Whistleblowing and Sarbanes-Oxley This document will describe the key characteristics of a whistleblower and briefly summarize on researched instance of Whistleblowing in one publically traded company within the last 12 months. It will include the details of the issue that the whistleblower reported and the effect of the whistleblower’s actions on both herself and the company. Next, it will evaluate whether or not the whistleblower was justified in reporting the company’s actions. Lastly, it will examine the extent to which the whistleblower would be protected under the Sarbanes-Oxley Act.
Characteristics
For many years, individuals have raised concerns about misconduct, unethical or illegal practices observed at their place of employment to reporters/media, employers’ ethics hotline, management, via labor law posters, or the Office of the Whistleblower. This included employees from private companies, non-profit organizations, and governmental agencies. Employees can report unethical actions regarding public safety, health, business practices, fraud, waste, and abuse. Keep in mind that is does not have to be an employee; it can also be a supplier, contractor, client or any individual who somehow becomes aware of the illegal activities. Despite the fact that unethical behavior occurs within the workplace, there are still several employees that are loyal to the law, the community and society as a whole. These people are known as whistleblowers.
Publicly Traded Company One case in particular that was settled April 01, 2015, Kellogg Brown and Root – Halliburton (KBR) “a publicly traded, Houston-based energy company, paid $130,000 and agreed to cease-and-desist from practices that violated SEC whistleblower protections. The move is another indication that the SEC is taking the relatively nascent whistleblower program seriously and that companies need to examine their internal compliance, investigatory, and disciplinary policies.” (Joshpe, 2015). This is the “First-ever action against a company for stifling the whistleblowing process” (Ensign, 2015) During SEC’s investigation, it was revealed that employees were required to sign a confidentiality agreement which “prohibited disclosure of the subject matter or any details of the interview without prior authorization of the law department and subjected any offenders to discipline and potential termination” (Joshpe, 2015), which violated the Whistleblower Protection Rule. It was not substantiated that KBR restricted anyone from communicating with the Security and Exchange Commission (SEC), “the mere prospect was sufficient for the SEC to bring an enforcement action. As part of the order, KBR agreed to notify employees who previously signed these agreements of the order and to include additional language in future agreements” (Joshpe, 2015). It appears that this case is the tip of an iceberg! Private companies and organizations that have disclosure statements “that obstruct reporting fraud are rightly void as a matter of public policy” (Joshpe, 2015) and the SEC’s “fine in this case may have been nominal, but the message to companies should be clear: don’t get too cute in trying to muzzle potential whistleblowers” (Joshpe, 2015).
Justifying
Every year several whistleblower complaints are reported and investigated. It has been documented that in some cases a whistleblower may have false claims, however, in this case, I believe that the KBR employee did the right thing in reporting the unethical actions of the company. Yearly there are hundreds of “unsubstantiated cases, opponents of whistle-blowing feel the process is dangerous to the company as it gives disgruntled workers a forum to discredit their employers” (Unknown, 2010). Research has determined that there are some conditions which might help when determining whether or not an act of Whistleblowing is justified. It must be determined that it is a legitimate claim reported through the right channels, a valid motive, other alternatives have been exhausted, or would it do harm to the public.
Sarbanes-Oxley Act According to the 2002 Sarbanes-Oxley Act court ruling of 6-3, Whistleblowers have protection against companies, private contractor and subcontractors. Employees who reported that their business retaliated against them for reporting alleged misconduct can bring legal claims against their employer; I think this a tough discussion for the courts to justify and that a claimant should be protected before judgment being made. I believe that every employee has the freedom of speech, and they can speak up if any unjust is taking place in the work environment.
Conclusion
Every year whistleblower complaints are reported and investigated. Some of these investigated complaints are valid and has shined a light on the unethical activity performed by an organization, thus causing them to face major consequences for their actions. Whistleblowers have assisted in the uncovering of several wrong act performed by large corporations such as KBR, Inc. I have presented one of the most recent cases, explained the consequences of justifying the report and review the extent that a whistleblower would be protected under the Sarbanes-Oxley Act.
References
Ensign, R. L. (2015, April 01). SEC Charges KBR with Violating Whistleblower Protection Rule. Wall Street Journal .
Joshpe, B. (2015, April 02). SEC Sends A Message About Whistleblower Treatment. Forbes .
Unknown. (2010, July 11). When Is Whistle-Blowing Justified and When Is It Not? Word Press .