Corporate Whistle-blower Climate Today

Do you think the Sarbanes-Oxley Act of 2002 offers sufficient safeguards to protect whistle-blowers from corporate retaliation? Do you think our current lending crisis could have been averted had employees blown the whistle? Do you think that corporate America is capable of policing itself? Or do you think we need stiffer government regulation at least in terms of financial transparency?

I think the Sarbanes-Oxley Act of 2002 is a legitimate step in the right direction to encourage employees to more carefully consider the impacts of their actions in a moral context. However, though it will offer better protections to employees who ultimately become whistleblowers, I question whether or not it will increase the number of whistleblowers or increase the frequency with which they choose to go public with their accusations.

The general status of societal morality combined with the internal culture of organizations is still the driving force behind the actions of employees. In an increasingly amoral culture with a decidedly relativistic bend, I wonder if our very perception of morality (what is right and what is wrong) is becoming so skewed socially that it reduces the number of individuals willing to come forward with allegations of wrongdoing. If such a pool of individuals willing to step forward to prevent immoral corporate behavior is reduced, it does not bode well for improved corporate performance. If this is combined with corporate cultures willing to stifle whistle-blowing in pursuit of the almighty bottom line, even legislation like the SOA is only one small finger in the dike holding back a mighty ocean.

As for whether or not our current lending crisis could have been prevented by whistleblowers, I don’t think so. Perhaps its scope could have been reduced but I don’t believe it would have eliminated. I think there was a systemic and pervasive willful blindness to reality and commitment to selfish gain as profits soared. Even today, as a real estate agent, I see an industry that still silently craves a return to the “boom years,” even at the cost of the consumer. I still routinely observe mortgage brokers and lenders that would repeat previous offenses if given half a chance. Still they would loan money to borrowers who are not credit worthy if there was a way for them to pawn off the risk.

To me this indicates that current policies and procedures enacted since the crash are more of a knee-jerk reaction to the circumstances rather than a heartfelt morph to higher responsibility and accountability. Policies seem to have been instituted more as survival mechanisms rather than as means to a better more equitable moral future.

In light of this, can corporate America police itself? I think it is capable. That this automatically implies willingness is another matter entirely. American corporations do have the resources and ingenuity to implement self-policing at all levels. However, this requires a commitment from the top down, and a willingness of management to follow-up all private allegations of misconduct as vigorously as if they were under a watchful public eye.

I do not necessarily think more regulation is the answer. Discussions of the merits of capitalism and government regulation are for another time and place, but I will simply posit that I think government regulation can only go so far. As an old preacher once said, “Gentlemen, there comes a time when we cannot legislate the heart.” This is to say, at some point, our collective corporate behavior must stem from an internal desire to operate profitably, both monetarily and morally rather than simply choosing to get away with as much as possible in the context of current law. Our fundamental corporate culture must be founded on solid moral policies from which ethically sound profitability may be sustained. I know this is easier said than done, but it certainly is worthwhile goal for which to strive.

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More Business Writing...

Do you think that business has an obligation to protect the environment beyond what the law requires? Be sure to explain the views of Bowie and Hoffman. With whom would Friedman side? Why?
First allow me to summarize the views of both men and answer the last question first. Then I will briefly delve into my opinion.

Bowie feels that business has two responsibilities when it comes to their environmental interaction: first, obey the law; second, do not interfere with the law-making process. In this way he feels the market and its stakeholders (including government) will determine what the appropriate level of involvement for the business is. He feels that the business will be prevented from improperly influencing the development of such legislation if they are not allowed to meddle in the process.

Hoffman, on the other hand, feels that business has an environmental responsibility that exceeds the limits of the law and should approach that responsibility from a naturalistic, biocentric perspective rather than from a humanistic homocentric one. In other words businesses should be proactively involved not just reactively involved, regardless of how it impacts its profits.

Bowie’s view would be the perspective most closely in alignment with Friedman’s theories. His response is true to the Friedman position of allowing the market to determine its own course and allow those with purchasing power to guide it.

Hoffman did not seem to think that equating environmental responsibility with a business’s self-interest was an adequate ethical foundation. I can see his point, but I tend to disagree a little bit. I agree with Hoffman on the basic idea that businesses should possibly have a responsibility above the law. However, I feel this is nearly always justified by a business’s own self-interest.

In the case he mentioned of the business-owner who bankrupted his business trying to achieve environmental responsibility, I feel there were several real errors in judgment. Thus, I do not feel that is the best case to represent a concept of social responsibility. As Hoffman indicated, it is one extreme. However, I do think responsible businesses must participate in a steady focused long-term campaign of environmental responsibility. They must do this to preserve their resources, their capital, the good will of their stakeholders, and steady long-term profits. Additionally, this concept is not untrue to shareholders because a responsible posture reduces the probability for lawsuits, clean-up costs, and health care coverage costs due to hazards resulting from unsafe and irresponsible behavior.

Hoffman did not seem to have much confidence in the long-term planning abilities of corporations (which I admit has been justified by corporate behavior in the last fifteen years). However, this is not a good excuse to not teach a long-term paradigm shift to corporations beginning with the lowest echelon of management. As has been repeatedly discussed and demonstrated, American culture and business – from the ground up – needs to retrain itself on impulse control, long-term planning, community cognizance, and quality management. This will facilitate the environmental responsibility desired by Hoffman.

At a more fundamental level, this discussion needs to consider the effects of world-view on how an individual approaches this debate. In a nutshell, the evolutionary bias of belief in the survival of the fittest lends itself to irresponsible behavior justified as we elbow and stomp our way over species and environments more fragile than ourselves. Juxtaposed to that idea, the Christian worldview provides a framework for the sacredness of all life, the value of the environment as a magnificent and precious creation, and the command for responsible stewardship of all resources. I understand this is a complex and far-reaching discussion that cannot be adequately treated here, but it is a foundational element of the discussion and should not be forgotten.

Overall this is a complex issue and I don’t think any one approach is sufficient. I think the marketplace is the ideal place for these changes to be made, supplemented by proactive businesses, and guided by active government regulation. Additionally, based on my belief in the Christian worldview, I would have to agree that business sometimes may have a responsibility above the law. However, this responsibility extends to all of us as individuals as well. Businesses are not to pursue this responsibility alone. All of us have the responsibility to do our part even above and beyond the law if necessary.