ACC5216 Accounting Theory: Examining Whistleblowing and Ethics

This case study analyzes the ethical implications of a CEO's attempt to expose a whistleblower, drawing upon legitimacy theory, stakeholder theory, and social contract theory. The case involves the CEO of Barclays being fined for attempting to identify an anonymous whistleblower who raised con...Read More

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ACCOUNT THEORY

Accounting
Executive Summary
With the help of change in the regulations there has been a huge development in the reporting
of wrong doing. Further, the presence of mechanism such as whistle blowing, the wrong
practices can be reported without having any personal involvement. In the present report, the
case of CEO of Barclays has been projected where the CEO was fined for $1.1 m when he
tried to breach the standards permitted. The entire report is based on whistle blower, theories
that deals with such acts.
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Accounting
Contents
Introduction...........................................................................................................................................4
i. Facts of the case & whistleblower.................................................................................................4
ii. Attempt to Expose the whistleblower...........................................................................................5
iii. Legitimacy theory..........................................................................................................................5
iv. Stakeholder theory........................................................................................................................5
v. Social contract theory....................................................................................................................6
vi. Compare, contrast and Evaluate....................................................................................................6
Conclusion.............................................................................................................................................8
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Accounting
Introduction
The case pertains to the CEO of Barclays and the hefty fine imposed on him when he tried to
trace the whistleblower. The person highlighted various issues pertaining to the personal
nature that had Main and Staley’s role in managing the concern at JPMorgan. Such issues
were highlighted and in the light of this various theories have been studied and linked. The
British authorities slapped a fine of 642,430 pounds($1.1 million) on Staley when he
breached the act of finding the whistleblower.
i. Facts of the case & whistleblower
The case refers to the CEO of Barclays where the CEO was fined for $1.1 m as he tried to
breach the standards permitted. The case refers to the year 2016 where the board of Barclays
received an anonymous letter that raised concerns regarding the recruitment of the Staley’s
former colleague at JPMorgan Chase. The contact highlighted various issues pertaining to the
personal nature that included Main and Staley’s role in managing the concern at JPMorgan.
In tune to this, when Staley learnt about the matter then he attempted to trace the whistle-
blower that was completely unethical in nature (Morris & Gloveer, 2018). It was altogether
inappropriate for the CEO to perform such activities as CEO should frame examples to other
rather being involved in an inappropriate act. For breaching the act and try to trace the
whistleblower, Staley was slapped a fine amounting to 642,430 pounds($1.1 million) by the
British authorities.
A whistleblower can be defined as a person that comes forward and share the knowledge on
the wrongdoing that exists in the organization or in a particular department. A whistleblower
can be an employee, a supplier or anyone who is aware of the illegal happenings. It is
imperative and vital that the whistleblower should be protected from losing the job or getting
treated in a poor manner. The companies have specific laws that guide and protect the
employees at large. A whistleblower can register a lawsuit or a complaint with the higher
authorities that will trigger a criminal investigation against the company or the department
that is engaged in it. Whistleblowing is a powerful mechanism that helps to reveal the
happenings that are unethical or against the fair practices (Fraser, 2011). Hence, it can be said
to be a potent weapon in the hands of the aggrieved party as it leads to the projection of the
mishappenings.
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Accounting
ii. Attempt to Expose the whistleblower
The Barclay CEO was trying to expose the whistleblower because the whistleblower is
always provided with a safeguard in terms of existence. Further, the whistleblower raised
concerns over the company CEO and his colleague Main. As the contact led to reveal the
various issue that was of personal nature and existed between Main and Staley, it might have
knocked the thoughts of Staley. The CEO might be apprehensive of the fact that furthermore,
details could be available with the whistleblower and if such matters are brought to the
forefront then such a happening will leads to massive downfall (Morris & Gloveer, 2018). In
tune to this, Staley tried to know the existence of the person who was engaged in bringing
such matter to light.
iii. Legitimacy theory
Whistleblowing is a system designed to protect the society. The legitimacy theory can be
linked with the whistleblowing concept. The legitimacy theory denotes that there is a social
contract between the organization and the society in which the operation is done. hence,
corporation and the CEO should try to legitimize the actions by engaging in activities that so
that the society is benefitted as it will lead to regular existence. The legitimacy theory comes
from the notion that the corporation should continue the operations successfully and act
within the rules and regulations. However, it has been noted in the case of Barclay's CEO that
the role of CEO was under the scanner when it comes to JPMorgan. Hence, the role played
by the CEO was not legitimate in nature. It is essential for the CEO to act in a manner that
provides an example and leads the company. However, the CEO failed to follow the norms
and was engaged in personal motives that lead to the issue.
iv. Stakeholder theory
The stakeholder theory can be used in the case of a whistleblower because organizations are
not only accountable to the shareholder but the interest of the stakeholders should be
considered. The stakeholder theory is utilized to evaluate the group to whom a firm should be
responsible. Therefore, considering this statement it can be said that the whistleblower can be
effective when the organization is accountable to the society at large. The stakeholder theory
embraces the organization and plays an active role in the operations. It is being asserted that
corporations should understand the impact of the action upon stakeholders who have a stake
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Accounting
in the organization. The stakeholder theory provides a general reflection on the managerial
and ethical branches (Gagnier, 2010). This theory ensures that the organization should have a
responsibility towards the stakeholders and hence, the whistleblower is an important
mechanism that safeguards the interest of the related parties. This states that the stakeholders
must have the knowledge of the social and environmental implication. Further, the
stakeholder theory stress upon the benefits of the organization and whistleblower is an
important mechanism that enables a protection.
v. Social contract theory
Social contract theory is another theory that views the business, as well as the relationship of
the society from the philosophical thought. Hence, this theory is important in the sense that
the regulator wants the CEO to be accountable. There is a presence of a social contract
between the business and the society and this contract leads to obligations of the business
towards the business (Kacperczyk, 2009). Therefore the CEO must act with precision and
adheres to the regulations. Any violation of the rules will lead to a problem with the society.
This theory paves the way for the CEO and ensures that the firm is responsible to the society.
Society is an integral part and this theory ensures that the CEO and the firm adopts a
mechanism that is directed towards the well being of the society (Parker, Guthrie & Linacre,
2011). The function of the business organization should happen in a manner that satisfies the
need of the society. The societal approach tends to be a strategic response to the changing
scenario and the challenges undertaken by the company. Hence, this theory is important and
regulator stress upon this theory as it is directed towards the well being of the society
(Edward & Moutchnik, 2013). Any violation of this leads to the violation of the principle.
Overall, the CEO can be accountable by dint of the social contract theory. Therefore, social
contract theory is well directed towards the benefit of the society and ensures that the CEO
acts in the best interest of the company by following the regulations.
vi. Compare, contrast and Evaluate
When it comes to the legitimacy theory, it can be commented that the theory views the
society as a whole, on the contrary, the stakeholder theory ascertains some group that is
selective in nature within the society so that it can be more powerful. When it comes to the
matter of CSR accounting, intellectual capital and environmental disclosure fix well into the
legitimacy theory (Parker, Guthrie & Linacre, 2011). The legitimacy theory is based on the
perception of the society; management is influenced to disclose the information that changes
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Accounting
the external user. The legitimacy theory is appropriate for corporations that have an
established in the developed countries (Pittroff, 2011). On the contrary, through the
stakeholder theory, the company is able to target the CSR disclosures towards them who
needs to manage the links with the other stakeholders. Social contract theory is another
important theory that helps the business to determine the relationship between the
philosophical end of the view (Bauer & Hann, 2010). This theory is of utmost importance
from the regulator point of view.
Lastly, the social contract theory is another important consideration because it sheds light on
the society links from the philosophical end. This theory resides in the notion that the social
contract should be established in a proper manner (Pittroff, 2011). This theory coins the fact
that the CEO must act in the best interest of the company as a society is a vital part of the
organization. This theory helps the organization to prosper and leads to a strong functioning
of the organization. The societal approach can be said to be the response that helps in
changing the scenario and the challenges that is being undertaken (Parker, Guthrie &
Linacre, 2011).
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Accounting
Conclusion
Hence, from the discussion, it can be noted that all the three theories have a dominant role in
shaping the destiny of the organization. An organization functions with the aim of earning a
profit and providing a strong support to the society. With the aid of the theories mentioned
above, it can be seen that the theories help the organization to function in a formidable
manner and remain answerable to the society (Hemmer & Labro, 2008). Further, it is vital for
the regulators and CEO to ensure that the theories are used and applied with precision
because it is directly associated with the well being of the company.
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Accounting
References
Bauer, R & Hann, D. (2010) Corporate environmental management and credit risk.
Maastricht University.
Edward F & Moutchnik, A. (2013). Stakeholder management and CSR: questions and
answers. Oxford Press
Fraser, C (2011). The Oxford Handbook of World Philosophy. Oxford University Press
Gagnier, R (2010). Individualism, Decadence and Globalization: On the Relationship of Part
to Whole. Palgrave Macmillan.
Hemmer, T & Labro, E. (2008) On the optimal relation between the properties of managerial
and financial reporting systems, Journal of Accounting Research. 46, 1209–1240. Doi:
https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1475-679X.2008.00303.x
Kacperczyk, A. (2009) With greater power comes greater responsibility? Takeover protection
and corporate attention to stakeholders. Strategic Management. 30, 251–285. Doi:
https://doi.org/10.1002/smj.733
Morris,S and Glover, J. (2018) Got away lightly': Barclays CEO fined $1.1m after trying to
expose whistleblower. Available from: https://www.smh.com.au/business/banking-and-
finance/got-away-lightly-barclays-ceo-fined-1-1m-after-trying-to-expose-whistleblower-
20180512-p4zew0.html
Parker,L.D, Guthrie,J and Linacre,S. (2011) The relationship between academic
accounting research and professional practice. Accounting, Auditing & Accountability
Journal. 24(1), 5-14, Doi: https://doi.org/10.1108/09513571111098036
Pittroff, E. (2011) Whistle-Blowing Systems and Legitimacy Theory: A Study of the
Motivation to Implement Whistle-Blowing Systems in German Organizations. Journal of
Business Ethics, 124(3), 399-412. Available from: https://www.jstor.org/stable/24033279
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