Ethics and Social Responsibility - Is Whistleblowing Ethical?

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Ethics and Social Responsibility – LGST001 (G19)

Is Whistleblowing Ethical?

Prepared by:

Lim Qian Guo

Lee Yang

Joan Tan

Prepared for:

Professor Jeremy Leong

The topic in question has long been debated by philosophers and provides for dizzying controversies, yet with no concrete conclusions. Given the complicated nature of this issue, it is difficult to accurately determine a definitive statement on whether whistleblowing is ethical. This paper thus seeks to determine under what situation whistleblowing is warranted, based on the potential effects the act would bring about to the relevant stakeholders. For this discussion, the definition of whistleblowing is as follows: “Whistleblowing is the deliberate, voluntary disclosure of individual or organisational malpractice by a person who has or had privileged access to data, events or information about an actual, suspected or anticipated wrongdoing within or by an organisation that is within its ability to control (Petersen & Farrell, 1986). The disclosure may be internal or external and may or may not enter the public record.”

The ethicality of whistleblowing is questionable because it entails an ethical dilemma whereby the individual is torn between two competing loyalties – loyalty towards the organization and loyalty to the public. Furthermore, the uncertainty of backlashes and consequences following the actions of a whistleblower makes the decision even more difficult. For a start, we will be examining a considerably straightforward case where whistleblowing was likely to be justified.

In 2001, Enron Corporation, a major American company dealing in energy, commodities, and services, was involved in a major accounting fraud scandal (Thomas, 2002). The fraudulent act was brought to light with the assistance of former vice president of Enron, Sherron Watkins. It was later revealed that Enron had conspired with Arthur Andersen LLP, formerly one of the “Big Five” accounting firms, to falsify financial statements. Through accounting loopholes and difficult-to-understand financial statements, the pair deliberately hid billions of dollars in debt from the eyes of the public (Thomas, 2002). Consequently, this led to consumers having a misguided perception of the company’s financial health and resulted in the loss of billions of dollars and thousands of jobs, affecting the relevant stakeholders severely.

Within two years from its peak, Enron’s stock price plummeted from a high of $90.75 in August 2000 to $0.67 in January 2002 (Thomas, 2002). This was due to a loss in consumer confidence in the business. Stockholders had lost over $60 billion in market value, more than 20,000 became unemployed and to-be retirees losing a total of $2 billion in pension money (Thomas, 2002). Arthur Andersen LLP’s employees also became unemployed after the dissolution of the company due to Enron’s auditing scandal (Thomas, 2002).