Whistle Blowing: a How-to Guide for Everyday Use

“Neither one of them started this, but neither one did anything about it,” said Jim Crane, owner of baseball’s Houston Astros, referring to team’s General Manager, Jeff Luhnow, and field manager A. J Hinch. Both were fired in January for their role in baseball’s sign stealing scandal.

You can find the same backstory in other tragedies: harmful practices proliferating through silence and inaction.

Insys Co-Founder, Former Employees Convicted of Opioid Conspiracy

Brazil charges ex-Vale CEO with homicide for dam disaster

Former Boeing Engineers Say Relentless Cost Cutting Sacrificed Safety

Every story about fraud and deceit needs a primary scoundrel. Former Insys CEO John Kapoor, former Vale CEO Fabio Schvartsman, and former Boeing CEO Dennis A. Muilenburg will be forever shackled to the suffering their companies created. Bernie Ebbers is a de facto synonym for WorldCom, the scandal he engineered in the 1990’s.

But in recounting the chronologies, the supporting cast often goes unrecognized. The investors, board members, bankers, accountants, auditors, functionaries, consultants, and regulators who knew about wrongdoing, and either actively participated, looked askance, or kept quiet. Similarly, we rarely learn the names and circumstances of those coerced into acquiescence. It takes a village to execute a scheme.

Like scoundrels, whistleblowers have centrality in their respective stories, but widespread recognition is more ephemeral. How many know of these whistleblowers, and what they were instrumental in stopping? Julie Taylor-Vaz, Susan Fowler, Rachel Denhollander, Jeffrey Wigand, Sherron Watkins, Cynthia Cooper, Mike Fiers, and Tyler Schulz. (Answers are at the end of this article.) And rarely, if ever, do we learn the identities of those who supported their effort.

Mark S. Schwartz , author of Business Ethics, defines whistleblowing as “an attempt by a member or former member of an organization to disclose wrongdoing in or by an organization.” Elements common to all whistleblowers are that their decision to call out wrongdoing is often conflicted, and the best path to take is not always clear.

See something, say something. Why don’t people speak up more often? It’s easy to be judgmental. “One UK and Continental Europe study found that ‘speaking up’ or whistleblowing is considered the most significant ethical issue to the organization,” according to Schwartz. Yet, a 2014 survey by the Ethics Resource Center found that “while 41% of US employees witnessed illegal or unethical misconduct in 2013, a significant percentage (37%) did not report it.”

What stifles whistle blowing? There are many likely reasons, including these:

First, malfeasance in the workplace doesn’t typically carry a warning label. Further, the very definition of workplace is debatable. Insidiously, malfeasance often emerges from banality. Maybe as an unexplained policy change or obfuscation of an audit trail. Perhaps it was rationalization for a practice deviation or tacit permission to doctor a quality control result. It might have been a boss’s request to circumvent a regulation or code of conduct. We’ve repeatedly learned that within the apparatus of a corporation, such mutations develop fangs. They explain how opioids get over-prescribed, shaky dams evade basic safety certifications, and flummoxed, undertrained pilots lose control of airplanes.

Second, fear of retaliation. “One’s perception of what’s appropriate or inappropriate depends heavily on what culture one identifies with,” wrote Eugene Soltes, author of Why They Do It – Inside the Mind of the White Collar Criminal. “One global survey of executives found that 10% of CFO’s believed it was acceptable to illegally backdate a contract to meet a financial target. In contrast, only 3 percent of chief compliance officers felt this was tolerable . . . More than a quarter of respondents in Vietnam and Indonesia approved misstating financial performance to survive an economic downturn, while no executives in the UK or Switzerland expressed such approval.”

Third, divided loyalties. “What makes the dilemma of whether or not to blow the whistle even more intense and difficult is the fact that in order to ‘do the right thing’ and prevent possible harm, the whistleblower must almost always suffer the personal negative consequences that follows reporting misconduct,” according to Schwartz. The decision is “possibly one of the most difficult dilemmas to resolve . . . a direct conflict between our loyalty to our firm and our colleagues versus doing the ‘right thing’ by potentially preventing harm to others.” In 2014, research surveys uncovered that “21% of those reporting misconduct experience some form of retaliation . . . and 46% of employees indicate fear of retaliation as the reason they did not report wrongdoing.”

Marketers, salespeople, and business developers are not strangers to this quandary. Squeezed between two unharmonious goals – make quota and ensure your customer’s success – they toil in ethical purgatory, routinely forced to trade off one for the other. Protecting a customer’s interests versus elevating current period revenue. Eschewing a deceptive selling tactic versus achieving a team bonus. Being transparent about product flaws versus earning commission. As Thomas Boswell recently wrote in The Washington Post, “when ethical values die, business value . . . can die with it.” No risk decimates market capitalization faster and more thoroughly than a scandal.

In strategy meetings, executives stew about market disruption, rabid competition, and relentless change, but no issue matters more today than preserving stakeholder interests. Achieving that goal requires giving employees the wherewithal to prevent wrongdoing, and creating a culture that provides them safety for doing so. Think of whistleblowing as virus protection for the enterprise. Ideally, that means preparing for malfeasance before encountering it. First, know when to consider blowing the whistle. Second, think about who you should tell. Third, decide how to tell them.

When should you consider blowing the whistle? Start here: whenever a workplace situation causes discomfort. A situation where you think, “my gut tells me this isn’t right,” or “this conflicts with my values.” Then, ask these questions:

1. Has activity been planned or taken place that violates the law, a corporate policy, or internal code of conduct?

2. Has that conduct caused – or could it cause – physical, psychological, or financial harm to someone, including employees, customers, suppliers, contractors, investors, or community members?

3. Does – or could – the conduct infringe someone’s basic moral right to life, health, or safety?

4. Is the conduct an injustice that you cannot tolerate, or would not tolerate if it were directed at you?

These questions help establish and solidify the case. They also reduce whistleblowing when primary motivations might be self-serving, such as ratting out an employee for a trivial infraction when he or she is competing for a promotion. “A proper moral motive for blowing the whistle would involve exposing illegal or unethical actions, and not based on seeking profit or attention,” Schwartz writes, adding, “personally, I am not as concerned with proper motivation for whistleblowing as some commentators, if the end result of the whistleblowing is that unnecessary harm to others is avoided.”

Who should be told? Choosing between internal and external disclosure.

Internal. In most instances, it’s best to initiate whistleblowing internally, that is, start inside the company. Schwartz recommends whenever possible, first informing perpetrator that the conduct “will be reported if it does not cease.” According to Schwartz, “empirical research supports the proposition that most employees are both willing and able to report matters internally first . . . The misconduct must first be reported internally whenever feasible to your direct supervisor and, if no action is taken, all the way up to the board of directors or through the designated reporting channel if one exists . . . any potential ethical misconduct should be included, including any misconduct involving a violation of the firm’s code of ethics if one exists.”

What about going over the boss’s head? “Internal whistleblowing above your supervisor should always be considered morally permissible as long as

1) any misconduct or harm is or is about to take place,

2) there is reasonable belief of the misconduct or potential misconduct exists,

and

3) you have already reported the matter to your supervisor when feasible.”

But two things complicate this decision:

1. Lack of a written whistleblower protection policy. If the company hasn’t provided a written policy specifying the protections employees should expect for reporting internal fraud, whistleblowers can face serious risks. In this situation, they might consider bypassing internal reporting, and decide to report incidents externally.

2. The perpetrator happens to be the whistleblower’s manager, supervisor, or boss. Even with an anti-retaliation policy in place, implicating one’s manager might make the employee’s situation untenable.

External. External reporting includes disclosing wrongdoing to anyone outside the organization, including industry associations, attorneys, and government entities. “Only 2% of employees solely go outside the company and never report the wrongdoing they have observed to their employer,” according to Schwartz. In addition to the internal reporting criteria, external reporting is advised when

1. the alleged misconduct has been reported internally, but the company has not responded with remedial action, or action appears unlikely

2. the employee is bound by a professional code of conduct or licensing that supersedes company policy. Examples include the Hippocratic Oath, or licensing for realtors, financial advisors and securities dealers

3. the state where the workplace operates provides legal protection to whistleblowers. For a state-by-state listing of whistleblower laws click here.

Whistleblowing is almost always a response to a fire-in-progress. While it might prevent the spread of harm, it’s important to remember that something amiss has already happened. As such, it’s not a perfect antidote for ethical risk, but it’s essential to protect companies from harming not only their valued stakeholders, but themselves.

The decision to involve others in thwarting wrongdoing must be carefully considered. In the case of external whistleblowing, Schwartz offers practical steps to mitigate the likely repercussions. They apply to internal whistleblowing, as well:

1. Before taking action, confirm that you have your family’s support

2. Contact a lawyer who can advise you of any potential legal ramifications

3. “If at all possible, you should first find another job before blowing the whistle, since there is high likelihood that you will lose your job or otherwise face harassment.”

4. “Report anonymously if this is possible to reduce the likelihood of repercussions taking place.

5. Document everything, since you can expect the basis of your claim will be challenged.

6. Find colleagues willing to come forward with you, and enlist their participation.

In a perfect world, we wouldn’t need whistleblowers. But as long as greed and exploitation exist, whistleblowers will have a vital purpose. As Schwartz puts it, “Firms through their boards of directors and senior management possess a contemporaneous ethical obligation to ensure that their employees work within an organization that has a strong ethical culture that reduces the need for whistleblowing while simultaneously protecting those employees who do choose to blow the whistle.”

Notable whistleblowers

Julie Taylor-Vaz: blew the whistle on the college admissions scandal that implicated William “Rick” Singer; Susan Fowler: blew the whistle about harassment at Uber, which led to the ouster of CEO Travis Kalanick; Rachel Denhollander: exposed the crimes of USA Gymnastics Dr. Larry Nassar; Jeffrey Wigand: exposed the tobacco industry’s manipulation of nicotine in its products; Sherron Watkins: blew the whistle about accounting fraud at Enron; Cynthia Cooper: exposed phony bookkeeping at WorldCom; Mike Fiers: disclosed the Astros sign stealing activities; and Tyler Schulz: disclosed sham quality results at Theranos.

For further information, contact the National Whistleblowers Center.