Whistleblowing Legislation And Its Role Of Corporate Governance Essay

Whistle blowing is the act of an employee exposing a company’s misconduct, illegal activity, or threats to the public. Whistle blowing is protected under Sarbanes-Oxley (SOX) act of 2002 section 806. There are two different types of whistleblowing, internal and external. Internal is when an employee discovers misconduct and reports it to a supervisor or executive to handle the issue. External whistleblowing is when an employee reports a company’s misconduct to external parties such as law enforcement or media. O’Brien had to complete both types of whistleblowing. When he reported it to Amgen’s upper management and no action was taken, he then sought out legal representation to discuss the issue and his wrongful termination.

The Dodd-Frank Act has allowed for more leniency when it comes to whistleblowing but this legislation was implemented after this story began. There are several industry protection programs for whistleblowers and the Security and Exchange Commission (SEC) even promotes whistleblowing by giving out monetary rewards for certain cases. The Sarbanes-Oxley Act (SOX) was supposed to make whistleblowers believe that they would not be retaliated against. However, making the determination of whistleblowing after hearing Tony Menendez’s story will make the weak squeamish and the strong possibly reconsider.

If the CEO received a report of his misconduct, the business would surely fall as the boss was the key person who kept the business running steadily. Most often, this event can cause massive damage to employee’s salaries, and affect the economic values as well. Furthermore, one may argue that whistleblowing may violate individual rights as employee’s signed a contract abiding by company’s standard. In an article called “Whistleblowing and Professional Responsibilities” by Sissela Bok, she emphasizes “employees have a loyalty oath of confidentiality and secrecy” (Bok 178) which may violate human rights as well. Individuals often view that they often have the right to privacy. However, whistleblowing to the company can create a breach in loyalty. Similar to a friend posting every secret about the person, employers contain information to avoid mass media and future damages to the community. Therefore, whistleblowing may create further chaos and future problems. While whistleblowing has its flaws regarding the standards placed on the employee, moral and ethical rights are higher than what an employer can offer for their

The history of Enron is described in detail in the film “The Smarted Guys in the Room”. According to the film, Enron was founded by Kenneth Lay in 1985, functioning originally as a producer and supplier of natural gas. Enron built and operated power plants and pipelines all over the United States. The company’s wealth expanded quickly due to marketing, promotional strategies and stock price. One of the important aspects noted in the film was Lay’s relationship with the Bush family. This will be described in detail later on and becomes a crucial piece of information during the California energy scandal. Enron’s traders were involved in a scandal early on in the company’s history involving the misappropriation of money and oil betting, this became known as the Valhalla scandal. Lay encouraged traders to continue these activities until the company was near bankrupt and finally the top traders involved were fired and convicted.

A whistleblower is someone usually an employee in a government agency who takes upon himself to report or disclose information on a threat or harm to the public interest and authority. The reporter undertakes the initiative in the context of his or her work-based relationship. It is mostly in line with mismanagement, corruption, illegality and some wrongdoing in accounting and financial statements. The paper presents some of the prominent characteristics of a whistleblower and summarizes a relevant instance of whistleblowing in a public company. Additionally, it examines the extent of protection of an informer by the Sarbanes-Oxley Act.

In this paper, I will cover the characteristics of a whistleblower provide an example of one and cover how the Sarbanes-Oxley Act would be used in this particular event.

Enron was a U.S. based energy-trading company. At its height of operation in the early part of 2001, it was booking revenues of about $140 billion (Enron Ethics). At the end of 2001 it declared bankruptcy. The Enron bankruptcy was the largest corporate economic failure at that time, and still remains an example of how corrupt practices magnify in the long run. What led to Enron’s failure was primarily a lack of ethics, and poor accounting practices. This scandal was one of the reasons that new regulations were passed for financial reporting standards, the Sarbanes-Oxley Act was passed in 2002 as a means of stopping such a collapse in the future.

Enron was firstly a natural gas pipeline company that combine as the combination of Nebraska and Omaha’s natural gas company, Houston Natural gas and InterNorth. It took 15 years from 1985 to 2000 to climb up into the one of the largest gas company in North America. Behind the successful of the company, it was a story of betrayal and

To many, the revealing of companies’ private information is an ethically reasonable action that deserves either less punishment than what it does today or no punishment at all. With some punishments for whistleblowing being ostracism, harassment, and demotion, people deem the amercements as unreasonable (Martin). These kinds of punishments are usually doled out to whistleblowers who work for large businesses, making their work environment more hostile and uncomfortable. Whistleblowers get themselves into these situations when they expose information about controversial and illegal actions committed by a company in the hopes that they will face justice or make corrections to their business. As stated by Brian Martin, a social sciences professor,

The number of tips received by the “Whistleblower's Office” of America's Securities and Exchange Commission have risen since its creation in 2011, totaling to nearly 4,000 complaints annually. “We live in the age of the whistleblower,” says Jordan Thomas, a former SEC official now at Labaton Sucharow, a law firm. Surveys by the Association of Certified Fraud Examiners or ACFE, a global group for financial investigations , consistently find that anonymous sources of information to be the leading mechanism for unearthing complicity, well ahead of audits or regulatory reviews.(the Economist, 2015) There has been a profound “Great Awakening of the Modern Age” as the common man takes power in his own hands to keep “Big Brother” in order, to keep the peace. In this day age, there are more incidents of Whistleblowing than ever before. A social revolution that only grows as the days go

Businesses today, more than ever, are under scrutiny by the public and its stakeholders. With an enormous pressure to be ethical, businesses produce and implement policies for the organization to abide by. On the other hand, it may be easier for businesses to think in their best interest than the interest of the public, causing unethical behavior. Then, a business may have employees that feel an obligation to the public and society to expose its negligence. Whistleblowers are “people who expose negligence, abuse or danger such as professional misconduct or incompetence that exists in the organization in which they work” (Ray 438). Whistleblowing transpires when an employee unearths an action to the public, either out of responsibility to their

sanctions collected. In the year following the implementation of the incentive provisions, a whistleblower fund of $452 million dollars was put in place. The possibility of qualifying for a significant whistleblowing award has been incentivizing some employees to bypass internal reporting controls in favor of reporting directly to the SEC. Corporate attorneys have to deal with employees that choose to bypass internal reporting and compliance and must also adapt with the changing landscape of whistleblower law to make sure they are protecting the company without violating employee rights.

Enron Corporation was an energy company founded in Omaha, Nebraska. The corporation chose Houston, Texas to home its headquarters and staffed about 20,000 people. It was one of the largest natural gas and electricity providers in the United States, and even the world. In the 1990’s, Enron was widely considered a highly innovative, financially booming company, with shares trading at about $90 at their highest points. Little did the public know, the success of the company was a gigantic lie, and possibly the largest example of white-collar crime in the history of business.

Ethics in the business world can often times become a second priority behind the gaining of profits and success as a company. This is the controversial issue that led to the Enron scandal and ultimately the fall of this company. Enron Corporation was an energy company, and in the peaks of their success, they were the top supplier of natural gas and electricity throughout America. Enron Corporation came about from a merger between Houston Natural Gas and InterNorth. Houston Natural Gas was a gas providing company formed in Houston during the 1920’s. InterNorth was a company formed in Nebraska during the 1930’s and owned one of America’s largest pipeline networks. In 1985, Sam Segnar, the CEO of InterNorth bought out Houston Natural Gas for $2.4 billion. A year later in 1986, Segnar retired and was replaced by Kenneth Lay, who renamed the company and created Enron. Enron was the owner of the second largest pipeline in America that measured over 36,000 miles. The company was also the creator of the “Gas Bank”, which was a new way to trade and market natural gas and served as an intermediary between buyers and sellers. As the company continued to develop, it became more of a trader rather than a producer of gas. This trading extended into coal, steel, water and many other areas. One of Enron’s largest successes was their creation of a website called, “Enron Online” in 1999, which quickly became one of the top trading cites in the world. By the year 2000 Enron as a company was

The story of Enron begins in 1985, with the merger of two pipeline companies, orchestrated by a man named Kenneth L. Lay (1). In its 15 years of existence, Enron expanded its operations to provide products and services in the areas of electricity, natural gas as well as communications (9). Through its diversification, Enron would become known as a corporate America darling (9) and Fortune Magazine’s most innovative company for 5 years in a row (10). They reported extraordinary profits in a short amount of time. For example, in 1998 Enron shares were valued at a little over $20, while in mid-2000, those same shares were valued at just over $90 (10), the all-time high during the company’s existence (9).