gilbert, 2001).

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Study Core Findings

Graham & Keeley

(1992)

The article recognizes the existence of multiple interpretations of the construct, and that it is not necessary to conclude that

only one interpretation of loyalty is the 'correct' version.

Argue that loyalty is an attitude that yields behavioural consequences and they introduce three types of loyalty: unconscious, passive,

and reformist.

Farrell & Rusbult

(1992)

Farrell and Rusbult suggest that Hirschman's original work as a model should be enhanced and extended, propose loyalty to be

an outcome of dissatisfaction and formulate loyalty as a behavioural response.

Leck & Saunders

(1992)

The article identifies the divergence between attitude (Hirschman) and behavioural response (Farrell & Rusbult) as the basic definitional

confusion over the loyalty construct. To eliminate the confusion between loyalty as an attitude or a behavioural, the article proposes the

use of the term “patience” to replace loyalty as behaviour. The argument lies in Hirschman’s description of loyalty as an attitude, thus

the rationale to change the concept of loyalty as a behaviour was appropriate in order to better distinguish the two concepts.

Additionally, the article suggests patience better describes the construct of loyalty, and disentangles the cause (loyalty as an attitude)

from the effect (patience as behaviour) This possibility of competing interpretations (attitude versus behaviour) is not intended as a

criticism, since it serves to suggest the ultimately complex nature of the loyalty construct.

Withey & Cooper

(1992)

Withey and Cooper propose there are different kinds of loyalty affected by different things which result in different behaviours. They

highlight the importance of greater attention to the conceptualization, operationalisation, and measurement of loyalty construct.

They present two types of loyalty in their work. "Active" loyalty better fits the concept of loyalty as positive, constructive

behaviour and correlates positively with employee commitment, whilst "passive" loyalty denotes decidedly destructive employee

behaviours, and would seem to correlate with commitment negatively.

Saunders,Sheppard,

Knigh & Roth

(1992)

The article underlines that prediction of employee voice is the area within which Hirschman's original model, applied in work

settings, has received the weakest support and agree with others that the voice construct has been poorly defined and therefore

has been poorly understood and inadequately researched.

The article focuses less specifically on problems with the loyalty construct, instead addressing the choices and processes

involved with employees speaking out - using voice--to their supervisors.

Canning

(1992)

Canning closes the loop by addressing voice behaviours as a function of loyalty and recasts voice as "a normal determinant of

organizational success that builds on the offer of employment security, “assuming corporate vitality that ensures better personal gains

from voice than from exit”.

Table 2: Summary of Loyalty studies adapted from Minton (1992)

As a consequence, organisational commitment is often confused or

confounded with the entire concept of loyalty and not just as a component

(Hart and Thompson, 2007). An appropriate example of this and relevant

for the purpose of the paper is Somers and Casal’s study (1994) in which

they explored the relationship between loyalty and intention on whistle-

blowing, only measuring organisational commitment to represent loyalty

construct. The hypotheses were as follows:

Table 3: Organisational Commitment and Whistle-blowing intention

adapted from Sommer and Casal (1994)

Hypotheses Type of relationship Explanation

Organisation”

Man

Wyte (1956)

Negative Linear In its view, commitment is thought to result in

conformity and loyalty, committed employees are

hypothesized to be less likely to report observed

organisation wrongdoing.

Reformer

Hirschman (1972)

Positive Linear Commitment was suggested to increase the

likelihood of whistle-blowing. In the reformer view,

loyalty to the organization is seen in a more positive

light, with commitment exerting pressure to put an

end to a wrongdoing because it is damaging to the

entire organisation.

U-shaped

Positive Curvilinear Based on reformer hypothesis, this view changes

the conception of low committed employees to

subversive and therefore they are more likely to

blow the whistle.

Inverted U-

shaped

Negative Curvilinear Based on “Organisation” Man hypothesis, this

changes the conception of low committed

employees to alienated and therefore they are less

likely to blow the whistle.

Despite the extant confusion between loyalty and commitment, Hart and

Thompson (2007) underline the four significant differences in terms of

conceptualisation and methodology between both. Conceptually while

loyalty is depicted as a duty, commitment literature adopts a personal

choice paradigm, that is, to commit or not to commit to a company are

alternatives that employees weigh based on rational-emotional analysis

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Secondly, scholarly literature tends to consider commitment as a

unidirectional construct, whereas loyalty implies mutuality. Regarding

methodology, organisational commitment is not designed to treat loyalty

as a moral matter and tends to focus on the extent of one’s commitment

instead of the diversity of content which obligations are entailed to

personal commitment towards their organisations.

Not surprisingly, results in the empirical research coincide with Hart and

Thompson observations and give place to hypothesize about other

factors to complement loyalty construct apart from commitment.

Saunders et al. (1992), for instance, do not find the OCQ to be highly

correlated to the voicing process, when such is considered loyal

behaviour by Hirschman. What is more, Saunders et al. (1992) also find

that a change in supervision could have a damping effect on the

tendency to use voice. Hence, it can be argued that loyalty is likely to

include a degree of trust and the existence of a supervisor loyalty

connection seems plausible (Vangel, 2011).

Taking into account the examined confusions and measures of loyalty

based on commitment, which demonstrated to be so framed to capture

the richness of the loyalty construct (Saunders et al., 1992), a new

perspective seems to be necessary to overcome the conceptual and

methodological limitations detected throughout the organisational

literature. Nevertheless, the importance of commitment as an element of

loyalty remains (Coughlan, 2005).

2.2.4. Cognitive Perspective

“We believe that considering loyalty from a psychological contract

perspective, and thus grounding loyalty in cognition and perceived

obligations, allows us to anticipate ways in which expectations between

individuals and organizational agents are misaligned”. With these words

Hart and Thompson (p.302) start the explanation of their cognitive

approach viewing loyalty as a psychological contract.

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Broadly speaking, employment relationships are determined by some

kind of written contract that details basic expectations for both the

employee and employer (Robinson et al. 1994). However, many

academicians have recognized a perceptual complement in the

psychological contract, that is, a set of perceived but unwritten promises

and obligations employees tend to develop about their relationship with

the employer that extends further any formal contract (Rousseau 1994).

Theoretically, psychological contracts can be seen as an outgrowth of

social exchange theory (Hart and Thompson, 2007), which assumes that

employees will seek a balance in their relationship with the employing

organisation (Blau, 1964; Homans, 1974). The exchange theory

presumes reciprocity between what the employees have to give to the

organisation and what can they expect from the organisation in return

(Robinson, 1996).

In contrast to legal contracts, psychological contracts do not require

agreement between two parties (Hart and Thompson, 2007). Hence, the

reciprocity may be difficult because the perceptions of the individual may

differ from what employers understand employee obligations to be

(McLean Parks and Schmedemann 1994).

Theorists distinguish into three types of currencies exchanges as the

nexus of the employee-organisation relationship; each currency has an

equivalent on loyalty according to Hart and Thompson (2007):

·Economic: an exchange of economic currency such as contributing time

and effort in exchange for monetary benefits (MacNeil, 1985). The

adaptation is the transactional loyalty which connotes fidelity in the

exchange of economic obligations between individual and organization

(Hart and Thompson, 2007).

·Socio-emotional / Relational Loyalty: employee sees employment

largely as an exchange of socio emotional currency such as pledging

personal devotion to the organization in exchange for job security and

membership in an identity group (MacNeil, 1985). In terms of loyalty, the

Page | 28

relational kind is embedded in personal relationships, for example, with

colleagues and superiors (Hart and Thompson, 2007),

·Ideological / Ideological loyalty asserts that ideological rewards -the

feelings associated with contributing to an ethical cause- serve as an

important incentive that binds people to organizations, being “the less

rooted in self-interest seeking” (Thompson and Bunderson, 2003, p.56).

Ideological loyalty occurs when employees feel bound by obligation

toward organisation because they perceive that the organisation

embodies and behave according to a good cause or ethical principles

(Hart and Thompson, 2007).

Robinson, Kraatz, and Rousseau (1994) state that most psychological

contracts involve the simultaneous exchange of more than one currency

In the same line, loyalty is often more complex than exchanges between

two parties since employees maintain loyalties to multiple parties

simultaneously, building complex nets of social obligations (Provis 2005).

In dealing with whistle-blowing, Hart and Thompson (2007) argue that

ideological loyalty tends to possess more moral importance in the

workplace than do transactional and relational ones. As a result,

unethical decisions or wrongdoing within the organisation that contradict

the code of ethics or corporate values an employee shares may provoke

a break in the loyalty relationship and a potential withdrawal of

transactional or relational loyalty –leading to whistle-blowing- even if

those wrongdoing or unethical behaviours do not compromise employee

personal welfare directly (Thompson and Burdenson, 2003).

2.3. Models for Whistle-Blowing

Despite the extensive research mentioned above, a general theory of

whistle-blowing has been absent from the literature as a notable problem

for researchers over 20 years (Miceli and Near, 1988). The theoretical

problem lies in the difficulties of studying whistle-blowing behaviour

Page | 29

directly (Park and Blenkinsopp, 2009), that is, researchers have to rely on

indirect measures such as attitudes.

2.3.1. Theory Planned Behaviour of Whistle-blowing

However, Park and Blenkinsopp (2009) recently propose a general theory

for whistle-blowing based on Theory Planned Behaviour (TPB). The fact

that attitudes and behaviours towards whistle-blowing may be disjunctive

led Park and Blenkinsopp (2009) to explore the validity of Theory of

Planned Behavior, which is accepted a general framework for predicting

behavioural intentions but is seldom utilised in whistle-blowing studies.

The results show TPB seems to be adequate as a general theory for

understanding linkages between attitude, intention, and behaviour in

whistle-blowing, although the theory was more appropriate in explaining

internal rather than external whistle-blowing intentions (Park and

Blenkinsopp, 2009).

2.3.2. Toward a Cognitive Model of Whistle-blowing based on

Rational Loyalty

The application of Theory Planned Behaviour on Whistle-blowing (Park

and Blenkinsopp, 2009) should be recognised as meritorious attempt to

set up a general theory of whistle-blowing. However, for the interest of

this research a new model of whistle-blowing compatible with loyalty and

applicable to external and internal channels will be proposed.

Firstly, the model should be built on the noted philosophical definition of

rational loyalty of Vandekerckhove & Commers (2004), which includes:

a) Compatibility between loyalty and institutionalised whistle-blowing,

through the new object of loyalty: corporate values and code of ethics.

b) Mutuality in loyalty relationship – not only employee should express

fidelity, but the company should set up a special and confidential channel

to report wrongdoing (institutionalised whistle-blowing), and introduce

training.

Page | 30

c) Institutionalised whistle-blowing permits to distinguish the nuances

between external and internal channels.

Secondly, the model follows the cognitive perspective of Hart and

Thompson (2007) on loyalty as psychological contracts, which includes:

d) To recognise that organisational commitment is a fundamental

element of loyalty but not unique and to embrace the complexity derived

from the psychological contract dimensions (transactional, relational and

ideological) and seek for other organisational factors to explain loyalty in

accordance with social exchange theory

So far, the model recognises organisational commitment as a main

component of loyalty according to many studies (e.g. Somers and Casal,

1994) but at the same time relies on complementary components (e.g.

Hart and Thompson, 2007). The conditions for potential components are

to be predictors of internal whistle-blowing and to be grounded on social

exchange theory, which is the basis of psychological contract

dimensions. To the extent of this literature review, three organisational

constructs were found that stream from the social-exchange theory and

may have potential linkages with internal whistle-blowing according to

previous research.

Justice

According to Cohen-Charash and Spector (2001), there are two main

kinds of justice in the organisational context; whereas procedural is the

perceived fairness of the process by which outcomes are arrived at, the

distributive justice consists of fairness in the distribution of rewards.

Treviño & Weaver (2001) observes how perceived fair treatment among

employees contributes to change their vision of the employment

relationship from purely economic to a social exchange including

motivation for extra-role behaviour. Using the social exchange theory,

Organ (1990, cited by Treviño & Weaver, 2001) argues that an

employee’s extra-role behaviour is a sign of reciprocity for feeling treated

fairly by their organisation. Reporting problems to management, for

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instance, should be considered a form of extra-role behaviour according

to Treviño and Weaver (2001) because in most workplaces reporting

possible ethical problems is not a required in-role task. Hence, findings in

several researches have confirmed a significant relationship between

perceived fairness and extra-role behaviours (Van Dyne, Cummings, and

Parks, 1995).

Trust in Management

Sztompka (1999, p. 25) defines trust as “the expectation that other

people, or groups or institutions with whom we get into contact – interact,

cooperate – will act in ways conducive to our well-being. Because in most

cases we cannot be sure of that, as others are free agents, trust is a sort

of gamble involving some risk”. Blau (1964) states that social exchange

involves trusting that the other party will fulfil their obligations and, in case

of whistle-blowing, Binkios (2008) adds the choice of reporting or not is

often a matter of trust in your supervisor, in the confidentiality of the

internal auditor or the absence of retaliation. Following Treviño and

Weaver (2001) view of including reporting as a kind of extra-role

behaviour, previous research confirms a positive relationship between

trust and extra-role behaviours (Podsakoff et al. 2000; Thau et al. 2004).

Team Leader Support

Jackson (2004, p.25) describes team leader support as “supportive

supervisory style”. According to Dworkin & Baucus (1998), perceived

support from supervisors predicts both whether and how whistle-blowing

occurs. Vadera et al. (2009) uses social exchange theory to argue that

high level of supervisor support leads to norms of reciprocity fostering

employee trust in institutionalised channels to report unethical practices.

King (1997) confirms these arguments in his study involving a 261

registered nurses in which supportive supervisor is shown to be positively

related to internal whistle-blowing.

According to the model explanation, another important aspect is the fact

that these factors represent different level variable. Vadera et al. (2009),

recommends the integration between individual and situational –group

Page | 32

and organisational- antecedents in whistle-blowing research.

Organisational commitment is an individual antecedent; while team

leader support -a group variable- and trust in management and justice –

both organisational variables- are situational antecedents (Vadera et al. ,

2009).

Theoretically, it is important to bear in mind the different frameworks

which relate these factors and whistle-blowing. As noted above, justice

and trust in management and team leader support are grounded on

social-exchange theory which predicts a positive relationship with internal

whistle-blowing. On the other hand, organisational commitment and

whistle-blowing relationship is explained by the Reformer theory

(Hirschman, 1970) which describes employees as individuals able to put

an end to a wrongdoing within the company. This theory is aligned to

rational loyalty concept (Vandekerckhove & Commers, 2004) in the sense

that loyal behaviour is not expressed as conformity or silence, but a

positive relationship is expected between organisational commitment and

internal whistle-blowing.

Given the difficulties to investigate directly whistle-blowing (Park and

Blenkinsopp, 2009), the option of this model is focus on the intention of

whistle-blowing. Similarly to Somers and Casal (1994) study, the model

includes six different recipients for the intention on whistle-blowing in

accordance with the confirmation that whistle-blowing is target-specific.

Therefore, the fact that whistle-blowing intention depends on the recipient

is coherent with the existence of multiple loyalties expressed in the

Cognitive Perspective (Hart and Thompson, 2007).

To sum up, we believe the potential relationships of this model cannot be

considered only precedents of whistle-blowing. In accordance with the

definition of rational loyalty (Vandekerckhove & Commers, 2004) , this

model’s dynamics is based on the principle that whistle-blowing should

be considered as a loyal behaviour when the report of wrongdoing follows

the institutionalised channels in the company, that is, internal auditor or

immediate superior (INDRA´s Code of Ethics). These factors would be

Page | 33

antecedents of whistle-blowing and also loyal components, in case they

positively correlate with internal whistle-blowing and not with external.

Taking all together, Figure 1 shows the developed model.

Figure 1: Model of Whistle-blowing and Employee Loyalty

It was mentioned in the introduction the main objective of this research is

to explore a cognitive perspective of employee loyalty through the

linkages between potential organisational antecedents and internal

whistle-blowing intention, with the specific query: do high levels of

organisational commitment, trust in management, perceived justice and

team leader support lead to greater internal whistle-blowing? Therefore,

the above model is proposed to seek and interpret explanatory results.

Wk

Organisational Commitment

Individual

Team Leader Support

Groupal

Justice Organisational

Trust in Management

Organisational

Wk= Type of recipient of whistle-blowing

W0 = general preparedness to whistle-blowing

W1= to colleague

W2= to immediate superior

W3= to internal auditor

W4= to Union

W5= to media – journalists

W6= to justice-lawyers

Page | 34

3. Case Scenario: INDRA

The case scenario of research is INDRA. This Spanish multinational

founded in 1993 can be described as a global technologic and innovation

company whose distinctiveness lies in its high value-added solutions and

services. INDRA operates in more than 128 countries and has more than

42,000 employees worldwide. The sections in which the company could

be divided are Transport and Traffic, Energy and Industry, Public

Administration, Healthcare, Financial Services, Security and Defence,

and Telecom and Media. INDRA´s knowledge of different sectors has

allowed it to develop innovative solutions that have successfully met the

expectations of customers reaching the number of €3.000bn in revenues

during 2012 (INDRA website, 2013).

In dealing with ethical and sustainability standards, INDRA is member of

Dow Jones Sustainability Indexes. What is more, it is the only Spanish

firm acknowledged one of the “World’s Most Ethical Companies” (2011)

by the Ethisphere Institute and, in 2013, was awarded “Best Large

Company” at CSR European Awards.

To mention just three examples of INDRA projects across the globe, the

company participates in the construction of two new airports in Ukraine, a

Smart-City plan in Barcelona and the new EU Emergency System

(INDRA website, 2013).

“The company’s long-standing commitment to innovation has allowed us

to improve our competitiveness year after year and continue to maintain

our profile as a company with sustainable growth. In fact, the company

invests between 6-8% of revenue in innovation per year (more than

€550m in the last three years) and has carried out 270 R&D&I projects.

Therefore, innovation constitutes the cornerstone of INDRA's strategy in

such a way that we have been able to adapt swiftly to our customers’

needs, without forgetting our clear commitment to nurturing talent. To

maintain our position as one of the companies most committed to

Page | 35

innovation, it is necessary to capitalise on all available talent, which

requires creating a multidisciplinary, global cooperation network” (INDRA

website, 2013).

INDRA, being a large multinational organisation with thousands of

employees, has a highly complex network of employees, mainly

engineers allocated across the world. Despite having central

headquarters and other core departments in Spain –e.g. accountability,

HR, the operational degree of decentralisation is remarkable, thus

employees and managers rely heavily on virtual working. Another

commonly used strategy is working in project teams, which means that

for determined tasks people gather together but that does not constitute a

formal area within the organisation scheme (INDRA website, 2013).

Current problems of large organisations are the impossibility of controlling

every single employee or supplier in their massive worldwide networks

(Vandekerckhove & Commers, 2004)). As a result, we have witness

iconic companies that have been ethically compromised, for instance, the

food industry during the horsemeat crisis or the Libor scandal involving

the “fat cats” of banking– Barclays, HSBC, and RBS. Not exempt of these

challenges, INDRA launched a new Code of Ethics in 2009, where

institutionalised whistle-blowing has a key role, fostering an

organisational change to avoid unethical behaviours and to nurture talent.

Figure 2 provides a summary of the Code of Ethics and Compliance

mechanisms (INDRA website, 2013).

Code of Ethics

INDRA’s Code of Ethics and Professional Conduct is based on a series

of principles that stem from the corporate values: determination, rigour,

sensibility and originality (INDRA website, 2013).

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Figure 2: Code of Ethics and Compliance Mechanism

The work principles for INDRA are: Integrity (e.g. respect for the rules,

refusing bribery or gifts); Professionalism (e.g. standards of quality,

proactive, and impartiality) and Respect (e.g. equal opportunities,

environment, privacy).

Institutionalised Channels of whistle-blowing

-Direct Channel: The direct channel serves to be informed about the

Code of Ethics and Professional Conduct and to communicate

irregularities about its application in a completely confidential way, but not

anonymous.

The Direct Channel is available to professionals as a confidential method

of communicating with the Tracking Committee for the Code of Ethics

and Professional Conduct on any questions that may arise about how to

interpret or apply this code. This channel is also available for

professionals to report on any actions they observe that do not comply

with INDRA’s Code of Ethics (INDRA website, 2013).

-Compliance Office

The compliance office consists of a team in charge for investigating

activities, behaviours and projects and its degree of adequacy to

Code of Ethics

Training

Wrongdoing

Reporting

Direct Channel - Compliance Office

Tracking Committee

Audition and Compliance Committee

Page | 37

INDRA´s regulations. Any inquiry or report in terms of wrongdoing may

also be addressed to this office (INDRA website, 2013).

Tracking Committee for the Code of Ethics and Professional Conduct

Once the alleged improper conduct has been reported through the Direct

Channel or Compliance Office, the Tracking Committee will issue a report

that will declare whether it has detected that improper conduct violating

the principles and conduct set forth in the Code of Ethics and

Professional Conduct has indeed taken place. In this case, HR

management will be notified, and it will determine whether disciplinary

proceedings will be taken or sanctions issued in accordance with the

labour regulations in force. However, administrative, judicial or other

types of responsibilities may apply likewise (INDRA website, 2013).

Audit and Compliance Committee

This Committee proposed the new Code of Ethics and Professional

Conduct as well as the Direct Channel. The Committee will regularly

analyse the level of implementation of the Ethics Code in INDRA,

particularly in international divisions, the communication tools utilised and

training programmes. Also, the Committee supervise overall reported

wrongdoing, the Tracking Committee resolutions and the role of Channel

Direct as a communication tool in such reports (INDRA website, 2013).

Training

Training content consists of knowing the Ethical Code and how Channel

Direct works, as well as the Compliance Programme, which is an

extension of the most critical points of Ethical Code –e.g. information

confidentiality, data protection, anticorruption and bribery. The training

focuses on what must be done in case of doubt or report of wrongdoing

and the available institutionalised channels –Direct Channel and

Compliance Office, via email or phone. There are two types of training:

in-person for top and middle managers, and online for front-line

employees. The training is carried out on a regular-basis employees

participate in the programme every two years (INDRA website, 2013).

Page | 38

The notion of institutionalised whistle-blowing through Direct Channel or

Compliance Office is the point of interest of this investigation, given that

INDRA has identified it as one of the strategic priorities to foster its

organisational change (INDRA website, 2013).

But, since the company has been working in the topic of institutionalised

whistle-blowing for over four years, the time has come to try to

explore the impact that such actions have upon the behaviour and

intention of the employees. With this goal in mind, INDRA’s

organisational culture serves as the scenario case to investigate the

research questions.

Page | 39

4. Methodology

It was mentioned in the Introduction that the main objective of this

research is to explore employee loyalty through linkages between

whistle-blowing intention and organisational factors with the specific

query: Do high levels of organisational commitment, trust in

management, perceived justice and team leader support lead to greater

internal whistle-blowing?

Therefore, a quantitative research was conducted. Since our interest

embrace four independent variables (organisational commitment, trust in

management, team leader support and justice), we use as a main

source of information a cross-sectional self-reported survey that

measured the mentioned four variables as well as the intention on

whistle-blowing among INDRA´s employees.

The use of SPSS, for processing the survey, facilitates the development

of concepts and the progressive integration of them into a scheme

that accounts for how organisational aspects influence whistle-blowing

intention which is the contribution to the present literature.

The project was aimed at INDRA employees from 7 different countries:

Spain, Peru, Colombia, Argentina, Chile, México and Brazil. Thus the

target was clearly limited in exploring the views of employees of a large

Spanish multinational company located in different countries. A popular

academic survey tool so-called Qualtrics was utilised to create the

questionnaire. .

4.1. Sampling choices

In order to control the variable of organisational position which was

positively related to whistle-blowing (Miceli and Near, 1984), we planned

to have different hierarchical positions in the company represented –the

top manager, middle manager and front-line manager- and at the same

include time variable control. For this reason, the probabilistic method of

Stratified Random Sampling, also sometimes

Page | 40

called proportional or quota random sampling, was selected because

matched with our goal dividing the population of INDRA’s employees into

homogeneous subgroups, and then taking a simple random sample in

each subgroup.

There were several major reasons why we preferred stratified sampling

over simple random sampling. Apart from the control variable function,

this method assured that the results would be able to represent the

overall population as well as key subgroups of the population, especially

small minority groups. Therefore, this sample technique allowed the

generalisation of the results to the entire organisation.

The process was led by INDRA’s representatives in each selected

country where they had to carry out the sampling following the researcher

instructions. Firstly, it took place the division of the population into non-

overlapping groups (i.e., strata) of top managers, middle managers and

front-line employees. Then a simple random sample was conducted

through Excel software which generated random numbers for random

selection.

Considering the above procedures some of the countries could not be

matched at all -that was the case of Argentina, Chile, Brazil, Colombia

and Mexico- leaving only Spain and Peru. As a result, the sampling

frame for the research consists of 1322 individuals working in three

different hierarchical levels –top manager, middle manager and front-line

employee- across 2 countries.

Consequently, the study was carried out in a sample of 257 individuals

from Spain (78%) and Peru (22%). A total of 26% of the individuals in the

sample had been in the company for 10 years or more, and 24%

between 5 and 10 years which suggested a relatively stable

workforce. In terms of gender, the majority of the sample was male

(73%), which approximately correspond to the gender division of

technically focused jobs. There were 180 (72%) non-managerial

Page | 41

employees and the rest were 71 divided into middle managers (25%) and

top managers (3%).

4.2. Data collection

The original planning was to publish the questionnaire during mid July

after receiving the employees’ emails list from INDRA. Following the

procedure agreed with the company, every National Communication

Officer had to send the list of employees to the Spanish Communication

Officer who was INDRA’s coordinator for this project. Later on, each

National Communication Officer had to sent an email informing the

selected employees in their countries about the project and motivating

them to participate. Accordingly the information recorded in INDRA, the

researcher was previously told that the frequent response rate to any

survey within the company was about 20%.

The questionnaire was finally published online on August 7th, 2013 after

gaining the ethical consent for data collection from the responsible

entities of Manchester Business School, The University of Manchester.

The questionnaire was developed in English for the purposes of

discussion with academic supervisor of the project and later on, through

back-to-back translation, it was translated in to Spanish for the targeted

demographic. Similarly, the questionnaire was developed through a tight

cooperation with the company representative in order to achieve a

friendly appearance according to INDRA’s organisation culture and

language.

The link to the online questionnaire, which included 41 questions (plus 5

demographics) divided into 7 main sections following the proposed

theoretical model, was distributed by the researcher emailing employees

and providing the hyperlink to respond. No definition of wrongdoing was

included in the survey as INDRA’s representative assumed a common

understanding of the term among employees owing to corporate training.

Page | 42

The overall anticipated sample size for the quantitative research was 150

respondents, so it was necessary to send the email to at least 750

employees taking into account the historical response rate. However, the

Peruvian list with 255 emails and the Spanish list with 1067 emails almost

doubled the minimum required. The collection of data through the online

questionnaire was closed on August 14th at noon with a considerably

higher close final response rate than the anticipated estimation of 257

19,44%.

4.3. Survey measures

Justice. According to Cohen-Charash and Spector (2001), there are two

main kinds of justice in organisational contexts: whereas procedural is the

perceived fairness of the process by which outcomes are arrived at, the

distributive justice consists of fairness in the distribution of rewards.

Consequently, perceived justice in the survey was composed by

procedural and distributive fairness scales. Procedural fairness was

measured by six items based on the scale of Jackson (2004). Example

items are: “Requests for clarification or additional information about

decisions made are met” and “Decisions are based on accurate

information”. Distributive fairness was measured by four items based on

the scale of Price and Mueller (1986, cited by Jackson, 2004), which

reflects “the allocation of rewards to individuals relative to their inputs and

to the rewards of others” (Jackson, 2004, p.25). Examples items were:

“Compared to others, I am well rewarded for the amount of effort I put

into my job” and “Compared to others, I am fairly rewarded for the work I

have done well”. The coefficient alpha index of scale reliability was 0.908

for the ten items of both scales.

Trust in management. Sztompka (1999, p.25) defined trust in

management as “the expectation that other people, or groups or

institutions with whom we get into contact – interact, cooperate – will act

in ways conducive to our well-being”. Five items were used to assess the

Page | 43

degree of employees’ trust in management based on Jackson (2004)

scale. The items were: “Management always act on decisions they

make”, “I can be open with management about my thoughts and

feelings”, “Managers have an open and honest style”, “Managers deal

with mistakes in a non-threatening manner”, and “By their actions,

management show they believe people are the company's most valuable

asset”. The coefficient alpha index of scale reliability was 0.92.

Team Leader Support. Jackson (2004, p.25) described team leader

support as “supportive supervisory style”. This construct was assessed

through five items. Respondents were asked whether their team leader:

“is friendly and approachable”, “makes sure I get the help I need to work

effectively”, “puts suggestions made by the team into operation”, “offers

new ideas for solving job-related problems” and “encourages people to

exchange opinions and ideas”. The coefficient alpha index of scale

reliability was 0.93.

Organisational Commitment. Meyer and Allen (1991, p.67, cited by Hart

and Thompson, 2007) described organisational commitment as "a

psychological state that characterizes the employee's relationship with

the organization, and has implications for the decision to continue or

discontinue membership in the organization". Organisational commitment

was assessed using the 9-item scale developed by Cook and Wall (1980,

cited by Jackson, 2004). This scale includes items assessing primarily

the strength of employees’ affective ties to the organisation (Jackson,

2004). Example items are: “I feel myself to be part of INDRA”, “The offer

of a bit more money with another employer would not seriously make me

think of changing my job” and “I would not recommend a close friend to

join INDRA” (reverse scored). The coefficient alpha index of scale

reliability was 0.70.

Whistle-blowing. Near and Miceli’s (1985, p.4) defined whistle-blowing 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

Page | 44

action”. In this study, whistle-blowing was assessed using target-specific

questions on whistle-blowing intention developed by Somers and Casal

(1994). The question was “In case you discovered wrongdoing, what

would be your degree of intention on reporting to ...” and each question

was completed with one of these six different recipients: “colleagues”,

“immediate superior”, “internal auditor”, “union”, “media” and “justice”.

Other questions were specially created for this survey and did not depend

on scales. The questions were “In which degree do you know the

procedure to blow the whistle in your company when wrongdoing occurs”,

“Have you ever reported any wrongdoing”, “Order from 1 to 5 the

following reasons to not blow the whistle” and “Do you think

organizational loyalty and whistle-blowing are incompatible”. Table 4

provides the structure of the survey with items and questions (see

Appendix 2 for the original survey).

Table 4: Survey Structure

Categories Questions

Organisational Commitment 9 (q. 1, 2, 3,4,5,6,7,8,9)

Team Leader Support 5 (q. 10, 11, 12, 13, 14)

Trust in Management 5 (q. 15, 16, 17, 18, 19)

Justice 10 (q. 20-29)

Knowledge of whistle-blowing channels 1 (q. 30)

Whistle-blowing intention 6 (q. 31, 32, 33, 34, 35, 36, 37)

Report of wrongdoing 1 (q. 38)

Obstacles to whistle-blowing 1 (q. 39)

Loyalty and Whistle-blowing

compatibility

2 (q. 40, 41)

Demographics 5 (q. 42, 43, 44, 45, 46)

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Every question in the four scales provided – justice, trust in

management, team leader support and organisational commitment- is

provided with a choice of answers in the format of a Likert scale where

Strongly Agree equals 1, Slightly Agree is 2, Neither agree nor disagree,

Slightly Disagree is 4 and Disagree is 5. Instead, whistle-blowing

questions have reversed scores in which 1 equals to Strong intention on

whistle-blowing, 2 corresponds to Slight intention, 3 is neutral, 4 is

Slightly Reluctant and 5 is Totally reluctant. Apart from that, there are

questions with a different set of answers:

- question 30 regarding the level of knowledge about internal channels of

whistle-blowing ranges from one star is zero knowledge, to five star

equals to full knowledge;

- questions 38 and 40 concerning reports of wrongdoing and

incompatibility between loyalty and whistle-blowing gave Yes (1) and No

(2) as options;

- question 39 about the main obstacles to report wrongdoings offered the

possibility to select from 1 to 5 the following options: fear of retaliation,

organisational loyalty, pressure with colleagues, lack of knowledge about

how to report wrongdoing and belief the whistle-blowing does not put an

end to wrongdoing;

- question 41 regarding the reason behind the answer to question 40

was open.

4.4. Exploratory Factor Analysis and Computed Variables and

Once the sampling was agreed, the next stage was to calculate the

different variables from the questions in the survey. For that purpose,

two different considerations were made. In terms of independent

variables, the aggregation of questions was established accordingly to

the four scales described in survey measures section: team leader

Page | 46

support, organisational commitment, justice and trust in management. On

the other hand, an Exploratory Factor Analysis was conducted to assess

the appropriateness of the questions into scales (see on the Appendix 2).

As a result, four factors were found although they did not correspond

exactly with the model. However, for the interest of this paper, the

reliance on the scales will prevail, while EFA findings will be discussed in

the limitations part.

Apart from the four independent variables as potential whistle-blowing

antecedents –organisational commitment, team leader support, trust in

management and justice- and the six variables in terms of whistle-

blowing reporting, a dichotomous variable was proposed called

Preparedness to Whistle-blowing. The intention of this new variable was

to assess a general level of preparedness of whistle-blowing among

employees. Essentially, this variable is not a sum of scores that would not

make sense due to target-specific nature of whistle-blowing, but a

register of high scores on whistle-blowing intention (1-strong intention on

whistle-blowing and 2-slight intention on whistle-blowing). As a

consequence, two groups are determined: one group has a general

preparedness to whistle-blowing based on one or several high scores on

whistle-blowing intention, and another which does not have this

preparedness because do not have any high score (strong or slightly)

Table 5 shows the list of computed variables.

Table 5: Computed variables from the survey

New Calculation Description

Organisational

Commitment

8-mean (q1-3, q5-q9) Belongingness and

attachment to the

company

Team Leader Support 5-mean (q10-q14) The perceived team leader

supportiveness to

employees

Justice 10-mean (q20-29) Procedural and Distributive

justice

Page | 47

Trust in Management 5-mean (15-19) Reliance on company

leadership

Whistle-blowing to

colleagues

Q 31 Internal channel; non-

institutionalised

Whistle-blowing to

supervisor

Q 32 Internal channel;

institutionalised

Whistle-blowing to

internal auditor

Q 33 Internal channel;

institutionalised

Whistle-blowing to Union Q 34 External channel; non-

institutionalised

Whistle-blowing to Media Q 35 External channel; non-

institutionalised

Whistle-blowing to Justice Q 36 External channel; non-

institutionalised

General Preparedness to

Whistle-blowing

Any tick on 1-2 (strong or

slightly intention on

whistle-blowing) in any

whistle-blowing question

counts as YES. Conversely,

the absence of any 1 or 2

tick equals to NO.

Favourable attitude to

whistle-blowing to some

targets within the company

Page | 48

5. Results

The introduction chapter referred to the expected result of this

research as the description of the relationship between whistle-blowing

and commitment, team leader support, justice, and trust in management.

We specifically aimed at exploring whether and how these four factors

lead to institutionalised internal whistle-blowing. The survey results also

reported information from employee’s perception of the implementation of

the new Code of Ethics and the available institutionalised channels of

reporting in INDRA.

5.1. Overview of Independent Variables

Table 6 gives a general description of the most relevant variables

independently. It can be seen that for the sample, the level of team leader

support is high (3.82 out of 5) whereas commitment, trust in management

and justice are slightly higher than average (2.5. out of 5). The results

confirmed that intention of whistle-blowing was target-specific (R2),

ranging from the highest level on 2 to the lowest level on 4,15, following

this order of decreasing intention: Immediate Superior > Colleagues >

Internal Auditor > Union > Justice > Media (it is important to remember

these items are reversed scored). Not surprisingly, media was the least

preferred recipient to whistle-blowing, and this result might be explained

by the sensationalist treatment of other whistle-blowing cases and the

media pressure on the company and employee in case of whistle-

blowing. Conversely, the fact that colleagues were placed between the

institutionalised channels of whistle-blowing such as the superior and

internal auditor brings a distinction that may be related to the seriousness

of wrongdoing, that is, internal auditor is seen as last resort for the most

serious wrongdoing –included supervisor’s wrongdoing- and thus

infrequent and distant recipient, whilst superior is a daily company

responsible to whom employees have contact with and is easy to be

accountable to.

Page | 49

Table 6: Descriptive Statistics of Independent and Dependent Variables

Mean Std. Dev. Mode

Whistle-blowing intention to colleagues 2,34 1,025 2

Whistle-blowing intention to immediate superior 2 0,884 2

Whistle-blowing intention to internal auditor 2,71 1,119 3

Whistle-blowing intention to Union 3,49 1,245 3

Whistle-blowing intention to media 4,15 1,105 5

Whistle-blowing intention to justice 3,82 1,071 5

Organisational Commitment 3,0792 0,63518 3,22

Team Leader Support 3,8276 0,95646 4

Trust in Management 2,9644 0,85895 3

Justice 2,811 0,67992 3

In response to the research question (R3), the results of computed

variable, Preparedness for Whistle-blowing, confirmed that employees

who were prepared to be a whistle-blower (77,3%) notably surpasses the

level of not prepared ones (22,7%). See Table 7.

Table 7: Frequencies of Preparedness for Whistle-blowing

Frecuencia Porcentaje Porcentaje

válido Porcentaje acumulado

Valid ,00 (NO) 58 22,7 22,7 22,7

1,00 (YES) 198 77,3 77,3 100,0

Total 256 100,0 100,0

As part of the first exploration of the data, a Pearson correlation of main

variables set was performed in order to find the relevant

correspondences. We can highlight, as a summary, the correlations

between W2 (to immediate superior) and W3 (to internal auditor) with

commitment, team leader support, trust in management and justice were

significant and positive. Instead, Wo (general preparedness to whistle-

blowing) only correlated significantly and positively with commitment and

Page | 50

team leader support. As a novelty, negative significant correlations were

found between commitment and all three external whistle-blowing

channels, between trust in management and W5 (to media) and W4(to

Union), and between Justice and W5 (to media).

Table 8: Summary of Correlations of Whistle-blowing intention in different

target

Commitment Team Leader

Support

Trust in Management

Justice

Wo - General Preparedness ,156* -,175* ,012 ,010

W1 - to other colleagues ,091 -,076 ,055 ,036

W2 - to immediate superior ,229* ,305** -,167* ,227**

W3 - to internal auditor ,299** ,235** ,224** ,245**

W4 - to the Union -,211* -,105 -,13* ,094

W5 - to Media -,259** -,031 -,135* -,127*

W6 - to Justice -,202** ,028 ,105 ,093

5.2. Regressions

Having looked at variables correlations, we focus on the main question

(R1) of this research which was the link between the whistle-blowing

intention and individual and situational factors (organisational

commitment, team leader support, justice and trust in management). In

the first stage, we observed several correlations between the four

variables and the seven types of whistle-blowing, which might lead to

discover potential predictors of whistle-blowing. In order to shed light on

it, a logistic regression analysis was performed. We hypothesized as

predictors of whistle-blowing commitment, team leader support, trust in

management, and justice; although just commitment and team leader

support had a previous correlation. The logistic regression analysis

illustrates that exclusively Team Leader Support and Commitment

appeared to explain the changes in the dependent variable (see Sig.

value in Table 9).

Page | 51

Table 9: Logistic Regressions of Preparedness for Whistle-blowing

Step 1

a B E.T. Wald gl Sig. Exp(B)

-1,016 0,266 14,636 1 ,000 0,362 Team _Leader_Support

-0,426 0,383 1,242 1 0,265 0,653 Trust_Management

Justice -0,225 0,485 0,215 1 0,643 0,799

Commitment 1,405 0,46 9,347 1 0,002 4,075

Constante 2,564 1,207 4,511 1 0,034 12,988

The fact that the two variables empirically acted as predictor of

preparedness gives coherence to the theoretical construct itself.

Confirming the correlations results, logistic regression evidences that

individual –commitment - and group antecedent – team leader support- of

the study were found factors to explain preparedness, instead of

organisational ones. The results indicated that commitment and team

leader support led to different degrees of whistle-blowing preparedness,

that is, a more positive or negative predisposition to whistle-blowing

intention, would depend on organisational commitment and team leader

support.

Going further it is necessary to turn into the target-specific (R2) results

between the four variables and whistle-blowing intention. Table 10 shows

these connections:

Page | 52

Table 10: Summary of Linear Regressions of Whistle-blowing intention in

different targets

Commitment Team Leader

Support

Trust in

Management

Justice

W1 ,161 ,134 ,871 ,942

W2 ,966 ,000** ,321 ,622

W3 ,022* ,038* ,444 ,767

W4 ,001** ,004** ,899 ,925

W5 ,000** ,047* ,484 ,859

W6 ,009** ,685 ,830 ,670

We used as predictors the four variables for each type of whistle-blowing

and we found that, similarly to the logistic regression, only Team Leader

Support and Organisational Commitment were actual significant

predictors in specific targets.

Team leader support predicted internal whistle-blowing to immediate

superior (W2) target, and less but significantly, to internal auditor (W3).

Externally, Team Leader Support acted as a powerful predictor to whistle-

blowing to the Union (W4) and. in inferior degree, to media (W5).

Regarding internal channels, organisational commitment only predicted

Targets

W1= to colleague

W2= to immediate superior

W3= to internal auditor

W4= to Union

W5= to media – journalists

W6= to justice-lawyers

Page | 53

whistle-blowing to internal auditor (W3) and to external channels the

predictor capacity is higher than Team leader support in all three

recipients: to Union (W4), Media (W5) and Justice (W6). These results

lead to the following model that Figure 2 provides.

Figure 3: Revised model of Whistle-blowing and Employee Loyalty

This model based on linear regressions supports the usefulness to study

different level variables in whistle-blowing intention as well as target-

specific recipients. Thanks to this design, it is possible to observe how

organisational commitment and team leader support have sharing and

balanced influence in different whistle-blowing targets such as Internal

Auditor, Union and Media -although in the last case organisational

commitment’s influence is manifestly superior. This combined influence

between attachment to the company and the relationship with your

superior match with the complexity associated to any difficult decision-

making such as blow or not blow the whistle.

As an unexpected result, the three external targets of whistle-blowing in

the study are somehow predicted by the mentioned pair of variables

(organisational commitment and team leader support). Whereas team

leader support and organisational commitment were both predictors to

Union and Media, only commitment was predictor for whistle-blowing to

justice. In order to explain it, we might turn into correlation results, and in

so doing we realised that previous correlations between this pair of

variables and the external targets were negative. Therefore, the complete

interpretation of the regressions might be: the lower level of

Page | 54

organisational commitment and team leader support, the higher

propensity employees have to use external channels to whistle-blowing.

This result reveals the unexplained importance about the polar opposites

of committed employees and employees who perceive high leader

support.

Statistically, a low R level of these regressions seems to be a flaw point,

that is, the selected variables only explain around 9-10% of overall

variance on whistle-blowing intentions. However, it must be considered

the extensive list of influencing factors on whistle-blowing noted in the

literature review -e.g. wrongdoing perception. Therefore, for the interest

of this research we focused on the causality relationships and the

significant regressions in team leader support and organisational

commitment which reached a satisfactory validity considering both

predictors of specific-target whistle-blowing. In order to explore a higher

percentage of the overall variance explained, a more extensive and

systematic study out of the limits of this work would be required.

5.3. Other findings

Although not related to the exploration of the relationship between

variables, some other results are worth mentioning in relation to INDRA’s

Ethical Programme and as a response to the research question (R6)

Firstly, 79% of respondents do not consider loyalty and whistle-blowing to

be incompatible which evidence the success of the INDRA’s new Code of

Ethics and also supports the Vandekerckhove & Commers’ definition

(2004) of rational loyalty. Secondly, 17% of employees admitted to have

reported a wrongdoing similarly to meta-analysis summary of Burton and

Near (1995) where 21% of first-level managers; 18% of employees in the

nuclear industry and 10%-16% of scientists. Thirdly, the level of

knowledge about internal whistle-blowing channel is medium in

accordance with the result of 2,58 out of 5. Finally, the main obstacle

among employees to whistle-blowing accordingly to the survey lies in fear

Page | 55

of retaliation, which leads one to think that there is no a full reliance on

the institutionalised channels of reporting or the confidentiality of them.

Regarding demographic correlations and T-Tests, Table 11 gives

evidence of correlations between hierarchical position in the company

and whistle-blowing intention to internal auditor (positively) and Union

(negatively). That is, the higher the position is, the more prone one will be

to whistle-blowing to an internal auditor instead of their union. It seems

logical that front-line employees are more likely to report to their union

because of direct affiliation whereas managers whose goals are often

challenged by unions claims prefer to report to an internal auditor. In

terms of gender, there are positive correlations with whistle-blowing to

immediate superior (W2) and to Union (W4), in which males tend to

report more to both recipients. Among countries, a correlation with

whistle-blowing to the media has been found where Spanish employees

are more reluctant to blow the whistle to the press than Peruvian

employees. It could be due to the sway of the press and media, as well

as the different democratic development of both countries. No correlation

between tenure and whistle-blowing appeared to be in the results.

Table 11: Correlations between Whistle-blowing intention and Demographics

To other colleagues

To immediate superior

To internal auditor

To the Union To media To justice

Position -,111 ,063 ,259** -,189

** -,118 -,112

Gender -,045 ,127* -,023 -,130

* -,040 -,041

Country -,082 ,016 ,105 -,077 ,168** ,057

Tenure -,033 -,047 -,062 -,019 -,124 -,069

Page | 56

6. Discussion

The findings partially support the proposed research model on whistle-

blowing intention. While Team Leader Support –situational antecedent-

and Organisational Commitment – individual antecedent- have

statistically significant effect as predictors of whistle-blowing intention,

Trust in Management and Justice –both situational- do not have contrarily

to the hypothesis grounded on social-exchanged theory.

Although the positive relationship we found between organisational

commitment and internal whistle-blowing to internal auditor, Somers and

Casal (1994) determined a negative relationship where the most

committed employees were less prone to internally blow the whistle.

Such contradiction in the direction of the relationship may confirm the

noted transition of loyalty concept and whistle-blowing during last two

decades (Vandekerckhove & Commes, 2004), precisely the period of

time that separates both studies. As a consequence, Organisation Man

theory based on employee conformity -in vogue during 80s-90s- seems

to no longer be a symbol of loyalty. The Reformer Theory and those in

which internal whistle-blowing symbolised loyalist behaviours are more

according to new corporate cultures and ethical programmes such as

INDRA´s demonstrated.

Still within the explanation the findings which support the model, the

confirmation of team leader support as a precedent of internal whistle-

blowing coincides with previous research (Dworkin & Baucus, 1998; King,

1997). Likewise based on the social exchange theory, which suggests

that high level of supervisor support leads to norms of reciprocity which

develop trust in the channel an individual can use to report unethical

practices (Vadera et al. 2009). This last point is confirmed in detail

through our target-specific design where team leader support was a

predictor for both targets the immediate superior –the person- and

internal auditor –the channel.

Turning to external whistle-blowing now, these results are unexpected

because the model only included positive relationships with internal

Page | 57

whistle-blowing (R1). However, the findings supported Dworkin & Baucus

request (1998) for different theoretical approaches to whistle-blowing

channels, internal and external, and were aligned to the research

question whether whistle-blowing was target-specific (R2). Apart from

being significant predictors for whistle-blowing to unions and the media

like other studies (Sims and Kennan, 1998; Starkey, 1998), the relevant

point here is how differently commitment and team leader support

influenced external and internal whistle-blowing intention. The

explanation may be found in the previous correlations performed in this

study between these two variables and whistle-blowing intention, where

significant negative relationships were assessed in external channels,

unlike positive relationships in internal.

Following these results, the reasoning is that polar opposite to a

committed employee who significantly tends to internally whistle-blowing

is a less committed employee more likely to externally whistle-blowing.

The same case exists of team leader support. Employees who perceive

high supportiveness from the company are significantly more prone to

internally whistle-blowing, whilst when this perception is low the external

whistle-blowing intention significantly increases. It seems that the degree

of “organisational socialization” –viewed as internalisation of company

values and supporting activities- determined two types of employee

alienation (Rosow, 1965): subversive –employees publicly and actively

opposing to their company– or alienated –employees passively detached

from the organisation. With regards to this, it seems plausible that low

levels of commitment and team leader support describe a low level of

“organisational socialization” which leads to subversive behaviours

among employees equal to blow the whistle to external recipients,

instead of passivity. This finding is paramount to redouble the critical

importance of both variables not only to foster institutionalised whistle-

blowing, but to avoid external one.

On the other hand, we expected positive results considering trust in

management and a sense of justice as predictors for internal whistle-

blowing according to the social exchange theory. That is, high levels of

Page | 58

perceived justice and trust employees were expected to report more to

institutionalised channels. In our view different explanations can be draw

from the lack of prediction capacity of both variables.

On the one hand, the lack of predictor capacity of trust management and

justice might be found that simply organisational level variables are

nothing but minor factors for whistle-blowing comparing to the individual

and group. This is certainly an argument against all of those studies that

have found perceived justice and trust contribute to discretionary helpful

behaviours such as reporting ethical problems to management. (e.g.

Treviño and Weaver, 2001; Vadera et al. 2009).

However, another option is not to discard justice and trust in

management in the whistle-blowing process and exploring other potential

effects. Previous studies have linked organisational features to whistle-

blowing (Treviño & Youngblood, 1990). For instance, Goldman (2001)

illustrated that distributive and procedural justice was negatively

associated to external whistle-blowing. Furthermore, several forms of

perceived justice have been introduced as stabilizing preconditions of

social exchange situations (Cohen-Charash & Spector, 2001). Therefore,

if we linki previous research with our findings in terms of significant

correlations –between these two variables and whistle-blowing intention-

and EFA results -which showed a high shared variance among the four

variables- we can theorize indirect effects between this two variables and

whistle-blowing. In this line, Konovsky and Pugh (1994) demonstrated

that trust is a key mediator of the effects that procedural and distributive

justice have on citizenship behaviours –e.g. internal whistle-blowing.

In dealing with demographics, we found significant correlations in terms

of gender, country and position in the company. The correlations between

country and whistle-blowing intention–to the media- may be explained

more for the reason that Spain is the country where INDRA is based,

while Peruvian employees are in a subsidiary division. However, we

should be cautious in our interpretation because of the characteristics of

the sample. For instance, the sample only included 6 top managers in

Page | 59

front of almost two hundred front-line employees, and there was an

unbalanced number of nationalities and uneven male/female ratio. What

is more, comparing to literature met-analysis results of Valdera (2009),

demographic variables have demonstrated inconsistent results and

mostly can be attributed to flaw research design. However, if we think

that there is little research conducted in Spanish-speaking countries, this

study’s results can be evaluated in a promising approach because and

more studies can contrast these results to obtain the actual weight of

cultural influence and headquarters/subsidiary country on whistle-blowing

intention.

Our results and previous research confirm the predictor role –target-

specific- of organisational commitment and team leader support on

whistle-blowing intention. However, from a loyal point of view, our

findings extended the relationship between these variables in considering

them predictors of loyal/disloyal behaviours. That is, high levels of both

commitment and supportiveness foster internal whistle-blowing, and low

levels serve to predict external one.

Above interpretations are grounded on two conditions: INDRA’s

organisational context where institutionalised whistle-blowing is promoted

–e.g. training, channels, Code of Ethics- and the fact that the sample was

of Spanish-speaking employees whose culture distinctiveness has not

been compared to English samples previously. Therefore the

generalisation of these results should take into account both conditions.

Page | 60

7. Limitations

Departing from the restriction of data to only two countries and

unbalanced number of nationalities, the cultural influence (Kennan, 2007)

could not been determined. In the same line, because of one-case

(company) research design, it did not allow to eliminate a potential

organisational bias (Kennan, 1991) in the results. To generalise the

results beyond INDRA, it should have been necessary to isolate

organisational weights with different companies.

Notice the researcher explained to all participants via email that they are

not directly connected to the company and the participants were asked to

answer truthfully without any pretence with the intention to fulfil company

expectations towards the results of the research. Nevertheless, a

possible limitation of data collection and quality –desirability bias- arises

when two emails were received from employees claiming not believe in

the anonymity of the survey.

Likewise, the lack of multi-method design –e.g. qualitative and

quantitative at the same time- avoided the advantages of quantitative and

qualitative research at the same time (Vadera et al. 2009). For instance, if

investigators were to conduct semi-structured interviews after

administering surveys, they would be able to clear up ambiguous

relationships, elaborate on the processes and mechanisms that underlie

the proposed framework and even look at factors that are difficult to

explore in surveys.

On the bright side, this research was favoured with the rare opportunity to

obtain access to multinational employees with freedom to inquire about

organisational factors, wrongdoing and whistle-blowing issues.

Page | 61

8. Conclusions and recommendations

Throughout this research we have expounded the transition of loyalty

concept regarding the relationship between whistle-blowing intention

and four organisational variables: commitment, team leader support, trust

in management and justice. There is a definitive answer to the initial

question of this study; it seems to be clear that organisational

commitment and team leader support are both predictors of internal and

external whistle-blowing intentions. While the high levels of commitment

and team leader support predict loyal behaviours of internal whistle-

blowing, low levels of any of both are antecedents of subversive or

disloyal attitudes materialized on external whistle-blowing.

Therefore, our proposed diagram of four predictors appears to be

effectively limited to two in the context of INDRA, and what is more, it is

confirmed by a clear majority of its employee the compatibility between

loyalty and whistle-blowing.

The main results of this investigation are detailed below:

- Team leader support, as a group variable, and organisational

commitment, as an individual variable, are predictors of internal and

external whistle-blowing.

- Both trust in management and justice are not predictors of neither

internal nor external whistle-blowing.

- The significant relationships found during the research are all target-

specific in line with previous studies.

-Despite findings in terms of demographics –position, gender and country

correlations- it is better to leave them just as variable controls because of

sample limitations and inconsistency with previous research

-The main deterrent to blow the whistle is the fear of retaliation and the

average of knowledge about institutionalised channels of whistle-blowing

is medium.

Page | 62

9. Further research and managerial implications

Originally, we suggested preserving a target-specific design and to

aggregate more multi-level variables in future research. Further, if

possible, multi-level variables according to Vadera et al. (2009) should

lead to an integration of the micro (individual) and the macro (situational)

factors influencing whistle-blowing to develop a "meso" (Rousseau, 1985;

cited by Vadera et al. 2009) theory of whistle-blowing. In so doing, it

would be possible to gain a true understanding of a phenomenon thanks

to a multi-level analysis (i.e., individual, group, organizational,

societal/institutional) and overcome several limitations of single-level

studies.

As a contribution to knowledge, the research explored loyalty construct

through a theoretical model that had been partially confirmed, where

internal whistle-blowing propensity found significant results with

organisational commitment and team leader support. Also, the inclusion

of different level variables to study whistle-blowing in both channels –

external and internal- led to discover the negative relationships of

organisational commitment and team leader support in terms of external

whistle-blowing. This finding has not been adequately reported in

previous research.

In dealing with managerial implications, this double influence of

organisational commitment and team leader support on whistle-blowing

(externally and internally) should be an important sign for mangers when

they seek to foster institutionalised whistle-blowing and reduce external

whistle-blowing.

With respect to INDRA, the results showed how the training content

should be based on eliminating fear of retaliation and improving

information about institutionalised channels. Other ways to improve the

implementation of its Code of Ethics and its credibility the publicity of

whistle-blower cases who had reported through institutionalised channels

without any further retaliation. Finally, taking into account the importance

Page | 63

of team leader roles for INDRA’s employees on reporting to internal

auditors and superiors, INDRA should try to link the managerial training

with non-managerial (it is currently separated). For instance, an option

can be common in-person sessions.

Page | 64

10. Ethics statement

The research has followed the ethical rules of University of Manchester

and the Manchester Business School Code of Conduct. Research

respondents were fully informed about the purposes of the research and

through their voluntary participation they therefore consented to data

provision and further analysis. All research data was handled with

anonymity and confidentiality.

Page | 65

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Appendices

Appendix 1: Exploratory Factor Analysis (EFA)

Exploratory Factor Analysis

Component

1 2 3 4 5

Q1_Commitment ,713

Q2_Rev_Commitment ,608

Q3_Rev ,532

Q4_Commitment ,636 ,470

Q5_Commitment ,587 ,456

Q6_Commitment ,467 ,404

Q8_Rev_Commitment ,596

Q9_Commitment ,437 ,438

Q10_Team Leader Support ,464 ,712

Q11_Team Leader Support ,582 ,682

Q12_Team Leader Support ,547 ,727

Q13_Team Leader Support ,536 ,673

Q14_Team Leader Support ,493 ,766

Q15_Trust in management ,777

Q16_Trust in management ,609

Q17_Trust in management ,772

Q18_Trust in management ,708

Q19_Trust in management ,775

Q20_Procedural Justice ,754

Q21_Procedural Justice - ,754

Q22_Procedural Justice - ,729

Q23_Procedural Justice - ,713

Q24_Procedural Justice- ,705

Q25_Procedural Justice ,781

Q26_Distributive Justice ,623 ,556

Q27_Distributive Justice- ,581 ,675

Q28_Distributive Justice- ,558 ,719

Q29_Distributive Justice- ,568 ,613

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Appendix 2: Survey

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