Business Ethics

Whistleblowing

(8 mins)

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Issue - Whistleblowing

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Whistle-blowing, Enron and Kantian Duty
• Enron was involved in fraudulent attempts to boost its share value by
hiding losses
• Enron (energy supplier) manipulated energy prices in California by
causing blackouts which saw the price of energy soar – and profited from
this

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What is Whistle-blowing?
• “Whistleblowing”, “raising concerns” and “speaking up” are all
phrases which describe disclosing information to an employer or
where appropriate a regulator, police or the media about
malpractice, wrongdoing or a risk to safety.
• It doesn’t happen very often – why not?

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Problem of Conflict of Duties
• What happens when two duties conflict?
• Kant argues for self-generated absolutes – our reason universalises by
an imaginative leap – ‘what if everyone did this?’
• But what happens when two such categoricals (absolutes) conflict?
• The duty of care and duty of honesty conflict with the duty of loyalty to
your employer and shareholders?
• You discover someone in your company is dishonest. What do you do?

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Sherron Watkins: Enron Vice-President
• Appointed in 2000 to supervise Enron accounts
• Discovered massive irregularity in the hiding of losses in subsidiary,
specially created companies, by Andrew Fastow of Enron
• Sends anonymous memo to Ken Lay
• Meets with Chairman Ken Lay to voice concerns
• Lay tries to reassure her that the board knows and promises to fire
auditors Arthur Andersen
• But she never makes her concerns public.
• Should she have gone to the police?

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 Whistle-blowing and Enron
•"What I stumbled across was hiding losses. It shocked me to
my core," she says. "As a trading company, your customers
need to know you are financially healthy. If there is any hint
that you may not be financially stable... your business dries up
like water through a sieve.”

•Sherron Watkins, Enron employee

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Watkins’ Conclusion
• "There is always a dark side to a strength. The dark side of innovation is
fraud. You push your employees to constantly innovate, they finally get
backed into a corner where they become too creative.”
• Sherron Watkins – Enron Whistle-blower

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Utilitarianism and Business
• What if the whistleblower is a utilitarian like Mill?
• Generally we follow a rule – be fair, tell the truth, consider others etc
• Moral dilemma – tell the truth and risk being sacked or ignored or…stay
quiet and hide the fraud at Enron

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Utilitarians
• Ignore motives
• Do a calculation as an act utilitarian
Costs of whistleblowing Benefits

Firm’s reputation suffers Firm survives

Unpopularity Status rises/promotion

Dismissal/no promotion Stakeholders are protected from loss

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Problems with utilitarianism
• I don’t know the consequences
• The personal risk is considerable and personal gains unlikely
• Loyalty to business may override loyalty to the truth
• If Enron had known the depth of the scandal that followed they wouldn’t
have committed fraud
• CEO Jeff Skilling sentenced to 24 years for fraud

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It takes moral courage
• Mill criticizes Bentham for failing to discuss character and the importance
of certain virtues such as sympathy for others
• But does utilitarian encourage moral courage when the risk to oneself is
so high?
• It is hard to distance myself from the decision and just add up numbers
(Bentham’s hedons or Mill’s happy or miserable people)

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Final Thought
• Richard Dawkins' book The Selfish Gene was CEO Skilling's favourite book
and served as the foundation of his managerial philosophy.
• Skilling held, by his own interpretation, a Darwinian view of what makes
the world work. He believed that money and fear were the only things that
motivated people.

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Problem: Lack of Integrity
Utilitarianism lacks moral integrity (Bernard
Wiliams)

Depends on a pragmatic view of consequences

and winners and losers

Seems the opposite view of Kant

It’s okay…as long as nobody knows

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