Ethics and the conduct of business 8th by john boatright and smith 2017 chapter 4

Ethics and the Conduct of Business
Eighth edition

Chapter 4
Whistle-Blowing

Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved


Modules
• Introduction: Whistle-Blowing
• 4.1: What Is Whistle-Blowing?
• 4.2: Justification of Whistle-Blowing
• 4.3: Right to Blow the Whistle
• 4.4: Developing a Policy
• Conclusion: Whistle-Blowing

Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved


Learning Objectives
•

•

•

•

4.1: Define the significance of whistle-blowing and the act
itself according to seven criteria

4.2: Assess situations where whistle-blowing may or may
not be justified, given the duties and obligations of all
parties and the potential consequences of the act
4.3: Describe the characteristics and importance of laws
designed to protect whistle-blowers and key points in the
debate over the moral justification of these laws
4.4: Identify the importance of developing an effective
whistle-blowing policy for an organization and the key
components of such a policy

Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved


Introduction: Whistle-Blowing
• Time magazine’s persons of the year
• Similarities and differences
• Points to consider

Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved


4.1: What Is Whistle-Blowing?
Objective: Define the significance of whistle-blowing and the act itself according to seven
criteria

• What is whistle-blowing?
• Criteria for whistle-blowing

Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

Table 4.1: What Constitutes WhistleBlowing?
Criteria

Whistle-Blowing

Not Whistle-Blowing

Who can blow the whistle?

An individual inside an organization
exposes wrongdoing to the outside world.

A witness to a crime or a reporter

What kind of information
is involved?

Nonpublic information that reveals new
facts

Facts that are already known to the public

What is it reserved for?

Calling attention to matters of substantial
importance

Exposing matters of minor importance,
such as incompetent management

Who is informed and how?

External: An employee “goes public” to
inform individuals or groups outside the
organization.
Internal: An employee informs others
within the organization by going outside
normal channels of communication.

An employee follows established
procedures to report wrongdoing through
normal channels of communication.

What is the immediate
goal?

To correct a wrong by bringing about a
desired change

To pass on information about wrongdoing
to a supervisor, director, or a third party

Was the person compelled
to act?

The release of information is voluntary.

The testimony is legally compelled (by a
court of law).

What is the motive?

To stage a moral protest.

To seek revenge or personal
advancement

Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved


4.2: Justification of Whistle-Blowing (1 of
2)
Objective: Assess situations where whistle-blowing may or may not be justified, given the
duties and obligations of all parties and the potential consequences of the act

• 4.2.1: Loyal Agent Argument
– Agent and principal
– Limits to agency duties

• 4.2.2: Meaning of Loyalty
– Pertinent questions
– Loyalty

Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved


4.2: Justification of Whistle-Blowing (2 of
2)
Objective: Assess situations where whistle-blowing may or may not be justified, given the

duties and obligations of all parties and the potential consequences of the act

• 4.2.3: Conditions for Justification
–
–
–
–

Analyzing the situation
Taking action
Role-based responsibilities
Chances for success

Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved


4.3: Right to Blow the Whistle (1 of 2)
Objective: Describe the characteristics and importance of laws designed to protect
whistle-blowers and key points in the debate over the moral justification of these laws

• 4.3.1: Existing Legal Protection
–
–
–
–
–

Existing legal protection
Other federal acts with anti-retaliatory provisions
Sarbanes-Oxley Act

False Claims Act
The 2010 Wall Street Reform and Consumer Protection
Act

Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved


Table 4.2: Legal Protections for WhistleBlowers
Federal Laws

Provisions/Protections

The Sarbanes-Oxley Act of 2002

Prohibits retaliation against whistle-blowers who are
private sector employees, and entitles them to
compensation for retaliation
Requires all companies to have confidential reporting
procedures

The National Labor Relations Act of 1935 (NLRA)

Prohibits retaliation against any employee who files a
charge with the National Labor Relations Board (NLRB)

The False Claims Act

Entitles whistle-blowers to file a qui tam action against a
company and receive 10–30% of the funds recovered in
any suit, plus compensation for legal expenses

The 2010 Wall Street Reform and Consumer Protection
Act (Dodd-Frank Bill)

Strengthens protections in other laws and enforces new
provisions for financial markets
Entitles whistle-blowers to monetary awards for violations
of security laws and rules enforced by the new Consumer
Financial Protection Bureau
Creates a special SEC whistle-blower office

State laws

Most protect only state employees
Most specify whistle-blowing procedures and
requirements for protection

Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved


4.3: Right to Blow the Whistle (2 of 2)
Objective: Describe the characteristics and importance of laws designed to protect
whistle-blowers and key points in the debate over the moral justification of these laws

• 4.3.2: Arguments against Protection
– Encroach on the rights of employer
– Reinstatement

• 4.3.3: Arguments for Protection
– Contribution to the society

– Freedom of speech

Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved


4.4: Developing a Policy
Objective: Identify the importance of developing an effective whistle-blowing policy for an
organization and the key components of such a policy

• 4.4.1: Benefits and Dangers
– Benefits and dangers

• 4.4.2: Components of a Policy
– Clearly defined procedure for reporting
– Well-trained personnel to receive and investigate
reports
– Commitment to take appropriate action

Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved


Conclusion: Whistle-Blowing
• Whistle-blowing is ethical
• Under certain carefully specified conditions
• When revealed in a justified manner

Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved