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EMPOWERING EMPLOYEE VOICE TO REDUCE ETHICAL RISK

Christina M. Scott-Young

ABSTRACT

As organizational misconduct, fraud and abuse increasingly make news headlines, public opinion is hardening against organizations that engage in illegal or unethical practices. Regulators are now acknowledging whis- tleblowers as frontline watchdogs, while governments are legislating to protect employees who report illegitimate conduct. However, many orga- nizations are out of step: punishing or ignoring employees who speak up. These organizations run the risk that bad behaviour goes unchecked and that internal whistleblowers take their concerns outside the organization, creating reputational damage and potential legal ramifications. We argue that companies need to get back in step with society by encouraging employee voice as an early internal warning system to detect organiza- tional misconduct. A five-step action plan is presented to enable manage- ment to create an ethical environment that encourages, trains and rewards employees to speak up openly about ethical concerns.

Keywords: Whistleblowing; employee voice; risk management; ethics training

The only thing necessary for the triumph of evil is for good men to do nothing.

- Attributed to 18th century British statesman Edmund Burke

INTRODUCTION

Public attitudes to ethical breaches have hardened following the large-scale financial misconduct that triggered the Global Financial Crisis. Almost daily, the media exposes high profile cases of misconduct that organizations and their officers have tried to conceal. News of the World's phone hacking, Penn State University's child abuse scandal, Barclays Bank's Libor rigging, and GlaxoSmithKline's $3 billion fine for healthcare fraud have all made prominent headlines. Much of the publicly denounced mal- feasance is exposed by organizational employees, labelled 'whistleblowers'. Whistleblowing is defined 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 effect action' (Near & Miceli, 1985, p. 4). This definition includes employees who disclose their information to others within their organiza- tion (internal whistleblowing) or outside the organization (external whistle- blowing). A survey of 5,400 companies in forty different countries revealed that organizational whistleblowers unearthed 43 per cent of all corporate fraud cases (PricewaterhouseCoopers, 2007).

However, whistleblowing is risky behaviour. According to a National

Business Ethics Survey (NBES) in the United States (Ethics Resource Center [ERC], 2012), almost 25 per cent of employees who reported wrong- doings received sanctions from their organization. The negative response of the powerful to those who speak truth to power (O'Toole, 2012) is a phenomenon that has pervaded history. For centuries, management has viewed internal whistleblowers as disloyal employees (Lewis, 2011) deser- ving of punishment (Miceli, Near, & Dworkin, 2009). The practice of execution of envoys of bad news gave rise to the common phrase 'shooting the messenger' (O'Toole, 2012). In modern times, although some reporters of wrongdoing may have died for speaking up (a Mozambique bank fraud whistleblower fell to his death in a bank stairwell; nuclear contamination activist Karen Silkwood died in a suspicious car accident), most whistle- blowers' physical lives are not in danger, but their careers, emotional well-being, health and reputations are often destroyed. Sherron Watkins, a former Enron vice president who revealed that company's fraud, once cautioned 'you won't find someone that is labelled a “whistleblower” who has been able to return to their original career …' (Berlin, 2012).

 
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