The Grey Chronicles

2009.August.30

Loyalty and Integrity, Part V



The issue of loyalty’s limits, John Kleinig (2007) notes, is usefully illustrated by the phenomenon of whistle blowing.

“The normative background to whistle blowing is a belief that employees owe loyalty to their employing organizations. Such loyalty will include an expectation that employees not jeopardize their organization’s interests by revealing certain kinds of information to people outside it. If employees have grievances, they should be dealt with within the organization (“we wash our own laundry”). The case for whistle blowing, then, is driven by the recognition, first of all, that internal mechanisms often fail to deal adequately with an organization’s failures, and second, that because the interests jeopardized by those failures often include those outside the organization, a wider group has a prima facie right to know of the costs that it faces or that have been imposed on it.” [Emphasis added.]

Uys and Senekal (2009) similarly explore the dynamics involved in this moral dilemma:

“When considering whether to disclose such information, whistleblowers confront the conflicting demands of the morality of principle versus the morality of loyalty. … Three dimensions related to wrongdoing, namely perceptions, extent of the wrongdoing and power relationships are also analysed. It is concluded that, although the conflicting demands of the morality of principle versus the morality of loyalty will always exist, there are measures that can be taken to limit the impact of these conflicts and in the long run even resolve them. In particular, if loyalty is reconceptualised as rational loyalty, the disclosure of perceived wrongdoing could more easily be interpreted as loyalty to the organisation as a whole. ” [Emphasis added.]

With regard to confidentiality of information, Jonathan Macey (2007: 1902) wrote:

“Whether one has the right to blow the whistle on somebody else and whether one has the right to trade on the basis of nonpublic information ultimately depends on whether the person engaging in the conduct has a rightful property interest in the information he or she is using. If so, then the conduct, whether characterized as whistleblowing or insider trading, should be not only legally permissible, but affirmatively encouraged. By contrast, in situations where the person doing the trading or the whistleblowing has no legitimate property interest in the information, the behavior should be illegal.”

Furthermore, Jonathan Macey (2007: 1903) expounds:

“Where one is blowing the whistle against an entire way of doing business or against people at or near the very top of a company, as was the case with Enron, reporting the behavior up the chain of command is not actually whistleblowing. After all, it is hardly whistleblowing to report misconduct to the very people engaged in the misconduct. But where the misconduct involved is that committed by public officials, instead of individuals in the private sector, disclosure to those outside the organization may constitute a crime if the information is classified pursuant to administrative action or subject to an executive order of confidentiality.” [Emphasis added.]

Confidentiality particularly refers to privileged information, proprietary information, patents, and trade secrets. Privileged information, subject to various exceptions, is in the realm for confidential communications between attorneys and clients, spouses, physicians and patients, and ministers and congregants. Proprietary information are usually protected by trademark, patent, or copyright; made, produced, or distributed by one having exclusive rights. Patent is a document granting an inventor sole rights to an invention. Trade secret is a method or device or formula that gives a manufacturer an advantage over the competition (Morales & Gilner, 2009).

To establish that whistleblowing is a vital part of transparency and good governance, Terry M. Dworkin (2002) examines the relationship among whistleblowing, multinational corporations [MNCs], and international peace. Dworkin finds that despite the varying cultural norms involved, adoption by MNCs of codes of ethics and whistleblowing procedures could be harnessed to help deliver on the promise of peace through commerce. Successful implementation of global ethical codes and internal reporting procedures, especially in countries that have yet to embrace whistleblowing, three things are essential:

First, reporting procedures must be clear, easy to access, and strongly supported by top management. Second, ethical norms should concern relatively few issues which can garner wide acceptance or understanding. Finally, allowances must be made for some cultural adaptation. … Combining whistleblowing and reporter protection with a code significantly aids in several ways: it shows the company means what it says, it gives employees a way to make sure the organization is legal and ethical, it shows that open communication will be practiced, and it shows that people who speak up will be dealt with fairly.”

Matt Stiles (2007) concludes:

“All employers … benefit by having an internal complaint procedure, treating all complaints as serious and worthy of the company’s attention and promptly and thoroughly investigating each complaint… to get a problem resolved quickly and with minimal exposure to outside interruptions. … Employers without internal complaint procedures risk that the employee will take [the] complaint first to the media. … Having a procedure for complaints is the first step, but making sure employees with complaints feel comfortable speaking up to the employer is even more important. Achieving this comfort level has more to do with your business culture, the degree to which new ideas are welcomed, the diversity of permissible workplace opinions and the extent to which your employees and managers get along with each other. Most business can take heart that it’s usually not the business with collaborative, open and approachable management that end up being the subject of whistleblower complaints, …”

On February 17, 2008, President Barrack Obama signed the American Recovery and Reinvestment [ARR] Act of 2009, now commonly known as the Stimulus Act, to stimulate the lagging U.S. economy, which brought the recent global economic crises. The Act provides broad anti-reprisal protections, including a potential private right of action, for complaints by employees of any “non-Federal employer” receiving funds under the ARR, as a means of ensuring that ARR funds are not mismanaged or misspent. The Act is in many respects more employee-friendly than other whistleblower protections, including Sarbanes-Oxley, to which employers have become accustomed (Orrick, 2009).

International Chamber of Commerce [ICC] (2008) cautions: “A whistleblowing system, being part and parcel of the enterprises’ voluntary integrity programmes, will only be successful if it is not over-regulated from the outside.

Thomas Devine & Tarek Maassarani (2008) prefaced their report:

“While still untested, these rights … provide a beacon of hope in an otherwise treacherous legal landscape for private sector employees who speak out in defense of the public. This report explains how we reached this point; why it is necessary to continue to pass sector-by-sector whistleblower laws, despite the promise of a “breakthrough” in corporate accountability in the post-Enron 2002 Sarbanes-Oxley law; and where we still need to go to solidify and streamline the gains made by the recent victory in the consumer product legislation. The consumer product model provides an historic precedent toward establishing a uniform, coherent system of “best practices” protection for all corporate and other private sector employees. … However, until the “best practices” model becomes the rule, rather than the exception, employees’ so-called legal rights are a serious threat to their professional survival.”


Notes:

Devine, Thomas & Maassarani, Tarek (2008). Running the Gauntlet: The Campaign for Credible Corporate Whistleblower Rights. Washington, D.C.: Government Accountability Project, September 2008. back to text.

Dworkin, Terry Morehead (2002). Whistleblowing, MNCs, and peace. Canada: Vanderbilt Journal of Transnational Law, March, 2002. 34pp. back to text.

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

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

Macey, Jonathan (2009). Getting The Word Out About Fraud: A Theoretical Analysis of Whistleblowing and Insider Trading, Michigan Law Review, 105:1899. June 2007. pp. 1899—1940. back to text.

Morales, Franc and Leah Gilner (2001-2009). TheSage’s English Dictionary and Thesaurus. Princeton University. back to text

Orrick (2009). Stimulus Act Broadens Whistleblower Protections, Global Employment Law Update U.S. Edition. Place: Orrick, 23 February 2009. 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.

Uys, Tina & Anton Senekal (2009). Morality of principle versus morality of loyalty: The case of whistleblowing. African Journal of Business Ethics, 3:1. 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.
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6 Comments »

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