by Tim Barnett, Assistant Professor of Management, Louisiana Tech University Sam Advanced Management Journal, Autumn, 1992, pp. 37-42
Whistleblowers, those individuals who call attention to possible wrongdoing within their organizations, are the subjects of much controversy. Some say that whistleblowers are noble characters, willing to sacrifice personally and professionally to expose organizational practices that are wasteful, fraudulent, or harmful to the public safety. Others suggest that whistleblowers are, by and large, disgruntled employees who maliciously and recklessly accuse individuals they feel have wronged them in order to attain their own selfish goals.
The truth, as is often the case, probably lies somewhere between these two extremes. Whistleblowers do call attention to genuine abuses of power by decision-makers in business and government. They do often suffer retaliation for their ethical resistance. However, whistleblowers may often be wrong in their accusations and their motives are not always pure. Their actions can disrupt a workplace, and may cause serious harm to individuals wrongly accused.
Whatever your personal view of whistleblowers and whistleblowing, as an organizational policy-maker you must consider the issue objectively. It is not an issue that can be ignored, due to the possible negative consequences for both your employees and your organization. For example, a recent review of whistleblowing incidents shows that among the whistleblowers surveyed, 62% lost their jobs, 18% felt that they were harassed or transferred, and 11% had their job responsibilities or salaries reduced. Fifty-one percent of the incidents resulted in external investigations of the companies involved, 37% in management shake-ups, 22% in criminal investigations, and 11% in indictrnents.[1] Although these outcomes may not be typical, they do point out the potential seriousness of whistle blowing.
Recent whistleblowing cases further demonstrate the potential problems facing companies that do not adequately address the issue. For example, after an employee of the entertainment company MCA notified his supervisor of a possiblc kickback scheme, he was fired. The employee filed a wrongful discharge suit, alleging that he was fired because of his attempt to stop the scheme. He recently received a favorable ruling in a California appellate court. In another California case, a jury awarded a former employee of a large drug company $17.5 million when he was fired after expressing concerns about product safety. Both companies have appealed the rulings.[2]
In each of these cases, the employee expressed concern about possible organizational wrongdoing to members of management, thus providing the company an opportunity to investigate and take corrective action if necessary. Yet, management was apparently unresponsive, even hostile, to the employees' concerns, with unfortunate results. What can you do to ensure that your company handles whistleblowing more effectively?
Whistleblowing research suggests several conditions that are necessary if whistleblowing is to be effectively managed. First, your employees must be informed of the appropriate steps to take in communicating their ethical concerns internally. Studies of federal government employees indicate that there is a significant association between employees' knowledge of appropriate internal channels and the likelihood that they will report perceived wrongdoings.[3] Second, your employees must believe that their concerns will be taken seriously and will be investigated. Studies suggest that many employees who first report their concerns internally later go outside the company with their information if they perceive their organizations to be unresponsive.[4] Third, your employees must feel confident that they will not suffer personal reprisals for using internal channels to report percieved wrongdoing. Whistleblowing studies suggest that employees who believe that management will retaliate for expressing concerns may be more likely to blow the whistle outside the organization.[5]
In this paper, I will argue that organizations should develop formal whistleblowing policies as a way to create the conditions necessary for the effective management of whistleblowing. These policies should provide standard guidelines within which organizations respond to the ethical or moral concerns of their employees. Whistleblowing policies should have the following components as a minimum:
I believe that the whistleblowing research mentioned earlier points to legal, practical, and ethical imperatives that compel organizations to develop whistleblowing policies. The following discussion explains why I believe this, and presents the legal, practical, and ethical imperatives that make whistleblowing policies advisable.
1. Increasing Federal protection for whistleblowers. Employees of most organizations are expressly guaranteed protection against reprisals from their employers when they disclose actions that violate specific federal statutes. Title VII of the Civil Rights Act, the Age Discrimination in Employment Act and the Occupational Safety and Health Act all contain anti-retaliation provisions.[6]
In addition, in 1989 President Bush signed a federal "Whistleblower's Protection Act" which extends protection available to federal employees who disclose government waste, fraud, and abuse. This law does not directly affect private sector employers. However, numerous legal scholars have recommended comprehensive federal legislation protecting both public and private sector whistleblowers. Congress is expected to consider legislation in 1992 that will extend federal whistleblower protection to private sector employees.[2]
2. The increasing number of state whistleblower protection laws. In the meantime, states are moving quickly to fill the void left by the lack of comprehensive federal legislation. Michigan passed the first "Whistleblower's Protection Law" in 1981, and the majority of states now have such statutes. Many of these apply equally to public and private sector employees. Most of these laws specify that employees have a right to report the illegal or illegitimate actions of their employers to regulatory agencies, government officials, law enforcement officials, and the like. They generally provide remedies, including reinstatement and back pay, for employees who can show that they have suffered adverse employment consequences as a result of their whistleblowing activities. Some states also allow successful plaintiffs to collect punitive damages. Organizations should be aware of the law regarding employee whistleblowers in states in which they operate.[7]
3. The increasing erosion of the employment-at-will doctrine. In addition to the legal trends toward whistleblower protection at the federal and state levels, the courts are increasingly recognizing exceptions to the traditional at-will doctrine which has governed most private sector employer-employee relationships for well over 100 years. For example, courts have found "implied contracts" in employee handbooks or in statements made by company officials when hiring individuals which limit the right to terminate except for"just cause." Some courts have found that some employers have shown "malice and bad faith" when discharging employees and have provided relief to the employees. Other courts have held that certain personnel decisions by employers violate "public policy" and that such actions are exceptions to the traditional doctrine of employment-at-will.[8] All of these exceptions have, in some jurisdictions, been cited to protect whistleblowers from discharge. The public policy exception probably offers the broadest potential protection for whistleblowers. Therefore, I will examine it in slightly more detail.
Essentially, the public policy exception means that employees performing acts that are consistent with public policy or refusing to perform acts that public policy discourages are protected against reprisals. The term "public policy" is vague, and has been interpreted differently by different courts. Some courts have ruled that the whistleblower who in good faith discloses perceived organizational wrongdoing is acting in a manner consistent with public policy, and therefore is protected from discharge. Other courts, however, have denied relief to whistleblowers, even while acknowledging that employers' disciplinary actions were unfair.[9]
So, while there is no certainty that at-will employees can find protection under one of the exceptions to the doctrine, courts in many jurisdictions have provided relief to whistleblowers. Organizations must be aware that even if there is no federal or state statute expressly protecting whistleblowers, there is a possibility that adverse personnel actions against whistleblowers may backfire because of the increasing limits the courts are placing on employment-at-will.
So what exactly is the legal innovative? Nothing in federal or state law, and no court decision, suggests that your organization is required to develop an internal whistleblowing policy. Does it follow that because whistleblowers may be protected from reprisals that your organization should have such a policy?
I believe it does. Research indicates that many organizations retaliate against whistleblowers.[10] In the absence of a clear organizational directive against such retaliation, it may happen in your cornpany. Such personnel actions may put your organization in violation of federal or state law protecting whistleblowers, or may make you vulnerable to employee lawsuits based on exceptions to the doctrine of employment-at-will.
Whatever your personal views toward whistleblowers, the prudent course is to formalize a stance toward whistleblowing that outlines your company's opposition to reprisals against whistleblowers. The legal imperative is to prevent adverse personnel decisions that may be linked to whistleblowing. Such retaliation, even when not specifically prohibited by law, has the potential for creating damaging lawsuits. A policy that expressly forbids such conduct is probably advisable for this reason alone.
1. The inevitability of wrongdoing. One executive, responding to my questions concerning whistleblowing policies, said words to this effect; "We don't have a policy. We don't have any need for one in our company, because no one is engaged in wrongdoing." This seems a particularly naive view considering what we know about the state of ethical behavior in business and government.
In a perfect world, wrongdoing would be nonexistent, employees would never disagree with the actions of organizational leaders on ethical or moral grounds. This is not a perfect world, however. Wrongdoing, or at least the perception of wrongdoing, is almost sure to occur. When it does, there are often employees who will desire to stop it. Whistleblowing policies that provide internal disclosure mechanisms for employees offer a viable alternative to employees who wish to express concerns of an ethical nature.
2. The likelihood of increased whistle blowing. Although empirical evidence is difficult to come by, there is a general perception that whistleblowing is on the rise, for several possible reasons.
First, there is a continuing problem of unethical conduct in business and government. One cannot read the newspaper or turn on the television without hearing of a new scandal, and there is little need to list the numerous well-publicized cases of recent years. We can probably assume that for every case of unethical behavior we hear about, many others do not make the headlines. It seems obvious that despite all the lip service we give to business ethics, we still have a long way to go to achieve ethical behavior in the workplace.
The second reason whistleblowing may be increasing is that our society seems to sanction blowing the whistle as a way to promote more ethical behavior in business. Big business and government are generally regarded as too powerful, and as exercising too much control over our lives. Whistleblowers are regarded as the underdogs, taking on powerful organizations for society's well-being. They are held up as heroic figures by the media Academics praise their actions and call for comprehensive protection for them. And, as they discussed earlier, such legal protection is indeed increasingly available.
Finally, the world is becoming increasingly complex. Business organizations must deal with diverse and demanding stakeholder groups. More and more conflict between business and these groups can be expected concerning controversial issues such as the environment, civil rights, product safety, animal rights, and many other issues. Employees who sympathize with activists in various interest groups may be torn between their feelings toward these groups and loyalty to their organizations. When confronted with ethical conflicts which force them to choose between competing loyalties, they may choose actions which are consistent with their perceived obligations to individuals and groups outside the organization.
3. The ineffectiveness of retaliation. Although it seems that organizations sometimes punish whistleblowers to silence them or to persuade other employees to keep silent, there is little if any empirical evidence that such tactics work. In fact, employees who blow the whistle to parties outside the organization generally do so because their efforts at internal resolution have been frustrated by unconcerned or hostile supervisors, top managers, etc. They are aware that their actions may bring adverse personal consequences, but are willing to run the risk to call attention to what they believe is morally or ethically unacceptable.
Whether whistleblowers' actions are justified or not, and whether their concerns are legitimate or not, retaliation accomplishes little and may cost much. It is simply not a viable long-terrn strategy for dealing with employee dissenters.
4. The potential for internal resolution. As the cases cited earlier clearly show, when organizational "dirty laundry" is exposed publicly, it can do great harm. The reputation of the firm suffers. The financial performance of the company may be affected. The organization may find itself sued by those who feel they have been harmed by the actions of the company.
Whistleblowing policies offer the opportunity for internal resolution of sensitive issues. Employees who use the internal channels established by such policies actually do organizations a great favor by giving them the chance to investigate employees' concerns before those concerns become public. If investigation reveals legitimate problems, at least organizations have the chance to correct them without the glare of publicity.
Many times, illegalities or morally dubious activities are taking place in organizations without the knowledge or consent of top executives. The internal communication channels established by whistleblowing policies may prevent top managemcnt from being blindsided by public disclosures of alleged wrongdoing.
Now we can define the practical iterative. You cannot expect that wrongdoing, or the perception of wrongdoing, can be entirely eliminated in your company, even if you develop ethics codes, preach ethical behavior to employees, and practice what you preach. If unethical behavior is occurring, the possibility of whistleblowing is very real. Neither taking an inactive stance toward whistleblowing, nor actively retaliating against employees who blow the whistle, are successful long-term strategies. Your organization should take proactive steps to resolve ethical and moral conflicts.
The practical imperative is to prevent public disclosure of alleged wrongdoing. Establishing a whistleblowing policy that creates internal communication channels through which employees can express their concerns about questionable activities is one of the more useful steps you can take to protect your organization from unexpected public disclosures. If employees can be persuaded that you are serious about responding to their ethical concerns, it seems unlikely they will feel compelled to blow the whistle on your company. Ethical problems may be solved internally, instead of showing up on the front pages and television news shows.
1. The potential for improving the ethical climate. I have already noted the continuing problem of unethical behavior in business and government. Many business leaders express concern about improving the ethical climate within their organizations but do not know how to do it. As academics, we have told executives to develop ethics codes which spell out standards of conduct. Many have done this, only to find that they seem to make little genuine difference in the behavior of employees. What else can be done?
I believe that whistleblowing policies can "put teeth" in ethics codes by institutionalizing both the process employees can use to share their ethical concerns and the process by which organizations respond. Effective whistleblowing policies may improve the ethical climate by increasing employees' confidence that their ethical concerns will be taken seriously and that they will not be punished for good-faith attempts to report perceived violations of the ethics code.
2. The need for fairness. Most companies develop a wide variety of policies concerning issues such as selection, performance appraisal, promotion, and compensation. One of the key reasons for developing such policies is the need to provide equitable treatment to employees. In other words, the objective of many personnel policies is to ensure that employees are treated fairly.
Whistleblowing policies also should be motivated by the desire to treat employees fairly. First, individuals concerned about possible wrongdoing within the organization, who honestly express their concerns, should be treated fairly. Those who find themselves the target of whistleblowers' accusations should be treated fairly. Whistleblowing policies can help ensure that all employees concerned receive equitable treatment by standardizing the way such situations are handled.
Whistleblowing policies can also ensure that employees' right to free speech isn't violated. This right is not absolute. Employees do not have the right to make malicious or irresponsible charges of wrongdoing that are not supported by facts. They do not have the right to disrupt the workplace just because they think organizational actions are unwise or because they disagree with company policy. But they should not be expected to go along silently when they are aware of probable wrongdoing, or when they are asked to do something they feel violates the law or generally accepted moral standards.
Recognizing employees' right to speech does not imply that organizational leaders must abandon traditional authority structures or abdicate their responsibilities as managers. What it does mean is that organizations recognize employees' legitimate right to express concerns with organizational practices that they believe violate the law or generally accepted moral standards.
Now we can summarize the ethical imperative. It is a rare organization indeed that does not pay lip service to ethical conduct among its employees. And yet we are constantly besieged by reports of scandals in business and government. Obviously, more is required of your organization than writing an ethics code and distributing it once a year to your employees. You must take proactive steps to improve your company's ethical climate.
The ethical imperative is to create a just workplace. In this context, I consider a just workplace to be one where:
Wrongdoing cannot be corrected unless organizational leaders are aware of it. Whistleblowing policies should promote more open communication about sensitive ethical and moral issues. One research study suggests that formal whistleblowing policies do indeed encourage such communication[11] The policies should make your organization's code of conduct more relevant by making it more likely that violators will be held accountable.
A primary goal of personnel policies is the fair treatment of employees. Whistleblowing policies should increase the chances that both whistleblowers and those who are targeted by their accusations will be treated equitably.
In closing, let me point out that I certainly do not believe that whistleblowing policies are a panacea for all ethical problems. Indeed, establishing such policies is just the first step. Communicating to employees the policy is equally crucial, and this means more than just an annual letter from the CEO. Ethical training sessions should be undertaken to acquaint employees with ethical dilemmas unique to your organization. Concrete examples of the types of activities that should be disclosed through internal whistleblowing channels should be discussed with employees. Employees should understand that they must be responsible in making accusations of wrongdoing, and that malicious or reckless charges are not sanctioned. Employees should understand how the organization will respond to their concerns in terms of an investigative process.[12]
The policy must be more than words on paper. Writing a policy, adopting it, and then going on with business as usual will do nothing to protect your company or to improve ethical conduct. The policy must reflect the real commitment of your organization to prevent retaliation against employee whistleblowers; encourage employees with ethical concerns to discuss them internally rather than externally; and create an overall environment within which employees have the opportunity and desire to behave ethically and responsibly.
copyright 1992 Sam Advanced Management Journal