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    Published: October 28, 2008

    The Policy Report
    More Protection for Whistleblowers? Or More Ethical Culture?
    By Paula J. Desio, ERC Chair on Ethics Policy

    There has been a constant drumbeat of legislation in recent years to expand whistleblower protections in the private and public workplace.   The Sarbanes Oxley Act extended federal legal protection to private sector employees of publicly-traded companies who report potential audit and financial violations. It also authorized the Department of Labor to receive, investigate, and adjudicate claims of workplace discrimination or retaliation by SOX whistleblowers.

    After Chinese imports raised serious safety concerns, Congress passed the Consumer Product Safety Improvement Act to guard the safety of children’s toys and child care products. A little-discussed section of that act also extends traditional federal whistleblower protections to employees who express concerns about products and handling in the manufacturing and retail chain.  Like Sarbanes Oxley, it authorizes the Department of Labor to protect employees who report potential violations of consumer protection laws to either federal or state authorities.

    These protections are modeled on an approach codified almost 20 years ago in the Whistleblower Protection Act.  With the expressed intention of “eliminating wrongdoing in the government,” Congress enacted a range of administrative and legal procedures to protect the jobs of federal executive agency employees who disclose illegal or improper government activities.

    Advocates who consider existing law inadequate now seek additional protections through bills pending in the current Congress  (H.R. 985 and S. 294)  for national security, government contractor, and science-based agency whistleblowers.    

    But no matter how well-intentioned and -crafted such additional measures may be, they generally fail to get at the very heart of the problem for which whistleblower legislation was initially designed – to encourage greater reporting of misconduct for the purpose of creating a more ethical workplace.  

    The Federal Model

    The federal whistleblower model presumes that reporting of misconduct leads to hostility and retaliation by peers and management, and commendably seeks to prevent it. Most of the protections offered by existing, and proposed, laws focus on ways to put the whistleblower on a more equal footing when challenging their employer’s  personnel decisions (such as demotion, dismissal, or transfers).  Their aim is to protect the job and livelihood of the whistleblower.  But these protections are inherently limited, in that they cannot shield the employee from peer ostracism and expressions of resentment in the community – fallout that many whistleblowers find to be the most devastating result of their well-motivated actions.

    As part of the presumption that whistleblowing  engenders hostility and retaliation, whistleblowers are encouraged to report misconduct anonymously.  Entire “hotline” mechanisms have sprung up in recent decades, again encouraged by legislation and regulation, to shepherd the information  anonymously within a company or  federal agency.

    Nonetheless, risks clearly remain and the  isolation facing whistleblowers is widely recognized in contemporary culture.  In fact, whistleblowing as often as not is acknowledged as a “necessary evil,” and the phenomenon generally retains the stigma of childhood “tattletales” and adult informants.  “Whistleblower” and “hero” are not necessarily synonyms, and many whistleblowers have publicly expressed regret over their decisions because of the negative impact on their lives and their families.

    What Else Might Work?

    ERC’s 15 years of research into employee perceptions of their workplace suggests that a fundamental reorientation is needed, from a strictly legal framework to an approach that embraces the role of culture and internal operations.

    Ethical or reputational risk to any organization, private or public, is defined as the frequency of workplace misconduct and its reporting to management (which is necessarily presumed to act to prevent misconduct once it is reported).   Reducing the rate of observed misconduct and increasing the rate of reporting to management significantly diminishes ethical risk in the workplace. Conversely, increased and unreported misconduct amplifies risk.

    Misconduct or “wrongdoing,” as Congress saw fit to characterize it in the Whistleblower Protection Act of 1989, is broader than illegal activity and includes violations of company or agency policies as well as defined ethical standards.  All levels of misconduct -- including, for example, conflicts of interest that are not prohibited by law, or a supplier’s use of child labor -- have potential for severely damaging an institution’s reputation even if there are no legal consequences. Workplace morale also diminishes and high-quality recruits go elsewhere – risks that good executives do not want to take.

    ERC’s national surveys consistently demonstrate that employees in all sectors are increasingly working in environments conducive to misconduct, and that the interventions proven to reduce ethics risks are not very common.

    Observed misconduct in the workplace is at record highs – with 56 percent of U.S. workers across the public, private, and nonprofit sectors saying they observed misconduct in 2007.   The rate of reporting misconduct is also troublesome. Some 38 percent of U.S. workers do not report misconduct, despite the fact that the vast majority, some 83 percent, are aware of an anonymous reporting mechanism such as a whistleblower hotline in their workplace. When workers do report misconduct, no more than 3 percent use the anonymous reporting mechanisms long encouraged by whistleblower legislation.  The vast majority prefer to talk to supervisors or others in their immediate chain, many of whom may not recognize that they should be reporting the substance of these concerns to management for more global consideration and necessary action.

    Alternative methods of encouraging reporting are needed if companies and governments sincerely intend to diminish workplace misconduct and all the attendant reputational risk that comes with it.   ERC’s longitudinal research validates the proposition that a complementary focus on well-implemented ethics and compliance programs and a strong ethical culture can improve the landscape and achieve these goals.   

    Some  Suggestions for an Alternate Approach

    According to federal sentencing guidelines, an ethics and compliance program is well-implemented, and not merely a “paper program,” when the following elements are present:1

    • Willingness to seek ethics advice
    • Receipt of positive feedback for ethical conduct
    • Employee preparedness to handle instances of misconduct
    • Management can be questioned without fear
    • Incentives, support, and encouragement to follow ethical standards
    • Questionable means of conduct are not rewarded
    • The organization encourages ethical conduct
    • Employees believe organization is ethical

    Yet, across the private and public workforce in the United States, no more than 25 percent of employees work in an environment  with a well-implemented ethics and compliance program. Fortunately, however, almost half (45 percent) of workplaces do demonstrate some of the attributes of a well-implemented program, so there is at least a solid foundation on which to build and increase reporting of misconduct.

    The corollary component, a strong ethical culture, develops when the following elements are present.  

    • Ethical Leadership: “tone at the top” of an organization and belief that leaders can be trusted to do the right thing
    • Supervisor Reinforcement: individuals directly above the employee in the company hierarchy set a good example and encourage ethical behavior
    • Peer Commitment to Ethics: ethical actions of peers support employees who “do the right thing”
    • Embedded ethical values: values promoted through informal communication channels are complementary and consistent with a company’s official values

    Among these measurable characteristics, a supervisor’s demonstration of ethical behavior and reinforcement of  employees’ ethical choices and behaviors figure the most prominently in building a strong ethical culture.  Yet only  9 to 10 percent of private and public sector employees work where there is a strong ethical culture.  Again, more than 40 percent of these workforces do have the attributes of “strong-leaning ethical cultures,” so the effort to strengthen ethical culture is well-grounded.

    What Can be Done Next?

    In view of these data-driven observations about ethics in the national workplace, policymakers and advocates for reform should consider how this information can advance their objective of reducing misconduct by increasing reporting.

    Greater emphasis should be put on encouraging internal operations that foster all the elements of a well-implemented ethics and compliance program, as well as on strengthening ethical culture. Both components are shown to result in increased reporting and less fear of retaliation, and specific methods exist for working with organizations to achieve specific, measurable results. 

    Advocates for future legislation should support all viable methods of reducing misconduct through improving ethics and compliance programs and strengthening ethical culture. Encouraging effective measurement and benchmarking is another way to demonstrate support for methods that focus on workplace implementation.

    Advocates for whistleblower protections would do well to engage their counterparts in the ethics and compliance fields to assess and develop more detailed and practical methods to further their mutual goals.

    1 These elements are behavioral manifestations of the criteria established by the United States Sentencing Commission and approved by Congress as part of federal sentencing policy to prevent and reduce organizational misconduct.  See USSC 8B2.1, as amended, and Reason for Amendment No. 663 (November 1, 2004)

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