Lecture 2 Whistleblowing

pdf

School

University of Technology Sydney *

*We aren’t endorsed by this school

Course

25602

Subject

Marketing

Date

Jan 9, 2024

Type

pdf

Pages

Uploaded by jessnvogue

Case: Data Analyst Dilemma - you're going against your boss or either the role of the job 1. Case facts - it's an insider job where you need to be confidential in your work and not give any info to people to outside, there might be bribes or gift incentives that affect your role 2. Principle or concept you can use to tackle this dilemma - that it is safe (won't be found out), belief it is in the best interest of the company and that the company would protect them, activity is within reasonable ethical and legal limits. 3. Behavioural biases - self interest (looking after your position and maintaining relationships), obedience to authority, incentive bias, ethical fading Apply a principle to the case: None of them are applicable to this case. You're not doing a bad thing for a justified means (utilitarian philosophy). Kantain is not applicable either because the act is not merit and its not moral What would you do? - Talk to someone of higher position 4. 4 steps: Awareness Decision making - what effects the decision making Intent - do you intend to go around it Moral - how do you enact on that decision Whistleblowing Has 6 components (boatwright definition - textbook): Undertaken by a member/ former member of the organisation - Concerns non-public information (private info) - Regards illegal or immoral conduct that opposes public interest - Reveal to outside normal channels - going to a regulator/ director of the company - Voluntary release of information - chosen to do this - Moral protest - Conditions for justified whistleblowing: (all the conditions need to be justified and are you fulfilling the 6 components?) Is the situation of immoral for there to be exposes - use ethical theory to back it up The outcome is to improve market integrity and outweighs the damage you're doing to the organisation (utiliatarian) ○ - Do you have all the facts and understand the significance - understand what's going on - Have all the normal channels and dealt with internally been gone to? - What is the best way to blow the whistle? Whistleblowing hotline? Director? Regulator? Police - What is your responsibility and your role to the company? Loyalty to the company vs whistleblowing - What are the chances of success? Will action of whistleblowing resolve? - Do you know a big case of whistleblowing - Enron Time's 'Persons of the Year' - what happened in each of these cases - Enron: What happened in each case? ○ Mark to marketing accounting = current state of investments and their value, you don't know what your position in the market is Makes them look better when they actually not Conflicting renumeration from Enron - external audits - Week 2: Whistle Blowing, Trade Secrets & Conflicts of Interest Wednesday, 22 February 2023 11:10 PM Ethics in Finance Page 1

Conflicting renumeration from Enron - external audits The whistleblower was an Enron auditor which had shares in Enron Auditing companies shouldn't be doing their own auditing - conflicts of interest Did anybody get hurt? Was there an ethical dilemma? ○ Shareholders, employees, government - lost ppl that paid taxes How did those accused of wrong doing rationalise their wrong doing? ○ All 4 could be justified - being safe, best interest of himself and the company and protected by the company Can you name and explain any decision making biases that play a role? Wrongdoers or whistle-blower. ○ Moral muteness, ethical fading, conflict of interest, conformative bias, obedience to authority, inventive gaming, loss aversion from the decision makers, Is this case of whistle blowing according to textbook ○ Sent a memo to the chairman, criticised for not going to financial regulators Yes: insider in company, private company info, illegal/ immoral conduct, moral protest, voluntary release of info No: reveal to outside Is the whistleblowing justified according to: Textbook - mostly  Utilitarianism - yes (the ends did not justify the means)  Kantian ethics - yes (committed an act that in itself was wrong - fraud)  ○ Are you actually being loyal by being quiet and hindering your employer? Women vs men whistleblowers - women were met with more hostility - self interest Men - did it for the benefit of the company/ better good What options? Turn a blind eye, follow, leave the company, whistleblow Are you obligated to do something? - Its more rational to expose it before the situation goes even worse Can be any way be apart of the company - be the spouse of the person that works at the company Breach financial acts Ethics in Finance Page 2

Breach financial acts Reasonable grounds For arguments: utilitarian argument, won't get fired, the rights for the freedom of speech Against arguments: could be opened to be abuse - disgruntled employee trying to get back, put blame on someone else, employer can't criticise whistleblower if they have done something wrong, another regulation on business - inhibits managers to do their job Foreign Exchange - "Sure thing" case What happened? 1. 2013, 2 Monash graduates, when new data came out from ABS that if they leak this info to trade Got discovered by pepperstones broker that did the trading on behalf - found out they had a connection by social media Ethical dilemma? 2. Could argue it was victimless, insider trading is not victimless - making a gain at someone's expense, and when called out it has an impact How did those rationalise their wrongdoings? 3. Activity is safe they would never be found out Can you name and explain any decision making biases that play a role? 4. Behavioural biases - incentive gaming, incrementalism, didn't understand the severity of what they did, conflict of interest Is this a case of whistle blowing according to the textbook? 5. Yes - broker dealing with one of the parties doing the wrongdoing, non public info, illegal/ immoral conduct, outside of normal channels (ASIC), moral protest Is the whistle blowing justified to: textbook, utilitarianism, kantian ethics 6. Yes it was justified to all What belongs into a whistle-blowing policy? Have you ever seen whistle-blowing policy? 1. Yes - companies have them If you had to design one, what would you put in there? 2. 5 important components (from the textbook): Effectively clear statement of responsibility - Clearly defined procedure for reporting - Train personnel to receive reports - Commitment to take appropriate action - Appropriate measurements after - Which of the suggested components from textbook's suggestions for a policy do you find most important? Why? 3. Which of the suggested components from the textbook's suggestions for a policy do you find least important? Why? 4. What do you think of "bounties" (Parliament Report 2017, ch11) for whistle blowing? 5. Bounties - the amount where people/ victims can get after the ordeal Similar to ASIC 3: Ability to report anonymously, monetary reports, proper Lead to successful action See bounties in US - See current parliament recommendations for Australia - Arguments for whistleblowing in Aus: incentivises people, encourage people to come forward, people will feel comfortable without facing financial risk, can get fines back from the wrongdoer, compensating the whistleblowers is not a bad thing Arguments against in Aus: need to be investigate, abuse of the system - would just whisteblow over small things to try and get money, perverse incentive/ income, unfair distribution of a bounty, does it restore a healthy culture, the end don't justify the means - shouldn't just think about compensation should have good protection Ethics in Finance Page 3

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Novartis Case What happened? 1. Whistleblower was eligible to receive 10-30% of the bounty Pharmaceutical supply company knew if they encouraged patients to take their drugs they could get government cofunding/ copaying for the drug 2. Encourage the drugs with the doctor's - doctors were paid and pampered to be educated about the drugs to be prescribed and were gone on a weekly/ monthly basis (bribe) Sales managers had to budget all these events for the doctors Ethical dilemma? 3. Government - for copaying for the drugs, patients - could be prescribed the wrong drugs, reputation of doctors, reputation of novartis, shareholders How did those rationalise their wrongdoings? 4. The best interest of the company, helping the company and it was condoned and they could be protected, could be safe and wouldn't be found out Can you name and explain any decision making biases that play a role? 5. Behavioural biases - self interest (dr), conflict of interest (dr), incentive gaming with govt (novartis) dr kept going and going to those events (), role morality (sales managers), conformity bias Is this a case of whistle blowing according to the textbook? 6. Yes Reported to the govt bounty scheme Is the whistle blowing justified to: textbook, utilitarianism, kantian ethics 7. Yes - to all 3 Other - circuit layouts Taking the mickey - the copyright of mickey will expire soon but trademarks last forever and Disney have argued that mickey is like a logo for disney and therefore should be a trademark Patents What are patents? Legally protects your invention or how something works - exclusive commercial rights over their invention 1. Types of patents in Australia: 2. Standard patent - 20 yrs - Innovative patent - 8 yrs - Pharmaceutical patent - Benefits: 3. Stops others from manufacturing and using - Ethics in Finance Page 4

Stops others from manufacturing and using - Encourage invention, creativity - Can licence a patent and take a benefit - Disadvantages: 4. Decreased competition - Monopoly over something for too long - Stifling creativity - can't improve upon it - Is it ethical? Pharmaceutical debate - Decision to apply for a patent - correct documents? Other people can see what your idea is - idea theft - can you apply consequences for this? 5. 30 July 2021: AI and patents - in Aus AI can be recognised as an inventor 6. Trade Secrets Definition: formula, patent, device/ process that you protect yourself and don't register 1. Example: software, design of a machine, manufacturing process e.g. KFC 7 spices, Coca Cola soft drink recipe 2. Obligations of others - employees can't copy the formula and use it elsewhere 3. Rights from owning a trade secret - isn't the right of exclusive use, once well known it becomes no longer protected as a trade secret 4. Criteria to determine whether a trade secret is protectable - value of information to competitors, how easily it can duplicated to others 5. Justifying trade secret protection Property rights (apply ethical theories) - utilatarian - society benefits if companies innovate and they have legal protection which will in turn allow them to be more innovative 1. Fair competition - seek new employment and work competitively against their former, employers would put non-compete arguments, 2. Confidentiality - continues after you left the job, cannot reveal info after 3. Conflicts of interest Critically important "engine" of wrongdoing - arisen in business 1. Principal-agent relationship - business environment - market/ economic and principal agent relationships to keep in mind for businesses 2. Distinctions of conflict of interest - actual vs potential 3. Actual - lead a person to act against an interest of their principal (act inappropriately) Potential - haven't yet fulfilled the obligation of contract, may not eventuate, but the possibility remains that it might Personal vs impersonal Personal interest of a lawyer that conflicts with their client (recommend to go to their brother) - Impersonal - lawyer had 2 clients that goes against each other (not connected to the lawyer) - Individual vs organisational (agent/ principal) Agent typically representing an individual - Ethics in Finance Page 5

Agent typically representing an individual - Kinds of conflicts of interest 4. Biased judgement: bribes, kickbacks - Direct competition: agent has competition with the principal's business or best interest - Agent misusing their position: bank manager might refer customers to bank to a family member for another financially relevant - Violation of confidentiality: lawyer breaks confidentiality - Describe (types, forms) conflicts of interests in past cases: Volkswagen, Enron, FX-Insider- Trading 5. Enron - conflicts of interests: bias judgement by the auditors of accounting firm because they were renumerated Fx-insider-trading (Sure thing case) - conflict of interest: showing information outside of the company Potential conflict of interest in future career 6. How to manage conflicts of interest: avoiding it, thinking objectivity, disclose the conflict to the relevant party, encourage competition - no conflict of interest when recommending a connected person, implement rules and policies - code of ethics, use independent judgement (bring someone in to assess), introduce structure into it 7. Ethics in Finance Page 6

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Lecture 2 Whistleblowing

Related Documents