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Global Economics and the Impact of Whistleblowing

In: Business and Management

Submitted By Gamble
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Whistleblowing and the global impact.
Table of Contents

The importance and understanding of whistleblowing
The notion of whistleblowing Whistleblowing – an act of good will
Whistleblowing – an act of revenge
The role of the government
Government whistleblowing
How Snowden formed society


Whistleblowing, an act of certain controversy, has provided material for many a discussion. It has filled our newspapers, televisions and radios on a daily basis, since Wikileaks went public with its first act of exposing illegal activity. ‘Whistleblowing’ is a dynamic process involving at least three social actors; the wrongdoer, the whistleblower and the recipient, each of whom takes actions in response to the other’ (Near et al., p 509, 1996), while accepting the associated dangers and risks. Current events relating to Edward Snowden, Julian Assange and Bradley Manning have sparked intense debate throughout the world regarding policy changes, creation of new laws and the conduct of government and corporations. It is widely agreed that whistleblowing exists and happens on a daily basis. Scholars have examined the topic over the years narrowing it down to ethnical divergences or even to how the act of wrongdoing can impact a whistleblower.

The importance and understanding of whistleblowing

Age has a significant impact on the way an individual perceives situations and actions, indeed the way he looks at the world, due to experience, lifestyle and the effects of media. There are major differences between 18 year olds and 50 year olds when it comes to the influence of media. The scope and size of the Internet has grown from 16 million in 1995 to 2,749 million users in 2013. (Miniwatts Marketing Group, 2013) The older demographic still seeks print media for its daily dose of information, whereas younger individuals opt to use social media and television, which tend to lack political information. (Chaffee et al., p 48, 1996) The difference here is that virtual media is not based on facts, which shaped the minds of earlier generations, but more on opinions, which are now shaping the minds and decisions of the younger generation. They learn that most people ‘"cannot be trusted," and most people are "just looking out for themselves"’ (Bryant et. al., p 44, 2002) They have continuous news streams and since Snowden, Assange and many other whistleblowers have been main protagonists in newscasts and movies such as the ‘Fifth Estate’ they are highly informed regarding the aspect of whistleblowing. The downside is however that due to hearing little in fact, they may also obtain false information. Further, it is vital on analysing the importance of whistleblowing within different age groups that the lifestyles of each group be taken into consideration. 18-29 year olds are either in university or fresh on the job market making it easier for them to follow social responsibility and make the decision to expose a company, since no long standing relationships are involved and they feel more responsible for the larger scope of the world. Whereas, on the other hand the older demographic may have invested a life time in their career and although may feel a social responsibility to go public, decide to protect their wellbeing and remain silent.

The notion of ‘whistleblowing’

According to Miceli and Near whistleblowing is ‘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.” (Near et al., p 6, 1996) Many scholars have opposed this notion and used Hofstede’s Cultural dimensions to explain how a decision is made to commit the act of whistleblowing. Germany has a high power distance, which yields to a more ready acceptance of inequality and paternalism, making it susceptible to whistleblowing. One must however note that such generic theories cannot be applied across the border. (Tavakoli et al., p 49, 2003)

Whistleblowing – an act of good will

One cannot simply believe that throughout history people have blown the whistle out of pure good will, since psychological ambiguity and diverse points of view surround that specific individual. An increased tendency to whistleblow relies on how positively the act is considered in the nation, within the company, or amongst the surrounding individuals. That is, do the involved people consider it as the right and morally correct thing to do? (Tavakoli et al., p 51, 2003) One can agree that whistle blowers intend to detect and to systematically expose critical and questionable conditions in an institution no matter if it is in the company, government or military sector. Through the research conducted one can see that holding the idea of whistleblowing as a positive and nurturing benefit to society decreases as an individual’s age increases. However, the majority of the population, even though a decrease can be seen, believes that the highly critical act of whistle blowing and exposing the wrong doings of a firm or government happens as a result of good will and beneficial intentions. In the news the individuals are praised as noble characters, willing to make huge potential sacrifices in their professional life and simultaneously in their personal life to expose organizational practices that are wasteful, fraudulent, or harmful to internal and external safety. Mark Whitacre stated that ‘the FBI never forced (him) to do anything, from the beginning (he) was not comfortable with the idea of price-fixing, not only because it’s illegal but because (he) also believe(d) it’s the wrong way to do business’ (Lieber, p 11, 2000) Upheld with a noble status and quoted as though a hero, this explains how the younger demographic believes in the fundamental good of people and sees whistleblowing as a noble act. As argued in the previous paragraphs, the strong influence of social media over the younger generation can sometimes generate false impressions, making it more viable for notions such as whistleblowing to be upheld as positive. One observes this as one of the most significant trends establishing itself amongst the young; they perceive it to be their social responsibility and regard whistleblowing as an act of true courage. A poll from Quinnipiac University showed that an overwhelming 68% of 18-29 year old and 60% of 30-44 year olds regard Snowden as a whistleblower and not a traitor. (Quinnipiac University, 2013)

Young people tend to be inadequately informed without sufficient insight into the consequences such actions yield. They may well be highly respected by the public for their deed but will sacrifice their personal and professional life to a much higher degree.

Whistleblowing – an act of Revenge It is important to note whether the act of whistleblowing is contemplated out of an altruistic sense of morality, or as a mechanism for revenge. (Tavakoli et al., p 53, 2003) However, as stated before it is very difficult to determine something that is so ambiguous, and which has been justified solely through an individual’s opinion. The older demographic of people are convinced that the act of whistleblowing is not particularly a deed of beneficial nature. Many suggest that whistleblowers are, by and large, disgruntled employees who maliciously and recklessly accuse individuals they feel have wronged them in order to attain and achieve their own selfish goals using this specific unethical manner. Edward Morgan Forster stated “If I had to choose between betraying my country and betraying my friend, I hope I should have the guts to betray my country”; again illustrating how whistleblowing is a far more complex moral situation, than a simple ‘right or wrong’ (Bouville, p 579, 2008) The vast amount of the 40+ demographic believes that it is solely an act of revenge and that whistleblowers may often be wrong in their accusations and that their motives are not always pure and determined. Their actions can disrupt and in most cases destroy the natural and harmonic atmosphere in a well established workplace, and may cause serious harm to individuals wrongly accused. This clearly illustrates, as stated in various other paragraphs, that lifestyle and consequently one’s age have a vital impact on one’s social responsibility toward whistleblowing. The older demographics have carved out a solid career and are in an established work environment, which they most likely do not want to disrupt. However, when one’s critical voice, requests and opinions are neglected and ignored there is no choice left than to rigorously present those wrong doings to the public - not only in order for them to be heard and noticed but also to damage the company and to harm its existence. The younger demographic believe these actions are taken because one believes it to be a noble act and simply the right thing to do. In this sense, many whistleblowers can be characterized as reluctant dissenters, moved neither by altruistic nor selfish concerns, but rather by a tide of events over which they feel they have little control. (Rothschild et al., p 108, 1999) Therefore the divergence in trusting a whistleblower to have acted on pure and good motives is solely based on different ages.

It is therefore clear to see that the understanding and importance of whistleblowing varies between different age groups. Whilst the younger demographic views it as a vital tool to inform the population as their individual social responsibility, the older demographic has a firmer grasp on the concept and may see that individual social responsibility must be disregarded in order to maintain personal wellbeing.

The role of the government

Governments supply the population with rules and regulations to sustain a peaceful harmony, by which everyone must abide. They vouch to protect their citizens from any harm and to act in the interest of their people, and it is vital that the people living in the country are able to fully trust them. The question to be asked here is, what are the consequences not only for a citizen but also for the ruling party, when illegal activities are exposed within the parliament.

Government whistleblowing The most important thing is that ‘whistle blowing should have some definite goal, in the attempt to terminate the current wrong doing or prevent future wrong doing of a similar type’ (Near et al., p 508, 1996), meaning that each individual must first of all observe, rank and then choose the worst act to call out on. Most people believe this step for step process is most important in the government. Although there is very little empiric study on how age effects whistleblowing, one can conclude from the results that people of all ages believe that when primitive legal rights such as Human Rights, Civil Code or any other law regarding ones individual rights, is being violated it should be made known to the public since the government area is most important within all age groups. This is similar to the outcome of the survey conducted in the military base where 53% blew the whistle regarding legal violations (Van Scotter et al., p 223, 2004). If there is a case of illegal activity, people are interested to know about it. Much analysis from researchers in psychology and communication has concluded that media has a strong effect on political behaviour and fear about the social world. They learn that most people ‘"cannot be trusted," and most people are "just looking out for themselves"’ (Bryant et al., p 43, 2002). They continuously follow the news and since Snowden, Assange and many other whistleblowers have been the main protagonists of late, heralded in recent movies, such as the ‘Fifth Estate’, portraying Assange and the creation of Wikileaks, they are highly informed regarding the aspect of whistleblowing.

How Snowden formed society

The NSA was founded in 1952 and is one of the major intelligence organisations in the United States. It used to focus on overseas surveillance, rather than domestic activities, but today it is widely known as the mobile phone and Internet surveillance specialist of the United States. Recently the NSA became known for breaking international law and tapping into foreign telephone lines. The information regarding the NSA’s activities has been and is still being revealed through Edward Snowden, an exiled computer specialist and ex-employee of the NSA. He revealed files to the public regarding mass surveillance programs. (HOUSTON, 2013)

The issue for the public in this case refers mainly to corporate firms and the use of private surveillance or their usage of intelligence agencies such as the NSA. This has been a major concern for Internet users across the world. Companies and agencies are expected to stay within the legal boundaries, when it comes to Internet users’ data. But some documents released by Snowden suggest perspectives that those boundaries have been breached and broken. Documents supplied by Snowden show privacy breaches in the thousands each year through mass surveillances. (HOUSTON, 2013) (Ehrenfreund, 2013) The latest documents leaked by Snowden prove for example, that the NSA has been monitoring 35 world leaders and constantly recording not only their private phones but also their work ones. One of the leaders involved was the German Chancellor Angela Merkel who is now accusing the United States of breach of trust. According to her words: "We need to have trust in our allies and partners, and this must now be established once again. I repeat that spying among friends is not at all acceptable against anyone, and that goes for every citizen in Germany." (Ball, 2013) The other extreme leaked by Snowden, is that firms have been in cooperation with the NSA. Companies such as Google, Apple, Microsoft and Facebook have been supplying information, which they are not legally allowed to release without the user’s consent. (Greenberg, 2013)

Everyone must abide by the law

The tax-CDs contain stolen bank account information from accountholders who avoided tax paying. The government paid private persons millions of Euros for these CDs. One example would be that in 2008 the government paid 2.8 million Euros for a tax-CD from Lichtenstein. The revenue from the resulting prosecutions amounts to 200 million Euros. (Deutscher Bundestag, 2010) These CDs are mainly seminal and represent a huge easing factor in finding tax evaders and other individuals who are part of this criminal system. The CDs are nothing special, they are silver and usually have a diameter of approximately 12 centimetres but the prominent feature is their price. The price is created and based on the familiar proportion and relation of demand and offer. The more tax evaders listed on a CD and the more likely they are going to be detected by the state after the state completes the purchase, the higher the price.

1. Bryant et al.:
Bryant, Jennings, Zillmann, Dolf (2002). Media Effects - Advances in Theory and Research. 2nd ed. London: Lawrence Erlbaum Associates, Publishers. 43-62. 2. Lieber, James B. (2000). Rats in the Grain. New York: Four Walls Eight Windows. 14-22. 3. Zogby, John (2008). The Way We’ll Be: The Zogby Report on the Transformation of the American Dream. New York: Random House. 28-43

Journals: 1. Bouville, Mathieu. (2008). Whistle-blowing and morality. Journal of Business Ethics. 81 (3), 579-585. 2. Chaffee et al.:
Chaffee, Steven, Frank, Stacey. (1996). How Americans Get Political Information: Print versus Broadcast News. Annals of the American Academy of Political and Social Science. 546 (1), 48-58. 3. Liyanarachchi et al.:
Liyanarachchi, Gregory A., Adler, Ralph. (2011). Accountants’ whistle-blowing intentions : the impact of retaliation, age, and gender. Australian accounting review. 21 (2), 167-182. 4. Near et al.:
Near, Janet P., Miceli, Marcia P.. (1996). Whistle-Blowing: Myth and Reality. Journal of Management . 22 (3), 507-523. 5. Rothschild et al.:
Rothschild, Joyce, Miethe, Terance D.. (1999). Whistle-blower disclosures and management retaliation : the battle to control information about organization corruption. Work and occupations: an international sociological journal. 26 (1), 107-126 6. Slater, M. D. (2007), 'Reinforcing Spirals: The Mutual Influence of Media Selectivity and Media Effects and Their Impact on Individual Behavior and Social Identity', Communication Theory 17 (3) , 281—303

7. Tavakoli et al.:
Tavakoli, A. A., Keenan, John P., Crnjak-Karanovic, B.. (2003). Culture and Whistleblowing an Empirical Study of Croatian and United States Managers Utilizing Hofstede's Cultural Dimensions. Journal of Business Ethics. 43 (1/2), 49-64. 8. Van Scotter et al.:
Van Scotter, James R., Near, Janet P., Rehg, Michael T., Miceli, Marcia P.. (2004). Does Type of Wrongdoing Affect the Whistle-Blowing Process?. Business Ethics Quarterly. 14 (2), 219-242.

Websites: 1. Ball, James. (2013). NSA monitored calls of 35 world leaders after US official handed over contacts. Available: Last accessed 24th Oct 2013. 2. Bell, Melissa. (2011). WikiLeaks’s Guantanamo Bay files: the numbers and names to know. Available: Last accessed 20th Oct 2013. 3. Berkrot, Bill. (2009). Taking on corporate giants can feel like tilting at windmills, but John Kopchinski's six-year legal battle against Pfizer Inc just made him a rich man.. Available: Last accessed 24th Oct 2013. 4. CBSNews. (2009). The Man Who Figured Out Maddoff's Scheme. Available: Last accessed 26th Oct 2013. 5. Deutscher Bundestag, (2010), 200 Millionen Euro Einnahmen durch Steuer-CD aus Liechtenstein, Available: 15th September 2013 6. Ehrenfreud, Max. (2013). Leaks by Edward Snowden suggest NSA collects millions of Americans’ address books. Available: Last accessed 24th Oct 2013. 7. Greenberg, Andy. (2013). Ten Things We've Learned About The NSA From A Summer Of Snowden Leaks. Available: Last accessed 26th Oct 2013. 8. Government Accountability Project. (1977). What is a Whistleblower?. Available: Last accessed 26th Oct 2013. 9. Houston. (2013). Whistleblowers and the economy of esteem. Available: . Last accessed 26th Oct 2013. 10. Khatchadourian, Raffi. (2012). Profile: Wikileaks founder Julian Assange. Available: Last accessed 20th Oct 2013. 11. Leigh et al.:
Leigh, David, Davies, Nick. (2010). Afghanistan war logs: Massive leak of secret files exposes truth of occupation. Available: Last accessed 21th Oct 2013. 12. Mail Foreign Service . (2010). Is this fresh-faced U.S. soldier behind the biggest leak of military secrets of all time that puts our Afghan troops at risk? Read more: Available: Last accessed 27th Oct 2013. 13. Miniwatts Marketing Group. (2013). Internet World Statistics. Available: Last accessed 23th Oct 2013. 14. Peace & Progress. (2005). THE GREATER DANGER Balancing national security and human rights. Available: Last accessed 21st Oct 2013. 15. Quinnipiac University. (2013). U.S. Voters say Snowden is Whistleblower, not traitor, Quinnipiac University National poll finds; Big shift on Civil Libierties Vs. Counter-terrorism. Available: Last accessed 23rd Oct 2013. 16. Schwellenbach, Nick. (2011). Why Military Whistleblowers Fear Reprisal. Available: Last accessed 20th Oct 2013. 17. Wikileaks. (2002-2008). WikiLeaks Reveals Secret Files on All Guantánamo Prisoners. Available: Last accessed 19th Oct 2013. 18. Younge, Gary. (2013). The whistleblowers are the new generation of American patriots. Available: Last accessed 26th Oct 2013.

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...Director Notes From Enron To Lehman Brothers Lessons for Boards From Recent Corporate Governance Failures by Frederick D. Lipman In order for boards to fulfill their oversight obligations, the organizations they serve must have robust whistleblower and compliance policies and programs to encourage reporting that can help identify risk exposures, fraud, or other illegal activity. This report identifies common pitfalls in many current whistleblower and compliance programs, and it offers recommendations on how audit committees can strengthen them. Government investigations, bankruptcy receiver reports, and numerous books provide a rich source of information about the major corporate disasters of the first decade of the twenty-first century. Although the financial implosions, starting with Enron and ending with Lehman Brothers, have significant differences, one common corporate governance theme can be seen: The board, and, in particular, the independent directors, did not have the information required to properly perform their oversight duties, even though such information was known to various members of management. In almost all the cases, the directors claimed they were misinformed or “duped” by the CEO or CFO.1 In this respect, these disasters were partly the result of corporate governance failure and, in particular, a failure to establish a robust whistleblower system as an internal control. Those 1 Frederick Lipman, Whistleblowers: Incentives, Disincentives and......

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...Claremont Colleges Scholarship @ Claremont CMC Senior Theses CMC Student Scholarship 2012 Corporate Social Responsibility and Financial Performance: Does it Pay to Be Good? Harmony J. Palmer Claremont McKenna College Recommended Citation Palmer, Harmony J., "Corporate Social Responsibility and Financial Performance: Does it Pay to Be Good?" (2012). CMC Senior Theses. Paper 529. This Open Access Senior Thesis is brought to you by Scholarship@Claremont. It has been accepted for inclusion in this collection by an authorized administrator. For more information, please contact CLAREMONT McKENNA COLLEGE CORPORATE SOCIAL RESPONSIBILITY AND FINANCIAL PERFORMANCE: DOES IT PAY TO BE GOOD? SUBMITTED TO PROFESSOR MATTHEW MAGILKE AND DEAN GREGORY HESS BY HARMONY J. PALMER FOR SENIOR THESIS FALL 2012 DECEMBER 3, 2012 Acknowledgements I have many people to thank for their help with this study. First and foremost, I want to thank my thesis reader, Professor Magilke, for all his help. This study would have be quite difference without his constant guidance and our numerous meetings and e-mail exchanges. Second, I would like to thank Mary Martin, the Reference & Instruction Librarian for Business and Law, at the Claremont Colleges Library. Obtaining the CSR data would not have been possible without her help and the library’s funding. Third, I want to thank the Kravis Leadership......

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