Business Ethics Report: Employee Secrets and Whistleblowing Analysis

This report delves into the critical intersection of employee loyalty, company secrets, and whistleblowing within the framework of business ethics. It begins by highlighting the significance of information in maintaining a competitive edge and the challenges posed by employee misconduct. The report then explores the concept of whistleblowing, emphasizing the conflict of interest faced by employees and the legal obligations outlined in employment contracts. It examines defenses available to companies, including the potential for false claims, mixed results from whistleblowers, and the importance of internal reporting mechanisms. Several case studies, including Bradley Birkenfeld's disclosure and the HSBC money laundering case, are analyzed to illustrate these points. The report concludes with recommendations for companies, such as addressing employee concerns promptly, providing training, and strengthening anti-retaliation measures. The overall aim is to promote ethical business practices and effective corporate governance.

BUSINESS ETHICS REPORT
Violation of the company's secrets by employees

VIOLATION OF THE COMPANY'S SECRETS BY EMPLOYEES 1
Contents
Introduction................................................................................................................................2
Background of the Whistleblowing...........................................................................................2
Defence for the Companies........................................................................................................3
Recommendations for the Companies.......................................................................................4
Conclusion..................................................................................................................................4
Bibliography...............................................................................................................................6

VIOLATION OF THE COMPANY'S SECRETS BY EMPLOYEES 2
Introduction
The term “information is power” is essential focus in the context of the successes of the
businesses in the modern times of complex business rivalries. It is a crucial point to note that
the strategic use of the business secrets can lead to the competitive advantage to the entities
and the creation of a strong market base of the loyal customers. The today’s business
environment is dynamic and competitive enough that the employees can be the chief reasons
for the success or the failure of the businesses1.
This implies that the one of the biggest challenges faced by the modern organisations is the
corporate scandals and the employee loyalty. However, in the wake of the increased
awareness and the enhanced compliance requirements, there have been numerous recent
cases where the employees of the entity have played the role of the whistle-blowers leading
to the corporate governance makeovers in several entities2. The following report is aimed at
shedding the light on the various aspects of the employee loyalty in the wake of whistle-
blower instances. The said analysis would be done in the context of the various principles of
the business ethics. The case laws of Bradley Birkenfeld disclosure: 2005–2011 and the UBS
Tax evasion, Everett Stern vs HSBC and Quinlan v. Curtiss-Wright Corp are the focus of the
work.
Background of the Whistleblowing
The term whistle blowing is often referred to as one of the most critical tools in the corporate
governance framework of an organisation. The employee are stated to be empowered against
the incidences of misconduct and thus the safe workplaces are maintained leading to the
protection of the profits and reputation of the entities. It is imperative to note that one thing
that distinguishes the acts of the whistleblowing from the other means of the reporting is that
by the virtue of the formal, information about an organization reaches to the public, or at best
outside the course of normal channels of the reporting actions3. The employee who are
engaged in the acts of whistleblowing are faced with the conflict of the interest in the
performance of the duties and the public interests.
1 Talhiya Sheikh, "Trade Secrets And Employee Loyalty", (Webpage, 06 July 2019)
<https://www.wipo.int/sme/en/documents/trade_secrets_employee_loyalty.html>.
2 Deborah L. Seifert, William W. Stammerjohan and Rebecca B. Martin, "Trust, Organizational Justice, And
Whistleblowing: A Research Note" (2014) 26(1) Behavioral Research in Accounting.
3 Eileen Z. Taylor and Mary B. Curtis, "An Examination Of The Layers Of Workplace Influences In Ethical
Judgments: Whistleblowing Likelihood And Perseverance In Public Accounting" (2009) 93(1) Journal of
Business Ethics.

VIOLATION OF THE COMPANY'S SECRETS BY EMPLOYEES 3
It is imperative to note that as the individuals become part of an entity, they are bound by
legal agreement entered generally referred to as the employment contract which is comprised
of the obligations and rights of both the parties in the professionally and morally specified
manner. One of the key obligations that forms the part of the employment contracts is that the
employees must be aware of doing things that are opposed to the interests of the employers or
the organisation. Thus, it is the prime duties of the employees to retain the sensitive
information with respect to the entity that may lead to an advantage to the competitors. The
above mentioned duty not necessarily be explicit and at times may not be spelled out but it is
there. Thus, in the event of the whistleblowing, an employee faces a dilemma whether to
disclose the information in light of the general moral obligations towards public or the special
professional obligations towards the organisations employing them.
Defence for the Companies
In spite of the various benefits associated with the whistleblowing, it is not always a good
idea and there are a range of defences available in the support of the employing companies
which are presented as follows.
It is crucial to note that one of the aspects of the whistleblowing is the tarnished image of the
entities. Over the years, there have been numerous cases as well where the whistleblowing
claims have turned around to be fake and are mainly possessing of the malicious intentions
towards an employer rather the purporting of the public interests. Further, mixed results have
been often quoted to occur when the whistle-blowers reveal only a section of information
owing to the personal reasons as had occurred in the popular case law of Bradley Birkenfeld
disclosure: 2005–2011 and the UBS Tax evasion.” In the stated case law, the individual had
made a disclosure to the U.S. Department of Justice (DOJ) owing to the conflict of interest of
taking advantage of the Tax Relief and Health Care Act of 2006, and earning the revenue.
However, Bradley Birkenfeld had reserved a certain section of information with himself.
Further, being a whistle-blower he himself was engaged in providing advisory services in the
capacity of the private banker towards the evasion of federal taxes amounting to
approximately US$200 million. Consequently whistle-blower was charged with 40 months in
prison and a $30,000 fine under the conspiracy to defrauding the Federal Government. Thus,
in the above case study, it can be stated that while the whistle-blower was himself in a state
preventing the acts of the enterprise, yet the whistle-blowers wait for the collection of the
proofs and are rather previously part of the same system itself. Thus, it is evident that whistle-

VIOLATION OF THE COMPANY'S SECRETS BY EMPLOYEES 4
blowers intentions and acts are itself sometimes questionable. In addition, the incentive
schemes of the governments are known to have mixed results in the minds of the whistle-
blowers.
In addition to the above defence to the company, yet another one is that there is no evident
social good from the acts of going out of the organisation as there are several moral issues
associated with the outside channel as against the internal reporting about wrongdoing. The
basic aim of the acts of the whistleblowing should be the improvisation of the organisational
corporate governance and hierarchal structure rather than sensationalise the same. Dragging
the matter out of the organisational boundaries not only is harmful for the organisation but for
the employees as well. The employees who engage in such whistleblowing acts are often
stated to be facing retaliation as in the case of Quinlan v. Curtiss-Wright Corp. In the given
case the employee Quinlan had herself reviewed and copied a number of confidential
documents in the capacity of Executive Director of Human Resources of the company. The
employee had faced a wide retaliation in the form of threat of discharge from the job, on
account of breaching of the employment contract that stated to keep the information obtained
during course of employment confidential. Thus, the focus of the entities and the employees
as well must be towards building a robust internal policies and system of governance rather
debating out into public. The said step can lead to the prevention of the whistleblowing
altogether which is beneficial for both the companies and the employees as well. Yet another
case of revelation was that of compliance officer in the capacity of AML revealing the money
laundering transactions at HSBC. In the said case, the repeated revelations led to the inquiry
being initiate against the entity which could have been saved had the accusations were taken
seriously at earlier stage.
Recommendations for the Companies
Some of the recommendations for the companies to handle the issues of whistleblowing
efficiently and avoid the legal exposure are stated as follows. Firstly, it is imperative for the
companies to address the concerns of the employee in a timely manner which facilitates the
employees to have the confidence that the internal measures of reporting are stringent and
efficient enough4. It is crucial for the companies to invite the feedbacks from the employees
on consistently repeated issue being reported and seek opinions on how they see the same in
4 Mark Pastin, "Why Embracing Whistleblowers Could Save Your Reputation", (Webpage, 06 July 2019)
<https://www.theglobeandmail.com/report-on-business/careers/leadership-lab/why-embracing-whistleblowers-
could-save-your-reputation/article17858924/>.

VIOLATION OF THE COMPANY'S SECRETS BY EMPLOYEES 5
the form of devising a solution to it. Further, it is crucial for the entities to organise training
and awareness workshops to educate the employees on what behaviour and acts must be
avoided by the employees that fall in the category of the abuse of position and power. In
addition to the above, it is important that it is need to address the issue as quickly as possible
before it becomes public. There have been numerous incidents where instead of believing the
internal reporting issues, the companies engaged in thorough examination and waiting for the
small report to become severe to realise the significance of the same. Thus, every report must
be taken seriously, investigation and discussion must be initiated till there has not been
achieved the proofs that are suggestive of the contrary of the claim. Further, the anti-
retaliation means should be strengthened so that the employees are free and confident enough
to disclose the issues at the nucleus stage and not the magnified stage5.
Conclusion
The discussions in the previous parts aid to conclude that the growing complexity in the
business processes and the economic, political and overall business environment, the
corporate governance measures are not found to be enough. As a result, often the people in
the power abuse the position to use it for their personal benefits and hence comes the
necessity of whistleblowing. The above report was an attempt to highlight the various facets
of the whistleblowing in detail in context of the business, moral and social ethics. Thus, the
report comprehensively highlighted the defence for the companies in the wake of
whistleblowing.
While the general notion is that the whistleblowing is aimed at good and interests of the
public at large, the truth is not always the same and the range of arguments as presented
above accords the same. These arguments were on the lines of whistle-blowers themselves
having the conflict of interests, lack of disclosure of full information, retaliation faced by the
employees and the tarnished goodwill and revenues of the entities. Some of the means that
can be adopted by the entities to get past these situations are strengthening the internal
controls and internal reporting structure and establishing the culture of transparent business
practice as initiated by the leaders at the top.
5 "Best Practices For Protecting Whistleblowers And Preventing And Addressing Retaliation",
Whistleblowers.Gov (Webpage, 06 July 2019)
<https://www.whistleblowers.gov/sites/default/files/2016-11/WPAC_BPR_42115.pdf>

VIOLATION OF THE COMPANY'S SECRETS BY EMPLOYEES 6
Bibliography
Books and Journals
Seifert, Deborah L., William W. Stammerjohan and Rebecca B. Martin, "Trust,
Organizational Justice, And Whistleblowing: A Research Note" (2014) 26(1) Behavioral
Research in Accounting
Taylor, Eileen Z. and Mary B. Curtis, "An Examination Of The Layers Of Workplace
Influences In Ethical Judgments: Whistleblowing Likelihood And Perseverance In Public
Accounting" (2009) 93(1) Journal of Business Ethics
Others
"Best Practices For Protecting Whistleblowers And Preventing And Addressing Retaliation",
Whistleblowers.Gov (Webpage, 06 July 2019)
<https://www.whistleblowers.gov/sites/default/files/2016-11/WPAC_BPR_42115.pdf>
Mark Pastin, "Why Embracing Whistleblowers Could Save Your Reputation", (Webpage, 06
July 2019) <https://www.theglobeandmail.com/report-on-business/careers/leadership-lab/
why-embracing-whistleblowers-could-save-your-reputation/article17858924/>
Talhiya Sheikh, "Trade Secrets And Employee Loyalty", (Webpage, 06 July 2019)
<https://www.wipo.int/sme/en/documents/trade_secrets_employee_loyalty.html>.