WHISTLE BLOWINGPRESENTING BY R. AYYAPPAN K.A GOPINATH M. KARTHIK J. KARUNANIDHI S. MAHENDRAN MOHAMED NAUFAL (07 MBA 020) (07 MBA 039) (07 MBA050) (07 MBA 053) (07 MBA 059) (07 MBA 063)

WHISTLE BLOWINGGGGGGGGGGAn exploration into what makes some employees blow the whistle against wrong practices and corruption in the organization, how it impacts the organization and the whistle blower, and what organizations can do to create an environment which helps employees to prevent organizationally and socially undesirable practices.

Whistle Blower An individuals who report unethical practices by their employer to

outsiders.

Encouraging Internal Whistleblowing in Organizations TIME MAGAZINE CASE: When Time magazine editors named WorldCom's Cynthia Cooper and Enron's Sherron Watkins two of their People of the Year for 2002, they were acknowledging the importance of internal whistleblowersemployees who bring wrong doing at their own organizations to the attention of superiors.

At WorldCom, Cooper pushed forward with an

internal audit, alerting the Board of Directors Auditing Committee to problems, despite being asked by the company's CFO to postpone her investigation.

(Encouraging Internal Whistleblowing in Organizations. Continuation.) According to Fortune magazine, "If Cooper had been a good

soldier, the whole incredible mess might have been concealed forever." At Enron, accountant Sherron Watkins outlined the company's problems in a memo to then-CEO Kenneth Lay.

But by the time Watkins and Cooper blew the whistle, much

damage had already been done, and the shareholders and employees were the ultimate losers.

So the question is, How does an organization create a culture

that encourages employees to ask questions earlyto point out issues and show courage in confronting unethical or illegal practices? taken? In other words, how does an organization encourage internal whistle blowing?

And then how can a company ensure that timely action is

Attitudes Toward Whistle blowing

These questions must be answered in the context of

conflicting cultural norms, which make it likely that whistleblowers will encounter hostility and alienation.

As Terance Miethe explains in his book, Whistle

blowing at Work, many people see the whistleblower as a "snitch," or a "a lowlife who betrays a sacred trust largely for personal gain."

This attitude was illustrated by an arbitrator in a 1972

case, who told the employee that you cannot "bite the hand that feeds you and insist on staying on for the banquet.

(Attitudes Toward Whistleblowing continuation )

illustrating yet another instance of the animus

whistleblowers have to expect from advocates of loyalty to the organization first. and Karen Silkwood are seen as "saviors" who ultimately helped create important changes in organizations.

On the flip side, whistleblowers such as Frank Serpico

This approach to whistleblowers as guardians of public

accountability is often taken by consumer advocates such as Ralph Nader. encounter difficulties when they appeal internally or go public with information that may damage their

Given this dichotomy, whistleblowers may well

The legal situation Does the law side with the whistleblower or with the

employer? English law has an implied common law duty not to misuse confidential information belonging to the employer and this duty may continue after the employment has finished.

Since there are practical problems in taking legal action

against ex-employees, the employer's best option is to seek from employees an express restraint clause.

An exception is made when disclosure is in the public

interest. In the 1968 case of Initial Services Ltd. vs Putterill, Putterill had resigned as sales manager and then handed to the Daily Mail documents providing details of an unlawful price protection ring involving the employers and of price rises attributed to employment tax in order to disguise higher profits.

(The legal situation continuation..)

Lord Denning held that the public interest exception to

the duty of confidence extended to '...any misconduct of such a nature that it ought to be disclosed to others... misdeeds, both those actually committed as well as those in contemplation. oil rigs - The Offshore Safety (Protection against victimisation) Act 1992.

The exception should extend to crimes, frauds and

The only legislation to support whistleblowing concerns

Offshore workers dismissed for raising valid concerns

could now make a complaint of unfair dismissal to an industrial tribunal.

A code of ethics for whistleblowers Norman Bowie lists his requirements of justifiable acts of whistleblowing:1. The whistleblowing stems from the moral

motive of preventing unnecessary harm to others. internal procedures for rectifying the problem before making public disclosure. (This may be precluded under certain special circumstances.) persuade a reasonable person.

2. The whistleblower has used all the available

3. The whistle blower has evidence that would

(A code of ethics for whistleblowers continuation)4. The whistleblower perceives serious danger

from The violation.5. The whistleblower acts in accordance with

responsibilities for avoiding and/ or exposing moral Violations.6. The whistleblowers action has reasonable

chance of success.

To Prevent Whistleblowing, Encourage WhistleblowingAs the preceding sections illustrate, whistleblowing to

an external entity, such as the media or government agencies, has been a hazardous activity, both for the individual and the organization.The ambivalent attitude toward whistleblowers

ensures that, even with legal protection, they may face retaliation in subtle ways: being shunned by coworkers, being closely supervised, or just feeling alienated.

(To Prevent Whistleblowing, Encourage Whistleblowing continuation.)So, the question is, How do organizations

encourage internal whistleblowingthat is, to an authority within the organizationto preclude external whistleblowing and the resulting damage to an organization? encouraging employees to bring unethical or illegal practices to the forefront and addressing them before they become fatal to an organization.

This section provides some best practices for

The objectives of an internal whistleblowing program areTo encourage employees to bring ethical and legal

violations they are aware of to an internal authority so that action can be taken immediately to resolve the problem damage that can occur when employees circumvent internal mechanisms about adherence to codes of conduct

To minimize the organization's exposure to the

To let employees know the organization is serious

The barriers to a successful internal whistleblowing program A lack of trust in the internal system Unwillingness of employees to be "snitches" Misguided union solidarity Belief that management is not held to the same

standard

Fear of retaliation

(The barriers to a successful internal whistleblowing continuation)Although companies should seek to remove

these barriers, it is also important to acknowledge that some whistleblowers have less-than-honorable motives. What if the whistleblower is retaliating against a supervisor with false accusations? What if the whistleblower is bringing genuine problems to the fore but is also a subpar employee? In that case, does the whistleblower get a free pass just because he or she exposed an issue?

(The barriers to a successful internal whistleblowing continuation)What should be done when it becomes clear that

encouraging employees to bypass the proper channels is undermining management decision making? What if whistleblowers participated in the very actions they are now exposing, perhaps as a means of escaping the consequences of their participation? What if there is reason to suspect a whistleblower is targeting a specific employee because of his or her race, gender, or ethnicity? These are just a few of the issues to be considered in creating a whistleblowing culture.

Steps for Creating a Whistleblowing Culture Create a PolicyA policy about reporting illegal or unethical practices

should include

Formal mechanisms for reporting violations, such as

hotlines and mailboxes

Clear communications about the process of voicing

concerns, such as a specific chain of command, or the identification of a specific person in the organization, such as an ombudsman or a human resources professional

(Steps for Creating a Whistleblowing Culture continuation.)Clear communications about bans on

retaliation In addition, a clear connection should exist between an organization's code of ethics and performance measures. process, employees can be held accountable not only for meeting their goals and objectives but also for doing so in accordance with the stated values or business standards of the company.

For example, in the performance review

(Steps for Creating a Whistleblowing Culture continuation.) Get Endorsement From Top Management Top management, starting with the CEO, should demonstrate a strong commitment to encourage whistle blowing.This message must be communicated by

line managers at all levels, who are trained continuously in creating an open-door policy regarding employee complaints.

(Steps for Creating a Whistleblowing Culture continuation.) Publicize the Organization's Commitment To create a culture of openness and honesty, it is

important that employees hear about the policy regularly.

Top management should make every effort to talk

about the commitment to ethical behavior in memos, newsletters, and speeches to company personnel.

Publicly acknowledging and rewarding employees

who pinpoint ethical issues is one way to send the message that management is serious about addressing issues before they become endemic.

(Steps for Creating a Whistleblowing Culture continuation.) Investigate and Follow Up Managers should be required to investigate all

allegations promptly and thoroughly, and report the origins and the results of the investigation to a higher authority.

For example, at IBM, a long-standing open-door

policy requires that any complaint received must be investigated within a certain number of hours.

Inaction is the best way to create cynicism

about the seriousness of an organization's

(Steps for Creating a Whistleblowing Culture continuation.) Assess the Organization's Internal Whistleblowing SystemFind out employees' opinions about the

organization's culture vis--vis its commitment to ethics and values. For example, Sears conducts an annual employee survey related to ethics. Some questions are: Do you believe unethical issues are tolerated here?

Less than half of privately held businesses support whistleblowing

Less than half (45 per cent) of privately held

businesses (PHBs) globally have measures in place to accommodate potential whistleblowers, according to the Grant Thornton International Business Report. percentage (68 per cent) of businesses with support for whistleblowers, while with 29 per cent of businesses reporting positively, East Asia (excluding mainland China) has the lowest percentage.

Regionally, Latin America has the highest

Percentage of business providing support to potential whistleblowers regional comparisionLatin America

68

NAFTA

56

All Business

45EU

42East Asia

Brazilian PHBs are the top country to

accommodate whistleblowing (85 per cent) followed by Scandinavian economies Denmark and Sweden (both 71 per cent).

Greek businesses come at the bottom of the

table which just 18 per cent of PHBs dealing with whistleblowing, closely followed by three East Asian economies Taiwan (18 per cent), Hong Kong (20 per cent) and Japan (22 per cent).

Alex MacBeath, global leader- privately held

business services says, "Whistleblowing can be an invaluable way to alert management to poor business practice within the workplace.Often whistleblowing can be the only way

that information about issues such as rule breaking, criminal activity, cover-ups and fraud can be brought to management's attention before serious damage is suffered.

"Privately held businesses can greatly

benefit from introducing measures to accommodate potential whistleblowers within their organisation. whistleblowers can be victimised as informants or traitors rather than a valuable early warning system which can save lives, money and reputations. prevalent, risk is that they remain quiet or leave the organisation and the underlying issues remain undetected."

Without sufficient measures in place,

The other, and perhaps greater and more

Percentage of business providing support to potential whistleblowers top and bottom five countries

Brazil

85 Denmark

71 Sweden

71 Botswana

69 Philipines

67 All Business

45 Russia

22 Japan

ILLEGAL ACTIVITY

CONCERENED INDIVIDUALS OR GROUPS

RUMOURS

STAKE HOLDERS

WHISTLE BLOWING

ORGANIZATIONA L RESPONSE

Managing Whistle BlowingCorporate ethics policy Importance for ethics pronounced in recruitment and training Linkage of ethics and governance to performance and feedback Institutionalization - ethics officers, teams Audit teams - internal and external Mechanisms to aid anonymous reporting - email, telephone numbers.

Questions to ask before Blowing the WhistleIs this the only method ot resolve my concerns? Do I have the appropriate documentation and

evidence to prove my case?

What is my motivation for expressing concern

over employee or company activities?

Am I prepared to deal with the matter on both a

personal and professional level?

Conclusion

Given the prevalence of corporate

misconduct in the recent past, whistleblowing incidents have been on the rise.A 2002 article in Business Week called 2002

the "Year of the Whistleblower" and quoted Stephen Meagher, a former federal prosecutor who represents whistleblowers, as saying that "the business of whistleblowing is booming.

" This trend is likely to be bolstered by the

provisions of the Sarbanes-Oxley Act, which for the first time, accords legal protections to whistleblowers in publicly traded companies.This means organizations will have to institute

rigorous policies to allow employees to bring unethical and illegal practices to the forefront.

Companies will have to train managers and

executives on how to encourage openness, not unlike the sexual harassment training of a decade ago.

Putting processes in place will not be quick,

but it is certainly necessary given the increased public scrutiny of corporate behavior.