Corporate Scandals and Whistleblowing: A Study on Social Responsibility

This study examines the impact of high profile corporate scandals on businesses and society. It explores the failures of education systems and their role in unethical practices. The study also delves into the concept of whistleblowing and its ethical implications, using theories such as deontology, utilitarianism, and egoism. Gain insights into the importance of social responsibility in the corporate world.

SOCIAL RESPONSABILITY
1

Table of Contents
INTRODUCTION...........................................................................................................................2
MAIN BODY...................................................................................................................................2
PART-1............................................................................................................................................2
High profile corporate scandals in recent eras.......................................................................2
PART-2............................................................................................................................................4
PART 3............................................................................................................................................7
REFLECTION........................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
2

INTRODUCTION
Social accountability is an ethical suggests & framework that an entity, be in an
individual or company, has an obligation to work for benefits of society or community at huge.
It refers to the duty and accountability of a person and organizations to perform so as to maintain
a balance between ecosystems and economy. This concept means that companies and
individuals have a role to act in best interests of their society as well as environment as a whole.
The current study is based on three tasks as part 1, 2 and 3. Part 1 highlights high profile
corporate scandals in recent years and also explains extent to which scandals can be happen due
to failures of education systems. Part 2 justified appropriate theories and examples to critically
examine phenomenon of whistle blowing. Both parts will be written in an essay format and parts
3 will written in form of reflective that defines individual learning about overall business social
responsibility.
MAIN BODY
PART-1
High profile corporate scandals in recent eras
Corporate scandal includes actual or alleged unethical behaviour or practice by
individual acting within or on behalf of companies. Many recent corporate scandals & collapses
have included inappropriate or false accounting of some sort. There are varied types of scandals
happen in corporate sector that affect businesses.
Volkswagen emissions scandal-
This company is known as leading automaker firm in the world founded in 1937 by
German government. They design, produce and distribute commercial as well as passenger
vehicles, engines, turbo machinery and motorcycle and also offers related services including
leasing and financing. Organization management deal with difficult situation emissions scandal
impact on its brand image within market place negatively. In simple words, Volkswagen
emissions scandal is considered as one of the big corporate sector scandal began in September
when US environment protection agency issued a notice of violation of clean air act (Che,
Katayama and Lee, 2020). It occurs because United State EPA announced that authority
believed company had cheated emissions tests. It turned out that firm had been fitting what some
sector commentators described as defeat devices to their products like diesel cars which included
3

software that cannot detect when electronic vehicles were undergoing laboratory testing and
switch on controls to reduce nitrogen emissions.
While laboratory testing procedure some of its workers do not perform ethically they are
not focusing on testing practices which in return outcome as scandal. This scandal shows that
how individual are unaware about their morale accountability and behaviour which is relay very
essential to consider while doing specific job within organization. This complex situation within
company affects up to 11 million electric vehicles or cars that decrease sales and revenue of
business rather than before (Rhodes, 2016). It can be said that unethical practices or act of staff
may be the reason behind this scandal they do not detect the defect while laboratory testing. Due
to poor education or may be ineffective education system employees are unable to learn how to
behave and work ethically that is important for business and individual growth. EPA served
legal notice of violation on Volkswagen group alleging that approximately 480,000 Audi and
Volkswagen automobiles equipped with 2L TDI engine and sold in nation had an emission
compliance regarding defeat device installed.
Uber scandal-
It is an American international ride hailing organization offering their services that
include peer to peer ridesharing with skilled employees. In current years, there have been varied
accusation of sexual harassment at company and questions over their stop at nothing method to
expansion. Latter allegedly consider it utilize illegal technology to evade poach drivers, law
enforcement from their competitors & spy on consumers. However, it was typically accusations
in context of company bro culture that assured to be one of the biggest corporate scandals and
led to CEO resignation in 2017 (Carrie, 2017). Allegations included complaints that senior
authority members of staff had made sexist pokes and jokes as well as visited a brothel in Seoul.
Even though few were not proven, claims impacted price of Uber’s shares which were
traded privately at that time. All the issues were created because of ethnical and ineffective
behaviour of seniors that impact negative impact on organization business performance and
practices. Complaints related to workplace discrimination in company make negative image
within market place all it happen because of their workers or seniors who are using their power
negatively and do not treat other person in ethical manner. Due to poor and failures of education
systems workers in organization was not able to aware about their social accountabilities and
ethical practices. It can be said that failure of education systems impact on learning and abilities
4

of students which reflects through their behaviour and nature towards other people. Without
getting good education individual is unable to work in effective and systematic manner when
they work for company. In this scandal, senior staff members are accountable for whole the
situation as it creates negativity all around the workplace. There are more complains about Uber
organizational culture arises from workers side that affects business growth and success for
longer period (Griffith, van Esch and Trittenbach, 2018). Firm fires more than 20 workers as a
outcome of their internal research, management says it obtain more than 215 complaints
throughout their investigation into inappropriate behaviour and act at their workplace, with
highest number of complaints related to sexual harassment, unprofessional behaviour and
discrimination. From above discussion it analyze that at high extent scandals can be happen due
to failure of education systems.
One of the biggest corporate scandals is Enron scandal which was surfaced in October
2001. It was revealed that the company was involved in corporate and accounting fraud. There
were lot of irregularities in the accounting procedures and then the question arises how the
company still making money despite it is facing crisis in energy, telecoms and commodities
among other industries. After which SEC began to investigate and later it was discovered that
the company is hiding billions of dollars in its liabilities by creating special purpose entities
which was used by the company to appear profitable but actually it was hemorrhaging cash. This
scandal leads to bankruptcy of the company and dissolution of the auditing firm Arthur
Andersen (Bondarenko, 2020). The shareholders of Enron lost $74 billion along with its
employees losing their jobs and billions in pension benefits. The CEO of the company Jeff
Skilling was sentenced to 24 years and the former CEO died before serving time. This scandal
shows that how the company was employees and the key personnel who were involved in the
scandal have misused their skills and drawn a wrong example for the young generation. They
lacked moral responsibility in terms of using their behavior and thinking. This shows that they
are unaware of their moral responsibility and brought the country to the shame. It can be said
that there is some fault in their education itself. They haven’t learned to basic ethics and moral
responsibilities to be followed while running a business and its implication the society as a
whole.
Another very strong and latest example is of Facebook. In March 2018, the Guardian and
the New York times reported that the Global Science Research had gained the data of millions of
5

Facebook users without their consent and later sold it to Cambridge Analytica. And this
company used the data for high targeted ads for encouraging users to vote for Trump and Brexit
(The Cambridge Analytica scandal changed the world – but it didn't change Facebook.
2019).The issue was so serious that even Mark Zuckerberg was called to provide answers to the
Congress in the US. After this, the thing came out that the earlier version of Facebook privacy
policy had allowed apps to collect the data of the users such as their friends list, location and so
forth. This has led the Global Science Research to collect information of 87 million Facebook
users and only 30,000 of them had used their app. Again, this scandal was a high profile and had
aserious consequence on the mind of the people and has also shown the thinking ability of the
people. This is not only about having a weak privacy policy but it’s the organizations who used
it in such a way.It has affected the image of Facebook and its CEO. Facebook should have
ensured that its privacy policy is intact and the data of the users are safe. It is actually the moral
responsibility of the company to take care of its employees, clients and users.Still Facebook has
not fulfilled its responsibilities in respect to auditing all apps.
PART-2
Whistleblower is the person who reports for insider knowledge of the illegal activities
that occurred or conducted in an enterprise. It could be suppliers, clients, employees, contractors
and an individual who are aware of the illegal activities of a business. They are been protected
from the retalian under several programs developed by OSHA that is Occupational Safety and
the Health Administration. Whistle blowing is counted as the debatable issue as it includes
exposing or revealing unethical secrets n which the firm is involved. It is defined as practice
within which employees knows that its company or peer is engaged in such activities that leads
to unnecessary harms, violating the human rights are seen as illegal which run counter to defined
purpose of instructions or professions and otherwise immoral forms of superiors, professional
corporations, government agency and public of such activities.
Whistle blowing creates dilemma for concerned employees and was been counted as bad
because it includes an activity of exposing other party in eyes of public or concerned system of
justice. Author viewed that it is a harsh term associated with the words like stooling, finking,
ratting and tattling. These are the words which projects the attitude of an individual towards this
concept. Moreover, it involve ample of responsibilities for a whistle blower in which an
6

informer is placed in centre of an investigations and would be asked for revealing problematic
areas (Brand, 2020). On other hand, there are some benefits which might result from the whistle
blowing. It helps in putting needs of the other concerned parties at priority in cases like
anticipating false profits to public; this practice could save investors from the huge amount of
losses. In addition to this, whistle blowing results in collapse of the large firms like Enron. Most
of the people would lose their respective jobs when truth about a company is been revealed.
Majority of the people blames whistle blower for the loss of their jobs. Often it overlooks main
fact that an entity was making for falsified profits.
Whistle blowing could create an ethical dilemma where some of the people argue that it
is the moral obligation for revealing an unethical act. However, this created problem in case an
individual considers that a perpetrator might leave as unemployed with poor reputation or an
entity will be close down. In thus stud y whistle blowing is been evaluated in respect of ethical
theories that are deontology, utilitarianism and egoism.
Egoism is stated as traditional ethical type of theory which reflects that an individual’s
aims at pursuing their respective welfares. However, author argued that an individual act in their
self interest and this in turn results to rejection of this theory as it promotes selfishness. Most of
the people believes that being as selfish seems as wrong because such people does not consider
wants and needs of other people. However, it has also been indicated that self interest and self-
concern does not considered as entirely bad and is quite necessary.
Thus, egoism is noted as the bad theory as it does not takes into account an interest of the
other parties. For instance- conceited auditor would not act in interest of his respective clients.
This theory is mainly based on fundamentals of the self-interest and therefore, in this one might
argue that it might not essential to reveal unethical acts a colleague or an entity does because it
do not advance them in the way (Miethe, 2019). In most of the cases there are no advantages
attached to the whistle blowing as this egoist concerned with personal interest of an individual.
On other note, egoist might postulate that it would be counted as viable for going ahead with the
whistle blowing in case if it advances his respective career. For instance- in case an employee
gets a top position in firm after calamity has been resolved. Therefore, whistle blowing must be
done in the honor of profession and not for purpose of self-advancement.
In context of utilitarianism, theme is to conduct an action that would benefit greatest
good for large number of people. Author depicted that action brings about more of the good
7

consequences is seen as viable, however, action which brings about the bad conditions is
considered as harmful. The main rule is that an action which created more and more happiness
deemed as viable. The major problem particular to this theory is that it does not consider the
factor in distribution problem.
For example- If their present 5 people and 2 oranges whereas the other two loathe them
then in what way oranges would be distributed for the purpose of creating greater level of
happiness. In case it is decided to distribute oranges fairly as like one orange is been provided to
every individual, total units of the happiness would resulted as 3. Therefore, the remaining two
individuals would not be pleased with respect to receiving oranges. However, if the oranges are
given to those who loves it very much as like two people who loves orange the most will receive
2 orange each. This leads to create greater number of the happiness units (Near and Miceli,
2016). Whistle blowing is support by this theory if it would benefit greater number of the
people. Therefore, it would cause an advertisement for great number of the people like soaring
unemployment and then it would not wise to go ahead along with such act.
The other ethical theory reflected as Deontology which is based on a belief that if one
acts in fulfilling the desire then they are not found as acting out of the moral motive. This theory
indicates that one must count their actions firstly and then determine if they could take as
universal principle or law. This theory helped in solving problem in utilitarianism. Utilitarianism
is mainly concerned with results whereas deontology is majorly based on the universalizing an
individual’s actions. This depicts people to act as ethically so that actions could be accepted
universally.
PART 3
REFLECTION
From the above report it has been analysed that in the case of Enron as well as in the
Face book company are the one who are being at the wrongful side, mainly decision making was
the part there were wrong at that time. Also, employee in the organization has forgot to carry out
variety of the ethical and moral responsibility, as they were looking to maximize the profit in the
case of Enron. At the same time in the case of the Face book it was not the issue, in that case
company was more focused toward the profit making as they overlooked the variety of the
security issue which is being faced by the organization in the as a whole. In the case of Enron
8

after the scandal has taken place, customer and employee were the one who has faced the variety
of the issue, as it has been find out that employee was getting difficult to cope up with variety of
the issue and also company has decided to look at improving the current position of the company
in local market, rather looking at expanding the business to the Global market. At the same time
in the case of the Face book it has been identified that consumer relationship in the market is one
of the biggest issue which has been faced by the company. To overcome the same issue in the
organization face book has taken the variety of the step in the organization to build a good image
of the company in front of the others. This has eventually increased the amount of the efforts as
well as cost of the company in the long run.
At the same time in the case of the Volkswagen emission it has been identified that this
issue was of another nature as in this case the activity of the organization was affecting the
environment of the nation, this has created the variety of the issue in relation to purified oxygen
in the environment this has created the variety of the issue for the organization. Biggest issue
which is being faced by the company in this case was that goodwill and the image of the
company was impacted very adversely in the market. In the case of Uber scandal at the same
time is the scandal which shows that it has been incorporated in the organization due to the
employee irresponsibility which has been shown by all the employee in the organization, as it
has seen that they were the one in the organization who were promoting the discrimination in the
organization. This has created the wrong image of the company in front of the other in the
market, also it has impacted the workplace environment of the company. Also, it get difficult for
the company to manage the human resources of the company for longer period of the time in the
nation.
CONCLUSION
From above analysis it has been concluded social accountabilities place huge importance
in life of individual as it also play vital role in progress and success of corporate sector. It has
been examine that Volkswagen emissions scandal, uber, Facebook and other corporate sectors
scandals affect businesses growth. It occurs due to failure of education systems through which
workers work within above companies doing their job. Employee behaves unethically that
impact on overall performance and functions of business.
9

REFERENCES
Books and Journals
Bachmann, R and et.al., 2019. Firms and collective reputation: a Study of the Volkswagen
Emissions Scandal (No. w26117). National Bureau of Economic Research.
Brand, V., 2020. The Ethics of Corporate Whistleblowing Rewards. In Corporate
Whistleblowing Regulation. (pp. 37-63). Springer, Singapore.
Carrie, J., 2017. Uber CEO Travis Kalanick resigns following months of chaos. technology. 6.
p.21.
Che, X., Katayama, H. and Lee, P., 2020. Willingness to Pay for Brand Reputation: Lessons
from the Volkswagen Diesel Emissions Scandal.
Griffith, D.A., van Esch, P. and Trittenbach, M., 2018. Investigating the mediating effect of
Uber's sexual harassment case on its brand: Does it matter?. Journal of Retailing and
Consumer Services. 43. pp.111-118.
Miethe, T., 2019. Whistleblowing at work: Tough choices in exposing fraud, waste, and abuse
on the job. Routledge.
Near, J. P. and Miceli, M. P., 2016. After the wrongdoing: What managers should know about
whistleblowing. Business Horizons. 59(1). pp.105-114.
Rhodes, C., 2016. Democratic business ethics: Volkswagen’s emissions scandal and the
disruption of corporate sovereignty. Organization Studies. 37(10). pp.1501-1518.
Online
Bondarenko, P., 2020. Enron scandal. [Online]. Available
Through:<https://www.britannica.com/event/Enron-scandal>.
The Cambridge Analytica scandal changed the world – but it didn't change Facebook. 2019.
[Online]. Available
Through:<https://www.theguardian.com/technology/2019/mar/17/the-cambridge-
analytica-scandal-changed-the-world-but-it-didnt-change-facebook>.
10

11