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Whistleblowing and Bystander Apathy

The ‘Bystander Effect’ is Key to Managing Ethics in the Workplace

In a recent Workplace Ethics Advice blog I mentioned The National Business Ethics Survey (NBES) of Fortune 500 employees released in July 2012 by the Ethics Resource Center that suggests incidents of fraud are more frequently reported in Fortune 500 companies and whistle-blowing is increasing, but so is retaliation in the largest companies. In this blog I look at the phenomenon of whistleblowing and bystander apathy.

In a post on the Corporate Social Responsibility Newswire, Kirsty Matthewson refers to “The Bystander Effect” as situations where passers-by don’t offer assistance when other parties are present. She raises a number of questions with respect to why passers-by don’t act:

  • Are we reticent to assist for fear of being ‘under-qualified’ to help effectively?
  • Is there an assumption, perhaps, that others will help or that if no one else is helping, why should we?
  • Is the severity of the situation diluted by the presence of others, of collective inaction (a phenomena known as ‘social proof’)?
  • Is it a coping strategy to prevent information overload?
  • Or are we simply paralyzed by indecision?

Studies have shown the greater the number of parties present, the fewer the incidents of assistance; we take our cues from the behavior of others and it is, after all, less stress and hassle to ourselves to assume that others will intervene.

There may be implications for reporting corporate fraud if the Bystander Effect carries over to whistleblowing. New findings by the Ethics Resource Center (ERC) that were reported in May 2012 challenges long-held perceptions of what constitutes a “whistleblower.” For years, the term has been used to describe those employees who go outside their company to report wrongdoing.  They may do so because they do not trust their company to handle the issue appropriately or because they are angry or frustrated after their attempts at internal reporting proved to be futile. According to “Inside the Mind of a Whistleblower,” a supplemental report to the ERC’s 2011 National Business Ethics Survey (NBES), whistleblowers almost always make some effort to root out wrongdoing internally before going outside the organization with their concerns.  The new report said that only two percent of employees go solely outside their companies to report misconduct. 

It seems clear that while internal whistleblowing is a common practice, the decision to go outside the company’s own compliance structure is rarely made. Fear of retaliation is, no doubt, the obvious reason. The Bystander Effect may account for some of the reluctance as well. For example, if I work for a company and suspect fraud may be occurring, then I may first ask whether others have noticed and/or reported the fraud. I may be concerned that if others have remained silent, then why should I go out on a limb?

Corporate fraud has always existed. Recently the U.S. Justice Department announced that it is on track to collect as much as $8 billion this year to resolve charges of defrauding the government, a record sum and more than twice the amount assessed last year by the Justice Department. The primary culprits are pharmaceutical companies, military contractors, banks and other corporations.

The surge in penalties is because of a number of factors, including the resolution of longstanding actions against drug makers and military contractors, as well as lawsuits brought against mortgage lenders after the financial crisis. But it also reflects a renewed emphasis on corporate fraud, as the Justice Department devotes more resources to the issue and demands higher penalties from companies.

The question I have is whether it is even possible to manage such vast operations effectively and ethically? The answer may be “yes,” if we can overcome the Bystander Effect that creates a level of apathy making it less likely wrongdoing will be reported.

Studies carried out by social scientist Arthur Beaman showed that after test subjects were educated about the principles of bystander apathy they were twice as likely to offer assistance to a person in need. Beaman reckoned that simply by understanding the phenomena and its attendant issues, positive engagement was established.

The bottom line is corporations may be going about instilling ethics in their organizations in the wrong way. A code of ethics can only go so far. Ethics training helps but it doesn’t counteract the Bystander Effect unless the training addresses bystander apathy and the need to overcome these tendencies in the workplace to create a truly ethical organization environment. In other words the company must convince its employees that reporting is the right thing to do; it won’t be punished; and the company will support whistleblowers. In the end, I believe, if this message is sent loud and clear then all employees, including top management, will know that corporate fraud is not acceptable on any level.

Blog posted by Steven Mintz, aka Ethics Sage, on August 22, 2012