Whistleblowing, Ethics in Diverse Cultures

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In the wake of Enron, Parmalat, WorldCom, Siemens, Tyco, LeisureNet and the many other corporate scandals that have littered the early years of this millennium, whistleblowing has become a focal point for attention from corporations and their stakeholders. There is considerable concern surrounding whether those individuals who are in a position to prevent potential harm have the voice, support and protection to enable them to do so.

Even though many, if not most, MNEs have established reporting policies and procedures, the “whistle” often remains silent in non-Western countries. This can be attributed to several environmental impediments that can be traced to local culture and societal norms (Martens & Crowell, 2002a; Martens & Crowell, 2002b). If reporting policies are to operate effectively, the focus needs to move from consistency to adaptability. The intersection between the national culture of origin of the decision-maker, the host country and the ethical climate of a particular organization is a critical reference point for influencing ethical decision-making within the organization.  It is not enough for MNEs simply to say the right thing; they need to make it possible, predictable and safe for their employees to do the right thing.

The 1986 Challenger disaster, a preventable space shuttle crash that occurred because of a known risk, provides one example of what happens when people do not voice their concerns. Although Engineers expressed to managers serious alarms about the effect of weather conditions on particular parts, those concerns went unheeded. Instead of escalating the issue, the engineers remained silent and allowed the Challenger to launch, only to tumble back to earth 73 seconds later a d kill all of its passengers.          No one blew the whistle.

Financial loss can also be managed through whistleblowing. Fraud, for example, costs companies tremendous sums – the figures are staggering. A study of more than 500 European firms found that fraud cost those companies more than €3.6 billion (Shaw, 2002). Another study placed the price tag of fraud for companies in the United States at $994 billion annually (Association of Certified Fraud Examiners, 2008). While it is difficult to prevent all fraudulent behavior, whistleblowing can enable companies to keep it in check. Establishing internal reporting mechanisms is merely the first step, however; ensuring that people are willing and able to use those mechanisms remains an essential rejoinder.

 Diverse Cultures

Given such immense differences across cultures, how do MNEs adapt policies and procedures effectively to create consistency without homogeneity or standardization?  I suggest  there must be some sort of uniform starting point. The globalization of business operations and management calls for at least some degree of consensus on values in order to cross cultural boundaries in the first place.  A recent survey by the Ethics Resource Center (ERC) has found that the presence of a strong, ethical, corporate culture can dramatically reduce corporate misconduct and increase the likelihood of reporting. In fact, while 98% of employees observed misconduct in weak cultural environments, only 24% of employees in strong cultures observed the same – well below the national average. The ERC concluded that the “strength of the enterprise-wide ethics culture is the single factor with the greatest impact on misconduct” (Ethics Resource Center, 2007).  Developing a strong, ethical, corporate culture depends heavily on communication and leadership.  Ethical leaders can create ethical cultures because leaders are salient figures in MNEs and employees pay attention to their behavior.  This is “particularly important in a context where global partners may encounter divergences of opinion as to what constitutes ethical/unethical behaviour” (Napal, 2007: 5). Whistleblowing presents a stunningly similar experience for many decision-makers since cultural distinctions result in a divergence of perspectives on the ethicality of reporting practices.

The success of MNEs in creating a shared global sense of ethical practices and in developing strong cultures of trust and integrity must include consideration of the nuances of national cultures. As globalization strains the ability to control operations around the world, reporting systems play an increasingly integral role. If MNEs do not manage internal risk adequately, they can find their worldwide reputation in jeopardy.

Whistleblowing is only one example of an issue that MNEs confront worldwide. With regard to whistleblowing, the challenge lies in getting workers to use reporting mechanisms. A strong ethical corporate culture and leadership support can provide valuable encouragement. That alone, however, is often insufficient; reporting policies and procedures must be tenable to workers for them to be useful and used. This means that they must be translated locally. On a country by country basis, policies and procedures are effective only when they take into account local legal environments, history, social norms, experience and logistics. This is true not only for whistleblowing, but for corporate policies, procedures and systems in general.

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