Whistle-blowing

1. Whistle-blowing Geoffrey G. Bell, PhD, CA University of Minnesota Duluth September, 2003

2. What is Whistle-blowing? • Whistle-blowing involves a measured and escalating response to perceived ethical wrong-doings. • A whistle-bower is an employee who exercises free speech rights to challenge institutional abuses of power (Devine, 2002)

3. Measured… Whistle-blowing must reflect the seriousness of the perceived ethical violations. Don’t go after a mosquito with a machine-gun. You will need to document incidents to provide evidence to support allegations. Escalating… Start with immediate superior and work up hierarchy. Don’t “go for broke” immediately. Measured and escalating response

4. Proposed approach to whistle-blowing • Approach immediate manager. • Discuss issue with family. • Go to the next level of management. • Contact an ethics officer or Ombudsman. • Consider going to affected areas outside formal chain of command. • Go outside the organization. • Leave the organization.

5. What protection do whistle-blowers have? (Devine, 2002) • Whistle-blowing is a high-risk activity that may alienate employees from their managers and their organizations. • Government employees covered by First Amendment protection, but there may be retaliation. • Private-sector employees have no First Amendment protection. There are some states with legislation protecting whistle-blowers. • Generally remedies involve reinstatement, not damages. • More than 2 dozen Federal statutes may protect workers. • E.g., Clean Air Act, Superfund law. • False Claims Act – If employee sues and prevails, the company that defrauded the Government must pay treble damages for the act. • Sarbannes-Oxley legislation now provides Federal protection for employees of publicly-traded firms against retaliation for disclosing information the employee reasonably believes the shareholders have a right to know. • Exceptions: • Protection does not extend to private companies. • Companies can exempt themselves through employment clauses that provide access to company-sponsored arbitration hearings.

6. Some limited empirical evidence • A survey of the literature revealed few empirical studies of whistle-blowing behavior. • Miceli presented a paper at the Academy of Management Meetings in 1990, examining successful whistle-blowing as a function of individual characteristics of the whistle-blower, situational characteristics, organizational characteristics, and power of the players.

7. Miceli findings – Individual characteristics:Whistle-blowing effectiveness positively associated with: • H1a: Whistle-blowing effectiveness will be positively associated with the whistle-blower’s level of job satisfaction. (n.s.) • H1b: Whistle-blowing effectiveness will be positively associated with the whistle-blower’s level of organizational commitment. (n.s.)

8. Miceli findings – situations characteristics:Whistle-blowing effectiveness positively associated with: • H2a: cases involving wrongdoing by small numbers of employees who benefit personally from the wrongdoing but negatively associated with cases involving wrongdoing by executives on behalf of the organization. (positive support for cases of employee theft, others n.s.) • H2b: cases involving direct evidence observed personally by the whistle-blower and agreement by co-workers that wrongdoing occurred. (positive with co-worker agreement that wrongdoing occurred, n.s. with credibility of evidence) • H2c: the use of external channels for reporting wrongdoing. (significant evidence contrary to hypothesis – i.e., internal channels more effective; negative relationship between effectiveness and use of external audit team or audit committee) • H2d: whistle-blowing by multiple organizational members. (n.s.)

9. Miceli findings – organizational characteristics: • H3a: Whistle-blowing effectiveness negatively associated with bureaucratic characteristics of the organization involved in the wrongdoing. (n.s.)

10. Miceli findings: Power characteristics:Effective whistle-blowing will be: • H4a: positively associated with the whistle-blower’s status in the organization. (hierarchical level positively associated with effectiveness) • H4b: positively associated with the whistle-blower’s performance and with the individual’s status as a non-role prescribed whistle-blower. (n.s.) • H4c: positively associated with value congruence between the whistle-blower and top management. (n.s.)

11. Miceli findings: Power characteristics:Effective whistle-blowing will be: • H4d: negatively associated with experienced or threatened retaliation of the whistle-blower. (significant support for hypothesis) • H4e: positively associated with the status of the complaint recipient. (n.s.; moreover, and contrarily, reporting to CEO/CFO or wrongdoer’s superior negatively associated with effectiveness) • H4f: negatively associated with the wrongdoer’s status. (n.s.) • H4g: negatively associated with wrongdoing whose termination would harm the organization, seriousness of the wrongdoing, harm to important stakeholders, or longevity of the wrongdoing. (only time since wrongdoing began negatively associated; others n.s.)

12. Conclusions from Miceli’s study • Whistle-blowers more effective in terminating alleged wrongdoings when they: • Reported cases of employee theft or cases judged wrong by co-workers. • Did not use external channels. • Did not report to the CEO/CFO or wrongdoer’s supervisor. • Spoke from some power base (hierarchical level). • Had not suffered retaliation. • Reported on wrongdoing on which the organization was not too dependent as indicated by time wrongdoing was ongoing.

13. Alternative courses of action • Company Ombudsman’s office. • Helps provide assistance in dealing with problematic issues. • Immediately leaving organization. • May be only option in a “no-win” situation.