Organisational Wrongdoing, Whistleblowing and Retaliation: What we Think we Know and What we Need to Know

1. Organisational Wrongdoing, Whistleblowing and Retaliation:What we Think we Know and What we Need to Know Janet P. Near Kelley School of Business Indiana University Bloomington, IN, USA

2. Why Does Whistleblowing Matter? • Costs of organisational wrongdoing in US: • $5 billion in employee theft • $350 billion attributable to antitrust violations • $300 billion in tax fraud • $100 billion in health care fraud (Miethe, 1999) • “Insiders” in better position to observe wrongdoing and report it than outsiders

3. Agenda for Today • What we think we know (US data): • Overall incidence of wrongdoing, whistleblowing and retaliation against whistleblowers • Predictors of whistleblowing by organisation members who observed wrongdoing • Predictors of retaliation against whistleblowers • Predictors of effectiveness in the whistleblowing process • What we need to know

4. Theoretical Framework:Whistleblowing is affected by Power Relationships among Multiple Social Actors and the Organisation Complaint Recipient Whistleblower Organisation Wrongdoer

5. Legal Issues in US Whistleblowing and Retaliation • Employment-at-will doctrine • “Public policy exception” • Protection from discrimination, sexual harassment, OSHA violations • Protection for union employees • Early state statutes protecting whistleblowers were not used in cases as often as torte law (Dworkin & Near, 1987, 1997) • Current state statutes vary (Callahan & Dworkin, 2000; Dworkin & Callahan, 2004) • Merit System Protection Act (1978) protects federal employees from retaliation (USMSPB, 1981, 1993) • False Claims Act protects others who report fraud against U.S. government (Callahan & Dworkin, 1992) • Sarbanes-Oxley (2002) provides federal statutory protection (only 3 whistleblowers have received a favorable ruling since 2002: Barakat, 2004)

6. Incidence Information: Federal Employees (1980-1992) and Directors of Internal Auditing who Observed Wrongdoing, Blew the Whistle and Suffered Retaliation (Miceli et al., 1991, 1999)

7. Conceptual Definition of Whistleblowing “The disclosure by organisation members (former or current) of illegal, immoral, or illegitimate practices under the control of their employers, to persons or organisations that may be able to effect action” (Near & Miceli, 1985, p. 4). Implications: Internal or external whistleblowing Not just recommending changes—has to involve wrongdoing Purpose of whistleblowing is to get wrongdoing stopped Focus on behaviour, not intent

8. Typical Questionnaire Measure of Wrongdoing: Most Serious Wrongdoing Observed in the Past 12 Months • Stealingof federal funds or federal property, accepting bribes/kickbacks, use of position for personal benefit,unfair advantage to contractor and employee abuse of office • Wasteof organisational assets, byineligible people receiving benefits or by a badly managed program • Mismanagementincluding management’s cover-up of poor performance or false projections of performance • Safetyproblems including unsafe or non-compliant products or working conditions • Sexual harassment • Illegal discrimination • Violation of law

9. Most Serious Type of Wrongdoing Observed, US Military Base Sample, n=1224, 37% of all employees (Near et al., 2004)

10. Response to Wrongdoing, by Observers of Wrongdoing, Military Sample, n=1125(Miceli et al., 2001)

11. Predicting Whistleblowing:Individual difference variables • Age • Years of service to the organisation • Years of school • Gender (male) • Pay level • Supervisory status • Knowledge of appropriate channels for reporting wrongdoing • Feeling of responsibility to report wrongdoing

12. Predicting Whistleblowing:Situation variables • Serious wrongdoing • Strong evidence • Supportive supervisors • Organisation supportive of whistleblowing

13. Definition of Retaliation Conceptual: “undesirable action taken against a whistleblower—and in direct response to the whistleblowing—who reported wrongdoing internally (i.e., within the organisation) or externally (i.e., outside the organisation).” (Miceli & Near, in press). Operational: Sum of threatened and actual retaliations, termed “comprehensiveness of retaliation” (e.g., Miceli et al., 1999)

14. Typology of Retaliation • Work retaliationvictimization: “adverse work-related actions that are often tangible, formal, and documented in employment records” • Social retaliation victimization: “antisocial behaviours, both verbal and nonverbal, that often go undocumented” (Cortina & Magley, 2003: 248)

15. Types of Retaliation (US Military Sample): ThreatenedExperienced Co-workers not socializing with me .4% 11% Pressure from co-workers to stop complaint 2% 5% Tighter scrutiny of daily activities by management 2% 14% Withholding of information needed to perform job 1% 10% Personnel/staff withdrawn 0 9% Verbal harassment or intimidation 5% 12% Poor performance appraisal 2% 15% Professional reputation was harmed 1% 7% Charged with committing an unrelated offense 1% 7% Denial of award 1% 7% Denial of promotion 2% 7% Denial of opportunity for training 1% 9% Relocation of desk or work area in office .4% 5% Imposed access restrictions to areas needed for job 1% 7% Assignment to less desirable or less important duties 2% 8% Reassignment to job with less desirable duties 1% 7% Reassignment to a different geographical location 0 3% Security clearance withdrawn .4% 1% Required to take a fitness-for-duty exam 1% 2% Suspension from job 0 .4% Grade level demotion 0 .4% Fired from job .4% .4% Other 3% 3%

16. Predicting Retaliation:Summary of Results ·Most whistleblowers didn’t suffer retaliation, and those who suffered retaliation did not differ reliably from other whistleblowers in terms of personal characteristics, such as age, gender, race, status in the organisation, pay, etc. (but among federal employees retaliation was positively related to education and inversely related to pay, performance and majority ethnic group: Miceli et al., 1999). ·Whistleblowers who did suffer retaliationoften felt that they had less support than others from managers and supervisors, and they were more likely to have used external channels to report the wrongdoing, rather than internal channels exclusively.

17. Regression of Retaliation (β), Federal Employees (Miceli et al., 1999)

18. Conceptual Definition of Effectiveness “the extent to which the questionable or wrongful practice (or omission) is terminated at least partly because of whistleblowing and within a reasonable time frame” (Near & Miceli, 1985: 681) Basis for definition • Early finding: whistleblowers themselves perceived the process to have been effective if they were successful in changing management’s views about the wrongdoing (Near & Jensen, 1983) • Effectiveness is separate from retaliation

19. Regression (β) of Effectiveness(Miceli & Near, 2002)

20. Implications and Questions for Practice and Theory Theory: • Bureaucracy is still the basis for most organisation structures • Bureaucracy is built on Max Weber’s notion of authority: the boss rules • What happens to organisation structure if dissent is permitted? • What happens to organisation effectiveness if dissent isn’t permitted? Practice: • If lawmakers want to reduce corporate wrongdoing, how can they persuade insiders to blow the whistle? • If managers want to improve organisation effectiveness and prevent lawsuits for wrongdoing, how can they encourage valid and useful dissent? • If organisation members want to blow the whistle effectively and without suffering reprisal, what strategies should they use?