Why Your Company Should Have a Whistleblowing Policy
Barnett, Tim, SAM Advanced Management Journal
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 resistence. 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 indictments.|1~ Although these outcomes may not be typical, they do point out the potential seriousness of whistleblowing.
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 possible 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 wrongdoing.|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 perceived 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. …