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Whistle Blowing

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What is a whistle blower?
What is a whistle blower? To the untrained eye, you may think that a whistle blower is a person who controls a sport or game with a loud device called whistle. In reality, a whistle blower has become an important part of the American business landscape. So what is a whistle blower? According to Blacks Law Dictionary, a whistleblower is an employee who turns against their superiors to bring a[n] problem out in the open. BusinessDictionary.com states that a whistle blower is a person who discloses improper or criminal activity within an organization. Finally, under Sarbanes Oxley, “A “whistleblower” is someone, usually an employee, who reports an employer who has broken the law to an outside agency.” Under this very important act, whistleblowers are protected by federal and state laws. Employers may not retaliate against them for reporting misconduct. Whistleblowers may not be fired or otherwise mistreated, and in some instances the government may reimburse them for costs incurred as a result of reporting. Most importantly, the federally enacted statute of Dodd – Frank defines a whistle blower as, “Any individual who provides . . . information relating to a violation of the securities laws to the Commission in a manner established, by rule or regulation, by the Commission.” There are two types of whistle blowers: external and internal. An internal whistle blower is a person who reports misconduct on a fellow employee or superior within their company. One important ethical question with respect to internal whistleblowers is why and under what circumstances people will either act on the spot to stop illegal and otherwise unacceptable behavior or report it? Conversely, an external whistle blower reports inappropriate conduct to an outside source. These sources include but are not limited to lawyers, the media, law enforcement or watchdog agencies, or other local, state, or federal agencies.
Whistle blower History In 1863, the United States government created the False Claims Act (revised in 1986), which tried to combat fraud by suppliers of the United States government during the Civil War. The act encouraged whistle blowing by promising them a portion of the funds recovered or damages won by the government and protects them from wrongful dismissal. the federal government was seeking a way to deter and punish unscrupulous profiteers who were providing substandard supplies to the Union Army. With the federal government’s energies and resources committed fully to the war effort, the False Claims Act empowered the citizenry to assist the government in ferreting out those who, in the words of President Lincoln, “feast and fatten on the misfortunes of the nation while patriotic blood is crimsoning the plains of the South.” The False Claims Act allowed the whistleblower to collect half of the money recovered by the government. The Act remained the same until 1943. Unfortunately, claimants under the Act learned that they could copy their civil fraud allegations from federal criminal indictments. The people filing the suits had no independent knowledge of the wrongdoing. This matter was taken before the United States Supreme Court. In United States ex rel. Marcus v. Hess, 317 U.S. 537, 541 (1943), the U.S. Supreme Court ruled that such “parasitic” or “copycat” suits were not barred by the False Claims Act, Congress amended the Act in two significant ways.
To combat this judicial decision, Congress enacted a “government knowledge bar” which prevented whistleblowers from filing suit if the suit was based on information that was already known to the government. Second, Congress reduced the whistleblower’s share of the recovered proceeds from half to between ten and twenty – five percent.
The next primary piece of legislation to provide protection for employees was Llloyd – La Follete Act of 1912. This act provided protections to federal employees who provided information regarding abuses and controls to the federal government.
Today, the single most important piece of legislation involving whistle blowing is called the Frank Dodd Act. In response to a wave of corporate malfeasance, “on May 25, 2011 Dodd-Frank Act Section 922 requires the Securities and Exchange Commission to establish a new whistleblower program that will pay awards, subject to certain limitations and conditions, to whistleblowers who voluntarily provide the SEC with original information about a violation of the securities laws that leads to a successful enforcement of an action brought by the SEC that results in monetary penalties exceeding $1,000,000. The amount of the award is required to equal 10-30% of the monetary sanction.” (AICPA, 2012).
This act is important because it supports anti – retaliation efforts for internal and external whistle blowers. Additionally, Dodd-Frank Section 728 requires the Commodities Futures Trading Commission to establish a whistleblower program similar to that required of the Sexurities and Exchange Commision. Hopefully, these measure will encourage whitsle blowers to speak up and prevent more corporate malfeasance such as Enron or Tyco.
Ethical challenges involved and what are the processes used to grapple with the issue?
Whistle blowing presents many ethical challenges. The most obvious ethical challenge is an employee who knows of wrongdoing within the organization. This employee must determine whether to blow the whistle, and to whom to blow the whistle against. The issue is problematic for employees because they may be fired for whistle blowing, become secluded from colleagues, lose the possibilities of promotion, loss of reputation and even, in some cases, risk of physical attacks or murder.
Although whistleblowers are often protected by law against retaliation from the employer, there have been many cases in which they have suffered consequences. or even harassed outside of the organization given the depth of the whistle blow. Secondly, the employee may not know who to blow the whistle against. The wrongdoing may occur across many organizations or people. Moreover, some of these people may be close friends of the whistle blower which further complicates the whistle blower’s motivation to actually protect the organization.
In 1998, Lynn Morgan was hired by the former corporation Enron as a senior specialist. As she worked at Enron that year, she noticed the Enron secured a loan from NationsBank using a natural gas deposit as security for the loan. The only problem was that Enron did not have the natural gas according to Texas state records. (Farrell, 2007).
The next moment presents a tremendous ethical problem for Lynn Morgan. She was newly hired and does not want to be a non – team player. At this point she has to decide whether to call the company out on this lie or move along with the loan as planned. She sided with her ethics and contacted her senior supervisor to report the problem. Unfortunately, many internal whistle blowers do not have the courage to follow in her footsteps. Congress recognizes this and placed important legislation to support people like Lynn Morgan.
Specifically, laws like Dodd – Frank, State legislators addressed the first issue by assuming most employees would choose to protect the organization and do the ethical action if they were protected from corporate or personal retaliation. (Near, 1987) In the banking case, courts in virtually all states recognize the public policy exception to employment at will or the importance of protecting employees who blow the whistle on wrongdoing; thus, the president has a basis for suing his former employer for wrongful discharge. (Near, 1987)
It is more difficult to determine who should be reported as the whistle blower. In some jurisdictions, it is mandated that the whistle blower report to someone outside the organization, such as the correct federal agency. On the other hand, other jurisdictions require reporting to some external party but are not clear as to who this party should be. (Near, 1987)
Again some jurisdictions require employees to report the problem internally before seeking external assistance (Near, 1987). As one can see, this presents tremendous pressure on the whistle blower as this person now must trust that the internal protocols will protect the whistle blower from retaliation. There are some laws that are silent on the whistle blowing requirements as there are varying legal requirements that all have important consequences for whistleblowers, since in many cases, employees who make the mistake of choosing the wrong person to report the problem to will not receive statutory protection from employer retaliation. (Dworkin and Callahan, 1991)
The choice of recipient matters, since it may influence the response of the organization to the whistleblower, the type of retaliation (if any) suffered, and the effectiveness of the whistle blowing. In other words, the choice of recipient may lead to significant variations in whistle blowing processes.
On the other hand, many anti – whistle blower organizations feel that whistle blowing encouragement is ethically correct, but also encourages employees to overreact to simple internal matters that may not even break the law.
What should a good manager do about whistle blowers
Management is about leadership in the face of tough decisions. It is always easy to lead when the road to success is paved with gold. However, it is more difficult to lead when that same road turns to uneven brick and rocks. As a manager of an organization, the manager must follow the appropriate protocol set forth by the organization, but ethics within the company must prevail over everything else.
The most important action that a manager can take to support whistle blowing is to communicate with his employees. In the article 5 steps to protect against whistle blowers, the author Mary Swanton opens the article by stating that “Recent studies indicate that employees have a pretty low opinion of their employers when it comes to the issues involved in whistleblower complaints. According to the National Business Ethics Survey, which the Ethics Resource Center released in January [2012], 13 percent of employees surveyed felt pressure to compromise standards, while 22 percent of those who reported misconduct said they were retaliated against. Thirty-four percent said their managers do not display ethical behavior.” (Swanton, 2012). She points out that the culture of the company may suggest reporting and compliance, in the day to day operations, this mindset is often overlooked to meet obligations. To protect against this problem, there must be a top down organization attitude that stresses the importance of “making the culture of compliance a strategic priority.” (Swanton, 2012).
The article further suggests appointing a middle man.

Bibliography

http://thelawdictionary.org/search2/?cx=partner-pub-4620319056007131%3A7293005414&cof=FORID%3A11&ie=UTF-8&q=whistle+blower.

http://www.businessdictionary.com/definition/whistle-blower.html#ixzz2DYOPDdQk.

http://www.legalmatch.com/law-library/article/corporate-whistleblower-protection-and-the-sarbanes-oxley-act.html.

--------------------------------------------
[ 1 ]. §21F(a)(6), 15 U.S.C. § 78u-6(a)(6). Frank Dodd Act.
[ 2 ]. Dealing with—or reporting—"unacceptable" behavior (with additional thoughts about the "Bystander Effect") Mary Rowe MIT, Linda Wilcox HMS, Howard Gadlin NIH (2009), Journal of the International Ombudsman Association 2(1), online at ombudsassociation.org
[ 3 ]. Dealing with—or reporting—"unacceptable" behavior (with additional thoughts about the "Bystander Effect") Mary Rowe MIT, Linda Wilcox HMS, Howard Gadlin NIH (2009), Journal of the International Ombudsman Association 2(1), online at ombudsassociation.org
[ 4 ]. United States ex rel. Marcus v. Hess, 317 U.S. 537, 541 (1943)
[ 5 ]. (Lloyd - La Follete Act, 1912).
[ 6 ]. http://www.aicpa.org/advocacy/issues/pages/whistleblowerrules.aspx
[ 7 ]. http://usatoday30.usatoday.com/money/companies/2007-10-11-enron-lynn-brewer_N.htm?csp=34&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+UsatodaycomMoney-TopStories+(Money+-+Top+Stories)
[ 8 ]. Dworkin, T. M. and J. P. Near: 1987, ‘Whistle blowing Statutes: Are They Working?’ American Business Law Journal 25(2), 241–264.
[ 9 ]. Dworkin, T. M. and J. P. Near: 1987, ‘Whistleblowing Statutes: Are They Working?’ American Business Law Journal 25(2), 241–264.
[ 10 ]. Dworkin, T. M. and J. P. Near: 1987, ‘Whistleblowing Statutes: Are They Working?’ American Business Law Journal 25(2), 241–264.
[ 11 ]. Callahan, E. S. and T. M. Dworkin: 1994, ‘Who Blows the Whistle to the Media, and Why: Organizational Characteristics of Media Whistleblowers’, American Business Law Journal 32, 151–184.
[ 12 ]. Callahan, E. S. and T. M. Dworkin: 1994, ‘Who Blows the Whistle to the Media, and Why: Organizational Characteristics of Media Whistleblowers’, American Business Law Journal 32, 151–184.
[ 13 ]. http://www.insidecounsel.com/2012/03/27/5-steps-to-protect-against-whistleblowers?t=department-management&page=2

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