The Grey Chronicles

2009.August.29

Loyalty and Integrity, Part IV



Thaddeus Golas once said “What happens is not as important as how you react to what happens,” a fitting quote after the Enron debacle and the recent series of corporate failures which brought us the global economic crises.

In Nothing But The Truth (2008), a fictional film by Rod Lurie inspired by actual events, Albert Burnside (Alan Alda) pleading for Rachel Armstrong (Kate Beckinsale) before the U.S. Supreme Court quoted Justice Stewart dissenting in 1972 Branzburg v. Hayes case:

“As the years pass, the power of government becomes more and more pervasive. Those in power whatever their politics, want only to perpetuate it and the people are the victims.” … We, as a nation, will no longer be able to hold those in power accountable to those whom they have power over. And what then is the nature of government when it has no fear of accountability? We should shudder at the thought.

The same is true for corporations. The emergence of the Sarbanes-Oxley Act brought corporate governance, which some authors viewed as extensions of corporate ethics, accountability, social responsibility, and thus integrity, to the limelight. The Act is aimed at “auditing of public companies that are subject to the securities laws to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports for companies whose securities are sold to, and held by and for, public investors.”

The question is: should private entities follow the same? Self-regulation and the application of best practices or benchmarking might pose a key. Every corporate entity—public or private—is also under the direct supervision of a security exchange or a regulatory commission and also operate under a body of commercials laws, foremost of which is an incorporation code, wherever the company is located in the world. In the Philippines, for example, Republic Act No. 8799 is The Securities Regulation Code [see Sec. 5.1(a)], reorganized under Presidential Decree No. 902-A [see Sec. 3]; and Republic Act No. 68 is The Corporation Code [see Title II]. Each of these commercial laws entitle a corporation certain rights, and equivalently, certain obligations as well.

In 1919, the International Chamber of Commerce [ICC] was founded as a world business organization, a representative body that speaks with authority on behalf of enterprises from all sectors in every part of the world. ICC promotes an open international trade and investment system and the market economy, and helps business corporations meet the challenges and opportunities of globalization. Today, it groups thousands of member companies and associations in 130 countries. ICC (2008) acknowledged that “A company’s workforce represents a valuable source of information that can be utilized to identify a potential problem, and to deal with it, before it causes significant damage to the company’s reputation or its stakeholders.” ICC identified the potential problems could include economic fraud, corruption, and the associated financial and non-financial damages, which could be detected by internal audit, external audit, risk management, corporate security but also, and to a large extent, by whistleblowing. ICC based its whistleblowing guidelines from international conventions, national legislation and recommendations by international public organizations.

There is a whole lot of difference between whiners and whistle blowers. Matt Stiles (2007) provides a succinct differentiation:

“Not every employee complaint amounts to whistleblowing. Complaints about working relationships, a difficult-to-please supervisors, a demanding client, company benefits and other job perks are generally not protected complaints so long as they are not in the context of a discrimination complaint. … Where an employee’s complaint approaches a federal or state discrimination or other employment law or if the complaint raises an issue of greater public interest (it questions an employer’s business ethics, accounting, environmental practices, etc.), the employee’s complaint is probably protected by law. Still, such protection only extends to good faith complaints. For example, the law would not protect an employee who made an intentionally false complaint designed to hurt the business or its management.”

Various definitions of whistleblowing are found in literature. John Kleinig (2007) notes that “although there is some debate about its scope, whistle blowing can be helpfully (if not fully) characterized as the activity of an employee within an organization — public or private — who alerts a wider group to setbacks to their interests as a result of waste, corruption, fraud, or profit-seeking.” Peter Jubb (1999) views it as “the reporting of a wrongdoing that needs to be corrected or terminated in order to protect the public interest.” Brian Martin & Will Rifkin (2004) consider whistleblowing as “a form of organizational dissent.” Ernie Fitzgerald, a whistleblower who exposed billions of dollars of cost overruns at the Pentagon, described whistleblowing as “committing the truth,” because employers often react as if speaking the truth about wrongdoing were tantamount to committing a crime (CA Magazine, 2004).

Johnson and Kraft (1990:850-851) identified the three components of whistleblowing:

“1. An individual performs an action or series of actions intended to make information public. The individual who exposes a wrongdoing is not a journalist or ordinary citizen; he or she must be a member or former member of an organization.”

“2. Information becomes a matter of public record. Whistleblowers differ from other organizational dissenters in conveying important information to parties outside the organization. They expect the information recipient to make the reported information part of the open, public record.”

“3. Information is about possible or actual, important wrongdoing in an organization that threatens the public’s well-being. Important wrongdoing is different from a trivial one by the 1) number of people affected; 2) the seriousness of the consequences for them; or 3) the amount of money involved.”

Thus, the main features of whistleblowing are the act of disclosure, the topic, the agent and the recipient. The conditions to be met are the need, proximity, capability and as a last resort. Harold Hassink, et.al.’s study (2007) analyzes the contents of whistleblowing policies, and parts of corporate codes of conduct and codes of ethics, describing such policies of 56 leading European companies. The most common general violations to report were breaches of internal policies and external regulations or laws. The study’s findings are most relevant to companies without a whistleblowing policy or those that intend to benchmark their policies, and to pan-European standard setters. Unfortunately, in the Philippines, several legislative proposals on whistleblowing were submitted 13th Congress of the Philippines (2004-2007). A 200-page monograph by Asian Institute of Management [AIM] (2006) is labelled Pre-publication copy. Not for quotation.

There is a choice whether a person just sits and complains, or he can engage. Better sit, complain and engage, sometimes one just have to say NO.


Notes:

Asian Institute of Management (2006). Consolidated Report on Whistleblowing in the Philippines: Awareness, Attitudes and Structures. Manila: Ramon V. del Rosario, Sr. (RVR) Center for Corporate Responsibility and the Hills Governance Center, June 2006. 200pp. back to text.

Gualtieri, Joanna (2009). When the Whistle Blows. CA Magazine, August 2004. back to text.

Hassink, Harold, Meinderd de Vries & Laury Bollen (2007). A Content Analysis of Whistleblowing Policies of Leading European Companies, Journal of Business Ethics. Vol. 75. Dordrecht, The Netherlands: Springer, 2007. pp. 25—44. back to text.

ICC Commission on Anti-Corruption (2008). ICC Guidelines on Whistleblowing. Paris: International Chamber of Commerce [ICC], June 2008. back to text.

Johnson, Robert Ann and Michael Kraft (1990). Bureaucratic Whistleblowing and Policy Change. The Western Political Quarterly, 43:4. December 1990. pp. 849—874. back to text.

Jubb, Peter (1999). Whistleblowing: A Restrictive Definition and Interpretation, Journal of Business Ethics. 21:1 Academic Research Library, August 1999. pp. 77—94. back to text.

Kleinig, John (2009). Loyalty, Stanford Encyclopedia of Philosophy. Stanford University, 21 August 2007. back to text.

Martin, Brian ∓ Rifkin, Will (2004). The Dynamics of Employee Dissent: Whistleblowers and Organizational Jiu-Jitsu, 4 Public Organizations Review 221,. The Netherlands: Kluwer Academic Publishers, 2004. back to text.

Stiles, Matt (2007). Whistleblowers Coming Soon To Your Work Place. Sarasota: SRQ: Sarasota’s Premier Magazine, October 2007. pp. 78—82. back to text.

Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 LicenseDisclaimer: The posts herein do not necessarily represent any organization’s positions, strategies or opinions. Read the full version of self-imposed rules for this blog: A New Year; New Rules. Unless otherwise expressly stated, the posts are licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.
Comments are moderated to keep the discussion relevant and civil. Readers are responsible for their own statements.

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