Whistle blowing gets real

By Sandeep Krishnan

An exploration into what makes some employees blow the whistle against wrong
practices and corruption in the organization, how it impacts the organization and
the whistle blower, and what organizations can do to create an environment which
helps employees to prevent organizationally and socially undesirable practices.

When Time magazine described the year 2002 as the ‘year of corporate governance’ and
three women filled their cover story, the organizations and society as a whole recognized
the role of whistle blowers in maintaining the sanctity of corporations. Cynthia Cooper of
World com, Sherron Watkins of Enron and Coleen Rowley of FBI made some of the
most sensational scandals. Corporate America and in general most of the countries across
the globe are facing the impact of deteriorating governance both in the public and
corporate domain. However the actions of whistle blowers and associated corporate
governance concerns have brought about much debate in business and government
circles.
It would be intriguing to explore what makes some employees blow the whistle against
wrong practices and corruption in the organization, how it impacts the organization and
the whistle blower, and what organizations can do to create an environment which helps
employees to prevent organizationally and socially undesirable practices.
Experts define whistle blowing as the disclosure by organizational 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 affect action. While the reporting of
sensitive issues may be part of the individual's role within the organization (e.g., internal
auditors, inspectors), when the individual finds it necessary to reveal such findings to
organizational members outside the normal chain of command, it is also considered
whistle-blowing through internal channels. Whistle blowing also encompasses situations
where individuals go out of the organizational hierarchy and make information available
to public or other external authorities to get a positive action.
There are four factors involved in the process. To begin with, there is a misdeed or illegal
activity in the organization, and a perception that either the management can prevent it or
that it has been initiated by management or certain employees. Another important factor
is the presence of an individual or group of people who view that some action should be
taken against the illegal activity. Finally, there is a process by which the individuals or
group try to expose the problem to the authorities who can take action.
The four factors have organizational and individual dependence. The unclear part would
be why only some employees act as whistle blowers. One obvious reason would be the
availability of the information. The sensitive information would be available only to a
selected few or understanding the issues in the information is possible only by particular
individuals. The second reason which points at the organizational dependence and culture
would be the issue of conformity. Employees at large feel that the information or the
illegal activity is part of the organizational functioning and tend to avoid making bold
moves to correct them. Considering both of these factors, we can generalize to a certain

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level that whistle blowers have a high level of moral responsibility, guts and concern for
the organization and society at large.

Illegal activity

Concerned
individuals or Rumours
groups

Stake holders

Whistle blowing Organizational

response

In the organizational context, some of the activities which the employees feel are
misdemeanors will be exposed in the form of rumors in the organization. For example,
this would be some thing like misconduct, individual actions, socially unacceptable
practices etc. The rumors at a particular stage can elicit organizational response. However
in cases of intentional activities this has little chance of occurring and creates a possibility
of evoking response from the whistle blowers. Interestingly trade unions, opposition
parties and social activists are whistle blowers in this context and whistle blowing is
considered an essential part of their effective functioning. In the other case, where the
whistle blower comes across serious manipulations or illegal activity, the reaction is of a
different type due to two reasons. Either the employee has first hand information of the
activity and goes through a variety of decision making challenges, or the response is
difficult and may be against a set system.
In the whole process the various stakeholders play a major role. The managers, other
employees and the society at large can be seen as major stake holders. The whistle
blowers are often treated as traitors by the organization. Other employees tend to treat
them as outcasts and blame the whistle blowers for putting the organization in a difficult

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position. Study of some of the cases show that whistle blowers often leave the
organization or face employer or coworker retaliation. This creates an unsafe and
difficult situation for whistle blowers and employees often take the stance of avoiding
getting into trouble. In an article titled “ What can you learn from Enron”, various
perspectives are put forth on why things go wrong in organizations. A major factor is
complacency from the part of the board, ethics officers, internal auditors, executives and
employees. Even though there is some feeling of discomfort in the way in which some
division or managers is making huge profits, employees tend to be reluctant about asking
how it can be done as they don’t want to be portrayed as trouble makers. Organizational
culture too plays a major role. An organization which emphasizes on innovation tends to
regulate their managers and employee less for the sake of free thinking. However this
may lead to managers exploiting the system. The increased emphasis on team working
and group thinking has led to the development of very cohesive groups inside
organizations. This is reflected as an all out commitment and a feeling of cult. It would be
difficult for employees to voice their individual concerns in this situation.
The relevant part would be what organizations can do to support whistle blowers and take
actions at the right point of time. From the management point of view the important
aspect would be keeping the issue from getting out of control, avoiding criticism from
public and preventing image loss. Responding at the right time to issues and encouraging
people to bring out problems concerning the functioning and governance of the
organization would be critical here.
HR is considered a neutral department in organizations and can play a critical role in
hearing the voice of employees. For HR, setting up channels and other mechanisms that
not only allow but also promote healthy, open communication will be important for
setting up an employee friendly culture. Training which explicitly states the ethics policy
in organizations and the means that employees can take to handle issues of corruption in
organizations will be relevant. Assigning accountability officers and providing special
telephone numbers and e-mail accounts encourage employees to bring out issues and will
help in maintaining anonymity. Meindertsma, an expert in whistle blowing litigation
suggests that it is important for organizations to formulate a zero tolerance policy and
should be ready to respond quickly, encourage employees in bringing forth issues,
understand the legal implications and provide training to managers and supervisors
regarding whistle blowing. Independent and neutral provision for reporting may be
critical. Setting up a clear value system in the organization which is implied in
recruitment, training, performance appraisal etc would help to develop and sustain an
open, honest culture.

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Managing whistle blowing

Corporate ethics policy

Importance for ethics pronounced in

recruitment and training

Linkage of ethics and governance to

performance and feedback

Institutionalization - ethics officers,

teams

Audit teams - internal and external

Mechanisms to aid anonymous

reporting - email, telephone numbers.

As employees or former employees, it is important to make sure that certain

aspects are taken into consideration before whistle blowing. Whistle blowers should
confirm whether the practice followed in the organization will cause harm to an
individual or the general public if uncorrected, make sure that the facts in hand are
reliable and not mere rumors, be fairly certain that by bringing the matter before an
outside group the problem can be corrected and harm avoided. Finally, weigh the
personal risks that are to be encountered if the choice is made to be a whistle blower
(quite often this will be the critical factor which makes the process difficult. However,
this will help to deal with the future problems in a much easier way).
Law can become handy for the whistle blowers in some cases. Support from the law can
help prevent sufferings of whistle blowers. For example, in the US, Whistleblowers
Protect Act of 1989 protects federal employees who make public interest disclosures.
Also the fall of Enron and WorldCom initiated the Sarbanes-Oxley Act of 2002 which
gives high degree of protection to the whistle blowers of publicly traded companies.
Quite interestingly in India, there are no legislations to protect the interests of whistle

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blowers. Considering various aspects, it is important that the employees are given
freedom and support to point out corrupt practices in the organizations. This culture of
openness would help to prevent the humiliating falls as happened in the case of Enron or
WorldCom.
The guts and high moral responsibility of whistle blowers shows that whistle blowers can
play a vital role in fighting loose ethics and slack corporate governance. Ironically, they
have to undergo insult and injury in form of job loss, ridiculing, retaliation and boycott.
However an important aspect here would be the tolerance of the society towards
corruption and unfair practices. In the Indian context it is of high importance that
organizations takes a serious view of instilling high sense of ethics and laws are
formulated to protect the employees who play the role of whistle blowers against
corruption both in the private and public sector.

Live cases of whistle blowing

Lo Pui-lam is an employee of Hong Kong City Civil Service brought to the attention of
the public the corruption that was happening in the service. Lo, a driver of sewage
collection trucks, understood that the night shift workers had the habit of filling the tanks
with fresh water so that when they arrived at the dumping ground, the truck would weigh
enough to pass inspection. Lo, who was concerned about the corrupt practice tried to
approach the supervisors. The general reaction was not to make any fuss and no action
was taken. Lo had to go up to the level of the member of legislature to have his concern
voiced. Even the welfare officer who was responsible for helping the cause tried to
persuade Lo to back off and threatened him with job loss. Although action was taken to
discipline the night shift workers, Lo had to face tough retaliation from the workers and
supervisors in form of verbal threats and insults and was given rougher jobs. He was
continuously monitored for the slightest infraction. For doing something he felt right, Lo
had to face boycott from his colleagues. As Lo puts it “I eat alone” and "I don't talk to
anyone."
(Source: Asiaweek, March 31, 2000, Yulanda Chung, HongKong)

Sherron Watkins opened up the accounting scandal at Enron. Watkins was concerned
about the fraud accounting practices and the partnership between the CEO, CFO and
other executives who were duping the company. Watkins, knowing that informing the
CFO who happened to be her boss about the wrong practices would be a job terminating
move, approached the Chairman to voice her concern. As Watkins puts it, “CEO Jeffrey
Skilling, Fastow and other executives "did dupe Ken Lay and the board," she said. "Mr.
Skilling and Mr. Fastow(CFO) are highly intimidating. I think they intimidated a number
of people into accepting" the partnerships (CNN). The initial response of the Chairman
was just to ask an agency to make an enquiry and in response CFO demanded for firing
Watson and seizing her computer. Before Enron finally filed for bankruptcy, Watson
again informed the Chairman about the pathetic state of affairs at Enron. Lay ignored the
advice of Watson and paved way for one of the most humiliating falls. Watson quit the
job after the scandal and believes that some of her colleagues still hate her as they believe
that if the organization was given enough time it would have corrected the mistakes by

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itself. Ironically, as the Time reports, the notepads of Enron, had the inspiring quote of
Martin Luther King Jr, which reads “Our lives begin to end the day we become silent
about things that matter.” !
(Source-CNN, Feb 12, 2002 and Time, Dec 22, 2002 by Richard Lacayo and Amanda
Ripley)
Olufson who was the Vice President of finance of Global Crossing Ltd informed the chief
ethics official of the company that the telecom company swapped fiber-optic capacity
with other carriers to artificially boost revenues five months before the company went
bankrupt. Global crossings limited retaliated by terminating the service of Olufsun and
projected it as part of the organization wide job cut. As Olufsun puts it,” PR machine
have accused me of being a disgruntled employee and Chairman of the Board Gary
Winnick [stood] up in front of the entire office and [called] me an extortionist.”
(Source: Business Week, Dec 16, 2002).
Cynthia Cooper and two other internal auditors of WorldCom exposed the $ 3.8 bn
accounting irregularities. They acted upon certain hunches and tips that their bosses had
cooked up the profits by irregular accounting practices. Their findings led to the dismissal
of the Chief Financial Officer. Unlike the other cases, the new management of World
Com provided Cooper with more staff and money. However she was widely ridiculed by
her colleagues and the local press. Responding to this to Time, Cooper says “There is a
price to be paid” and “There have been times that I could not stop crying.”
(Source: Across the board, Mar/Apr, 2003, Business Week, Jan, 2003 and Time, Dec 30,
2002.)

Sandeep Krishnan is a Fellow Programme student in the personnel and industrial

relations area of Indian Institute of Management, Ahmedabad. He can be contacted at
sandeepk@iimahd.ernet.in.

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