Whistleblower
Whistleblowing and Sarbanes-Oxley
Instructions:
Describe the key characteristics of a whistleblower, and briefly summarize one (1) researched instance of whistleblowing in one (1) publicly traded company within the last 12 months. Include the details of the issue that the whistleblower reported and the effect of the whistleblower’s actions on both the whistleblower himself and the company.
2.Decide whether or not the whistleblower was justified in reporting the company’s actions. Provide a rationale for your response.
3.Examine the extent to which the whistleblower would be protected under the Sarbanes-Oxley Act. Justify your response.
4.Use at least two (2) quality resources in this assignment. Note: Wikipedia is not an acceptable reference and proprietary Websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:
•Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
•Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are:
•Determine the underlying causes for passage of the Sarbanes-Oxley Act and determine protections afforded to whistleblowers.
•Use technology and information resources to research issues in law, ethics, and corporate governance.
•Write clearly and concisely about law, ethics, and corporate governance using proper writing mechanics
Solution.
Whistleblowing and Sarbanes-Oxley
A whistleblower is honest and courageous; he/she has must be fearless and brave enough to uncover misconduct. Determination, perseverance, and a fighting spirit are paramount because whistleblowing can be a protracted process and with severe consequences bear. The individual has to have resolved to go the whole nine yards no matter the ramifications. A whistleblower must be resolute as they will be under public scrutiny, co-workers and family may shun them, and before and after justice is delivered, there will be tedious and spirited legal battles. An important characteristic is being able to handle reprisals. Employers will threaten the whistleblower with sacking or suspension. Taking a firm stand ensures the whistleblower can see out the process.
On April 2015, the Securities and Exchange Commission (SEC) announced that it would compensate a compliance officer who had turned whistleblower, a bounty award ranging from $1.4 and $1.6 million. 2015 is the second instance SEC had paid a whistleblower employee charged with internal audit or compliance responsibilities. The SEC believes the compliance officer “had a solid foundation that led him to believe that disclosure to the SEC was necessary to stop the forthcoming misconduct of justice that would cause substantial financial damage to the company and its investors.” SEC’s Division of Enforcement director noted that the compliance officer “divulged misconduct after the management team at the entity were made aware of potential plans to harm investors and failed to take steps to arrest the situation.” This award has jolted some employers awake, as it shows that employees trusted with compliance duties have significant monetary incentives to divulge dirty deals to the government. Normally, such instances are rare, as compliance officers are excluded from bounty award eligibility. Many employers, however, remain quite perturbed.
The whistleblower was justified to report the company to the SEC as there were substantial reasons to believe something unethical was about to take place. In this case, the management also refused to act, further fueling the whistleblowers’ fears that the perpetrators would be able to execute their plan and injure the company he/she held high regard. The whistleblower did the right thing by calling it in. Not blowing the whistle would have reinforced the unethical behavior (Kohn, Kohn, & Colapinto, 2004).
Also, the biggest victims would have been shareholders and employees whose future is entrusted with the management. In failing to protect, their shareholders and staff welfare, the administration failed in their job. It was therefore justified to seek redress from a higher authority to ensure that the stakeholders remain unscathed. The whistleblower committed a brave act by standing up for what is right, what is good for the majority. By spilling the beans, the whistleblower saved hundreds of families stress and agony that might have resulted from the planned misconduct. Even more gallant, is the fact that he put his career, reputation, friends and relatives on the line to stand with justice.
The Sarbanes-Oxley Act, (“SOX”), was passed in 2002. It comprises of and spells out important protections for corporate whistleblowers. As it is made up of a wide range of civil, criminal and administrative clauses, this statute may as well, over time, be considered one of the greatest whistleblower protection laws of all time. As opposed most whistleblower laws, the SOX’s whistleblower provisions may go beyond to providing a legal redress for cases of wrongfully discharged employees. The SOX Act also entails employment-based privileged for whistleblower employees. The law spells out four other provisions directly connected to whistleblower safety and protection (Kohn, Kohn, & Colapinto, 2004).
First, the law states that all publicly traded corporations should create internal, free and independent “audit committees.” As members of the sanctioned audit committee units, publicly traded companies must also create a channel for disgruntled employees to present internal whistleblower grievances, and processes which would safeguard the identity of employees who file depositions with the audit committee.
Second, the SOX has come up with new ethical standards for attorneys in practice before the Securities and Exchange Commission (SEC). This law, in essence, require lawyers to maintain high moral standards, such that under certain circumstances, they are obliged to blow the whistle on their employer or “client.”
Third, the SOX revises the federal obstruction of justice statute. It proceeds to criminalize any reprisals against whistleblowers who has come forth with “credible information” to an officer with law enforcement about the “committal or possible committal of any Federal offense.” This provision of the SOX is not bound in its application to publicly traded companies; it protects every employer nationwide.
Fourth, the SOX includes an enforcement provision covering every clause of the SOX. Section 3(b) of the SOX states that “any person that violates the SOX] . . . Shall be treated for all purposes in the same way as a violator of the Securities Exchange Act of 1934.” This section gives the SEC the jurisdiction to enforce every facet of the SOX Act that includes the several whistleblower-related provisions. It also sets the criminal penalties for violation of the SOX Acts, including the whistleblower-related sections (Brown, n.d.).
These four provisions the cornerstones of the Sarbanes-Oxley Act. They collectively provide a unique and intensive federal framework for enforcing whistleblower protections for corporate employees.
Works Cited
Kohn, S., Kohn, M., & Colapinto, D. (2004). Whistleblower law. Westport, Conn.: Praeger.
Brown, A. International handbook on whistleblowing research.