One’s Motive for Acting is the Key
Is whistleblowing a moral practice? Different views exist on this important issue. Generally, the act of whistleblowing should be motivated by good intentions – i.e., to right a wrong. On the other hand, if the motive is to gain a financial reward or retaliate against a company for what it has done, the motive is questionable.
Kant’s Deontological Ethic
Immanuel Kant emphasizes one’s duty to others as the foundation of ethical decision making. In Kantian ethics, reason dictates ethical action, and one has a duty to respect the humanity of others. People have a duty to do the right thing and act out of “goodwill,” or rightful intentions. A criticism of Kant’s ethic is that the duty to act is absolute even if it produces a bad result. For example, it would be wrong to tell a lie in order to save a friend from a murderer.
Kantian ethics are based on the “Categorical Imperative,” which means actions should only be taken when they conform to rules that could hold for everyone, which gives it a universal appeal. More formally, a person should act in ways that they would expect others to act in similar situations for similar reasons.
Utilitarianism is quite different. Utilitarianism considers the harms and benefits of alternative actions and choose the one that maximizes the net benefits for the stakeholders. Unlike Kant, utilitarians believe that pain and pleasure are relevant to ethical decisions.
De George’s Ethic of Permissibility
Unlike Kant, Richard De George rejects the position that external whistleblowing is always morally justifiable, and he rejects the position that external whistleblowing is never morally justifiable. For De George, the whistleblower should have a moral motivation to blow the whistle, such as to expose unnecessary harm, illegal, or immoral acts. He also recognizes that there may be cultural resistance to whistleblowing, such as loyalty to one’s reference group.
De George identifies five criteria when whistleblowing is morally permitted.
(1) The firm's actions will do harm to others.
(2) The whistleblowing act is justifiable once an employee reports it to their immediate supervisor and makes their moral concerns known.
(3) Absent any action by the supervisor, the employee should take the matter all the way up the chain of command to the board of directors.
(4) Documented evidence must exist that would convince a reasonable and impartial observer that one's view of the situation is correct, and that serious harm may occur.
(5) The employee must reasonably believe that going public will create the necessary change to protect the public and is worth the risk to oneself.
One problem with De George’s approach is that criteria (4) and (5) may be difficult to evaluate. How do we determine what a “reasonable” person is thinking? Do his criteria create ethical relativism?
All organizations should have a whistleblowing policy that is fully enforced. One way to do so is to have a hotline where employees can anonymously report perceived wrongdoing. A recent survey by the Association of Certified Fraud Examiners found that 42 percent of frauds are detected by tips.
By having a whistleblowing policy, the organization shows that it takes such matters seriously. Any such policy must preclude retaliatory action against the whistleblower. A case in point is that of Tony Menendez, former Director of Technical Accounting Research and Training, at Halliburton. Back in the mid-2000s, Menendez blew the whistle to the SEC on financial fraud at the company. He was treated as an outcast once his identity was disclosed internally. Ultimately, he resigned and fought a decade-long legal battle to clear his name. His story is a cautionary tale about how one’s moral intentions can be shoved aside by an organization in the pursuit of self-interest.
Like Menendez, employees that blow the whistle may become subject to the “kill the messenger syndrome,” that is, the organization doesn’t want to hear about the claims of wrongdoing and act against the whistleblower even though they were not involved in the wrongdoing and have good intentions.
Whistleblowing and Regulation
The U.S. Securities and Exchange Commission promotes whistleblowing and has protections for those who do so, assuming the information reported is voluntary and not otherwise available to the SEC.
The Dodd-Frank Financial Reform Act contains a provision that whistleblowers can receive between 10%-30% of any penalty awarded to the SEC in excess of $1 million that results from a lawsuit against the offending company.
A 2018 ruling in Digital Realty Trust, Inc. v. Sommers has the effect of requiring a whistleblower to report the matter to the SEC, even if they report wrongdoing internally, to be protected against retaliation under Dodd-Frank. A criticism of this decision is that based on ethical standards of the accounting profession, an internal accountant or auditor is expected to report the matter up the chain of command of the organization before blowing the whistle to the SEC. The controversial decision may drive employees to the SEC sooner rather than later. Ruth Bader Ginsburg wrote in the U.S. Supreme Court ruling on the case that the purpose of the Dodd-Frank robust whistleblower program is to “motivate people who know of securities laws violations to tell the SEC.” That’s why the program provides for substantial monetary rewards for SEC reporting.”
Morality of Whistleblowing
The morality of whistleblowing can be summarized as follows. First, one’s motive should be to right a wrong and the whistleblower acts out of duty to others. Second, the intention should be to protect the public against harm. Oftentimes, harm occurs because of the implications of financial fraud for investors and creditors. Third, the whistleblower should use the internal reporting process or run the risk of not following ethical standards, such as those in the accounting profession.
One unintended consequence of blowing the whistle is that a would-be-whistleblower might gather evidence about improper actions taken by management and then use it later if, for example, they feel badly treated or retaliated against. Also, the sole motivation for blowing the whistle could be to gain a financial reward. These actions are unethical in general and violate the ethical requirement for acting out of a motivation not only to right a wrong but do so as soon as evidence exists that the organization has committed a wrongful offense.
Blog posted by Steven Mintz, PhD, on April 27, 2023. Find out more about his professional activities on his website (https://www.stevenmintzethics.com/). Follow him on Facebook at: https://www.facebook.com/StevenMintzEthics and on Twitter at: https://twitter.com/ethicssage. Check out his professional recommendations on LinkedIn.