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Chapter 7 review


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  • 1. Chapter 7
    Blowing the Whistle
  • 2. 7-2
    “The word whistleblower suggests that you’re a tattletale or that you’re somehow disloyal… But I wasn’t disloyal in the least bit. People were dying. I was loyal to a higher order of ethical responsibility.”
    Dr. Jeffrey Wigand, ‘The Insider’
  • 3. What is Whistle-Blowing?
    An employee who discovers corporate misconduct and chooses to bring it to the attention of others.
    Internal Whistle-blowing
    When an employee discovers corporate misconduct and brings it to the attention of his supervisor, who then follows established procedures to address the misconduct within the organization.
    External Whistle-blowing
    When an employee discovers corporate misconduct and chooses to bring it to the attention of law enforcement agencies and/or the media.
  • 4. When is Whistle-Blowing Ethical?
    Ethical whistle-blowing must meet 5 conditions:
    1. When the company, through a product or decision, will cause serious and considerable harm to the public (as consumers or bystanders), or break existing laws, the employee should report the organization.
    2. When the employee identifies a serious threat of harm, he or she should report it and state his or her moral concern.
    3. When the employee’s immediate supervisor does not act, the employee should exhaust the internal procedures and chain of command to the board of directors.
    4. The employee must have documented evidence that is convincing to a reasonable, impartial observer that his or her view of the situation is accurate, and evidence that the firm’s practice, product or policy seriously threatens and puts in danger the public or product user.
    5. The employee must have valid reasons to believe that revealing the wrongdoing to the public will result in the changes necessary to remedy the situation.
  • 5. When is Whistle-Blowing Unethical?
    Whistle-blowing must be questioned if:
    Motivation is the opportunity for financial gain or media attention
    Employee is carrying out a vendetta against the company
    Key point – better be very sure of your facts and your evidence better be irrefutable before blowing the whistle
  • 6. Qui Tam Lawsuits
    A lawsuit brought on behalf of the federal government by a whistle-blower under the False Claims Act of 1863
  • 7. The Year of the Whistle-Blower 2002
    • SherronWatkins – Vice President of Enron
    • 8. Coleen Rowley – FBI Staff Attorney
    • 9. Cynthia Cooper – Internal Auditor at WorldCom
  • 10. The Duty to Respond
    Prior to 2002 – legal protection for whistle-blowers existed only through legislation that encouraged the moral behavior of employees who felt themselves compelled to speak out, without offering any safe-guards against retaliation
    The Whistleblower Protection Act of 1989:
    Addressed the issue of retaliation against federal employees
  • 11. The Whistleblower Protection Act
    Imposed specific processing deadlines of complaints
    Guaranteed anonymity of the whistle-blower
    Required prompt payment of any portion of the settlement entitled to the whistle-blower
  • 12. The Duty to Respond
    Employees who prevail in whistle-blowing cases are entitled to damages, which may include:
    Reinstatement to the same seniority status
    Back pay
    All compensatory damages to make the employee whole
    “Special damages”
  • 13. The Duty to Respond
    Mechanisms that employers need to put in place:
    A well-defined process to document how such complaints are handled
    An employee hotline to file such complaints
    A prompt and thorough investigation of all complaints
    A detailed report of all investigations
  • 14. Whistle Blowing As a Last Resort
    Becoming a whistle-blower and taking a story public should be last resort
    After blowing the whistle on fraud:
    90 percent were fired or demoted
    27 percent faced lawsuits
    26 percent had to seek psychiatric or physical care
    25 percent suffered alcohol abuse
  • 15. Whistle Blowing As a Last Resort
    17 percent lost their homes
    15 percent got divorced
    10 percent attempted suicide
    8 percent were bankrupted