Whistleblowing, MNCs, and peace.

Author:Dworkin, Terry Morehead
Position:Multinational corporations
 
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ABSTRACT

This Article examines the relationship among whistleblowing, corporations, and international peace. The Author attempts to establish that whistleblowing is a vital part of transparency and good government. In Part II, the Author examines the rational for whistleblowing. Part III addresses the cultural dimensions of whistleblowing and its practicability for global organizations. Finally, the Author looks at the advantages of whistleblowing in relation to both corporations and peace efforts.

  1. INTRODUCTION

    Globalization of business is an accepted fact, as is the growing power of multinational corporations (MNCs). (1) A desire for peace also seems to be globally accepted. (2) What is less certain is whether the power of multinationals can be harnessed to help achieve peace. Desire is not enough. Practical policies and procedures must be implemented to help achieve this goal. Discussions of peace through commerce mention certain preliminary conditions such as establishing justice, good governance, transparency, and giving individuals a voice as necessary requirements. (3) A tool increasingly discussed and implemented to deliver and maintain these conditions is whistleblowing.

    Whistleblowing is a procedural way to reinforce the transparency necessary to free trapped capital, (4) encourage foreign investment, and move economies--especially transitional ones (5)--away from reliance on personal relationships and bribes. (6) To the extent that there is a positive correlation between corruption, poverty, and violence, (7) the need for whistleblowing is reinforced. Empowering individuals to combat cronyism and call into question economic decisions made for personal gain rather than the general good should allow more resources to be allocated to those at the bottom of the economic scale.

    Professors Fort and Schipani have persuasively argued that corporations can have the greatest impact on peace through mitigating internal--rather than international--conflicts; the way in which corporations are governed makes a significant difference in the ethical values leading to mitigation of these conflicts. (8) Whistleblowing as a governance tool becomes even more important in this context because it encourages responsive, and thereby responsible, governance practices. It gives individuals a say in their organization, and contributes to a feeling of procedural justice. Giving individuals a standardized way to speak and be heard also helps reinforce democratic ideas. This check on power is crucial for an effective democratic institution. (9) Globalization often leads to a feeling of disempowerment and creates conditions which allow the few to benefit at the expense of the many. (10) Whistleblowing leads to accountability, and accountability helps defuse the resentment (11) and opportunities for corruption.

    When whistleblowing is used to enforce just treatment norms, inter-ethnic, inter-gender, and inter-religious interaction and notions of equal treatment can be fostered. This is already true in the United States in terms of sexual harassment. (12) Such interaction (13) and enforced equality helps to defuse conflict. (14)

    The growing dominance of multinational corporations allows them, in some respects, to act as independent states outside of the effective control of particular countries. (15) Thus, it is appropriate to consider the goals and restraints these multinationals impose on themselves, as well as those that are externally imposed. (16) In the United States, and to a lesser extent in other common law countries, (17) companies are being encouraged, or even compelled, to establish codes of conduct and whistleblowing procedures to enforce them. This Article discusses whether these practices and goals can be harnessed to help deliver on the promise of peace through commerce. (18)

    Part II of the Article examines the rationale for whistleblowing, its growth in the United States, and the response to whistleblowing in other countries. Part III examines the cultural dimensions of whistleblowing and whether it is practical for multinational organizations to adopt it as a governance tool. Adoption is found to be feasible if appropriate reporting procedures and ethical norms are adopted, and if allowances are made for some cultural adaptation. Finally, the advantages of open reporting and communication procedures to the corporation and the peace effort are discussed in Part IV.

  2. THE GROWTH OF WHISTLEBLOWING

    1. Why Whistleblowing?

      The most commonly accepted modern definition of whistleblowing is "the disclosure by organization members (former or current) of illegal, immoral or illegitimate practices under the control of their employers, to persons or organizations that may be able to effect action." (19) As indicated by this definition, it is seen today as an employee action. This has not always been the case. For example, the council of the city-state of Venice instituted whistleblowing to help fight corruption and to give citizens a more meaningful voice in their government. (20) The U.S. Congress, building on an idea adopted from much earlier English legislation, passed a whistleblowing law as a way to supplement governmental resources in fighting fraud during the Civil War. (21) The recent emphasis on whistleblowing, however, began with Ralph Nader's 1971 call for its implementation as a means to stem organizational wrongdoing. (22) There are many reasons why this is an idea whose time has come again.

      Work organizations, both governmental and civil, are growing in size and complexity, and individuals are often little more than "cogs" in the organization in which they work. (23) Individual jobs have also grown in complexity, and as a result have become more specialized and expertise-based. (24) This, in turn, makes the detection of wrongful conduct more difficult due to both lack of knowledge and access to information. (25) At the same time, the information and technology revolutions have increased the opportunities for significant fraud and other harmful and illegal activities. (26) Whistleblowing is one way to obtain--or regain--societal control over the large organizations that increasingly dominate society. (27)

      The premise behind recent governmental promotion of whistleblowing is that people of conscience work within these large, complex organizations, and would normally take action against wrongdoing except for fear of losing their jobs or other forms of retaliation. (28) Thus, if adequately protected from retaliation, they will come forward with evidence of wrongdoing before external detection is possible. Harms from the wrongdoing could be reduced, wrongful behavior stopped, and the expense of public oversight and investigation would be reduced if such reporting occurs. (29) Also, if whistleblowing proved a relatively common occurrence, wrongdoing would decrease because potential wrongdoers would be aware that their activities were not truly secret.

    2. The U.S. Experience

      While initially discussed in the early 1970s, it took significant disasters such as the explosion of the Challenger, (30) mass accidental poisoning of food, (31) and publicity about extensive contractor fraud (32) for whistleblowing to become a common tool of control. All three branches of government, at both the federal and state levels, now have adopted measures designed to encourage whistleblowing. (33) While all measures protect the reporter from retaliation, other provisions vary considerably on issues (34) such as to whom the whistle should be blown, (35) whether motive should be considered, (36) whether the whistleblower may benefit from reporting, (37) what standard of evidence of wrongdoing should be required, (38) and what remedy should be provided to a whistleblower who suffers retaliation. (39)

      As public policy supporting whistleblowing has matured, there has been a shift toward encouraging internal whistleblowing and away from the almost exclusive legislative emphasis on reporting outside the organization. This represents a change in emphasis away from a primary focus on punishment by governmental bodies toward earlier and more complete cessation of wrongdoing. (40) It also saves public funds. There are many other advantages to internal reporting. It accords with the actions of most whistleblowers, (41) is less harmful to the organization and the employee, (42) and is considered more ethical. (43) A variety of laws and decisions both directly and indirectly have caused employers to establish internal whistleblowing procedures in order to reap the benefits that these reports can deliver. (44)

      The most important direct cause of organizational establishment of internal whistleblowing procedures (45) is the Corporate Sentencing Guidelines. (46) The Guidelines, which determine penalties for corporations convicted of federal crimes, (47) take a "carrot and stick" approach toward curbing organizational wrongdoing. Convicted organizations that have made little or no effort to prevent or reduce wrongdoing suffer increased monetary penalties (48) and sanctions, including probation, (49) and mandated negative publicity. (50) Reduced fines and avoidance of sanctions are provided for organizations that, in good faith, have attempted to stop and detect misconduct. (51) A written code of ethics, a meaningful reporting system, (52) and protection of whistleblowers from reprisals are key characteristics of an acceptable deterrence and detection program that will qualify for reduced fines and sanctions.

      The Supreme Court has also prompted organizations to establish codes and internal reporting procedures through its hostile environment sexual harassment decisions. (53) Most organizations, however, have established these procedures for the limited purpose of controlling harassment and not for the reporting of other kinds of wrongdoing. (54) In these decisions the Court recognized an employer defense to hostile environment sexual harassment...

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