Whistleblower protection laws and corporate accountability cases

¶ … Whistle Blowing

Introduction and History of Whistle Blowing

Whistle blowing is the revealing of immoral, illegal or illegitimate deeds to authorities. The authorities may be insiders or from outside the affected organization. Many cases of whistle blowing involve people revealing information to outsiders especially media organizations or pressure groups about an act they consider to be irresponsible, irregular or illegal (Robbins, 1993).

Cases of whistle blowing have increased dramatically in the recent past but the practice began way back in the 1970s (Shimabukuro & Whitaker, 2012). Scandals involving big corporations and that have led to the collapse of such organizations such as WorldCom and Enron among others come to mind (Minks, 2010). The U.S. Federal government has since enacted several statutes tailored at dealing with the problem.

This paper therefore aims at discussing these laws. Three whistle blowing cases involving the government and another three involving corporations will also be discussed. We will close by highlighting the impact that WikiLeaks has had as well as the contributions made by Edward Snowden.

Laws of Whistle Blowing

There are several operational laws whose goal is to protect whistle blowers. The Civil Service Reform Act of 1978, for example, was the first case where such protections were adopted to protect employees of the federal government (Shimabukuro & Whitaker, 2012). It was necessary to have this law as it had been realized that these employees could have been victimized if they blew any whistle and people came to know of it. The coming into law of the Whistleblower Protection Act of 1989 opened a new chapter as far as whistle blowing is concerned. (Shimabukuro & Whitaker, 2012).

This law seeks to protect all employees of the federal government who might reveal illegitimate activities done by federal officials. Provisions like protected disclosure and covered employee are present in the law so as to ensure that they are not victimized. Further, this law has been assimilated in 19 trade federal laws (Shimabukuro & Whitaker, 2012). The statutes have laid out the correct procedure for reporting misconduct by government employees.

The Sarbanes-Oxley Act 2002 ensures that top tier executives in a company do not escape culpability by feigning ignorance of the on goings in the firm (Miks, 2010). The legislation allows for the conviction of the corporate on account of misconduct or acts that can compromise the entire economy's performance. Arrogant executives should especially be treated suspiciously as there should be benchmarks for measuring a company's performance for the sake of all stakeholders and investors (Miks, 2010).

With the aim of advancing transparency as well as attracting funding, public companies ought to always be ready for scrutiny and accountability. Doing otherwise would give the impression that a company is making an effort to hide some dirt from theirs investors, stakeholders and shareholders. Some company executives do manipulate company financials so as to appear attractive in the eyes of investors (Miks, 2010).

Corporate Cases of Whistle Blowing

This part discusses three of whistle blowing cases that have led to the fall of major corporations. There are actually several scandals that have plagued the corporate world. The Enron Corporation case is the most notable. It was reported that executives took advantage of weaknesses in the accounting system and reporting to misrepresent the actual standing of the company. Billions of dollars in debt from projects that did not go through were hidden. The situation presented to investors in their accounts was a far cry from the dire straits that the company was in. Andrew Fostow, the Chief Financial Officer, and other executives were the masterminds of the whole saga. This was brought to the knowledge of the public when the company could not agree to be censured on account of its unwillingness to present its Statement of Financial Position as well as other financials.

Makkur Centre for Applied Ethics' executive director, Kirk Hanson, opines that the Enron case had the most significance among corporate collapses in U.S. Due to the failure of banks dealing in loans and savings (Markkur Centre, 2002). The stock of the company fell to less than $1 and investors lost about eleven billion dollars. Further, due to lack of confidence in the company, its business suffered and the company ended up filing for bankruptcy. This was a huge blow to investors and financial institutions .

The other case is the WorldCom Scandal (2002) involving a telecommunications company. The company, now called MCI, Inc., had inflated its assets by about eleven billion dollars and this lead to the loss of 30,000 jobs and $180 billion in investor money (The ten worst corporate accounting scandals of all time, nd). Internal auditors discovered 43.8 billion fraud that had been done with the knowledge of the CEO Bernie Ebbers. The accounts were inflated and did not reflect the company's true financial position at the time. The scandal led to the resignation of the CEO and controller, the firing of the CFO and the sentencing of Bernie Ebbers to serve 25 years on account of fraud, conspiracy and filing false documents with regulators (The ten worst accounting scandals of all time, nd). A related scandal is Health Sound Scandal (2003). Health Sound was the largest health company that was publicly traded and the accounts had seen inflation to $1.4 billion so as to meet expectations of stock holders (The ten worst corporate accounting scandals of all time, nd). Richard Scrushy, the CEO was the mastermind. His offloading of $75 million worth of stock just before the company posted its dismal performance caused suspicions and led to unearthing of the scandal. He was, none the less, not found guilt of any accounting fraud but was sentenced to serve a seven-year stint in jail for bribing the Alabama governor ( The ten worst corporate accounting scandals of all time, nd ). It is interesting that cases of fraud in companies involve CEOs. This is probably because they can use their positions of power to sweep such deeds under the carpet.

WikiLeaks

WikiLeaks is the new face of whistle blowing. The internet has made it even harder for governments to limit the sharing of information. Some dictatorial governments may go to great lengths to ensure state secrets stay secret but the internet now allows the previously information starved citizens to have access to such information. WikiLeaks is the perfect example. The operators of WikiLeaks concentrate in divulging sensitive information. WikiLeaks enables people to expose information safely, something that would be very difficult especially with government regulations. The WikiLeaks website claims that they 'aim for maximum political impact' and the website is accessible to people from all jurisdictions who nay want to expose illegitimate acts of various institutions and governments (WikiLeaks, 2013). WikiLeaks has greatly impacted several governments where unethical acts by officials have been brought to light. Citizens who wish to access such information can do it from the safety of their own dwellings and air their views on matters whistle blowing. WikiLeaks is an excellent platform for people to access and share sensitive information.

Edward Snowden

Heroes have been born overnight due to whistle blowing. A former NSA subcontractor, Edward Snowden, hit the headlines when he revealed secret information concerning the NSA's spying activities on American citizens. The NSA was spying on Americans through phone calls and the internet. Snowden considered this a violation of people's privacy and compiled a dossier that detailed how the NSA was spying on American citizens via programs like PRISM (Snowden, 2013). Snowden then requested for leave on medical grounds and went to China from where he divulged NSA's secrets. Snowden is currently based in Russia and the U.S. Government wants him repatriated. While the government considers him a villain, Americans have hailed him as a hero for exposing such discomforting activities of the government.

Conclusion

Generally, whistle blowing appears to be a dividing issue and elicits different reactions from different people where some people hail it as good but others disdain it as it compromises the image of organizations and governments. The federal government has made strides in having legislations aimed at protecting whistle blowers after it was realized that the practice would be handy in dealing with mega scandals where people in influential positions especially those in corporations sought to hide sensitive information. Whistle blowing is also useful in having government officials pay for their deeds. The practice is also beneficial to the average citizen who may lack access to critical information. None the less, there needs to be a middle ground between public and organization needs. If not properly handled, whistle blowing can ruin an organization or a government.