Subject: Finance and Accounting
Topic: WHISTLEBLOWING AND SARBANES-OXLEY
Language: English (U.S.)
Pages: 3
Instructions
1.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.

Whistleblowing and Sarbanes-Oxley

A whistleblower is an individual who has evidence of deceitfulness or mis-conduct in an organization or even the government (Fernando, 2011). The whistleblower will usually disclose this information to others in the organization or even to the public as a means of raising public awareness and a means of chastising the company for its wrongful acts. The purpose of leaking this information to the public is to guarantee public safety and to let the necessary authorities know of the illegal activities occurring in the organization.  

Characteristics of a Whistleblower

The major characteristic that a whistle-blower portrays is that they are extremely devoted to the cause and motivated by the truth to fight the system. They are seekers of justice with a high purview of morality. Their conscious cannot allow them to keep quiet about the things they know because they realize that somebody could be suffering as a result of the negative actions of the company. 

To be a whistleblower one needs to have courage and tenacity, as well as a fighting spirit because many people will attack you and threaten you due to the disclosure of such sensitive information. There will be several retaliatory attacks against a whistleblower with some people/ organizations going to great lengths to discredit the whistleblower including invading his private life and that of his family (Melnick, 2014). 

Whistleblowers can also be described as being naïve in a sense as they rarely realize that people do not do what they say they will do. Most of us have a sense of cynicism when it comes to understanding how the world works. We know that people do not often do what they say they will do. It seems that the majority of the whistleblowers come to this realization a little bit too late and they are surprised that the company they work for is acting against public good. They are usually so disappointed by this betrayal that their morality forces them to act against the company that they work for (Alford, 2001). 

Recent case of whistleblowing

In September 2015, the Environmental Protection Agency put out a notice of violation of the Clean Air Act against Volkswagen, one of the largest car manufacturers in the world. The report was based on evidence that the car manufacturer had purposefully altered the emissions of its cars during regulatory testing. During the testing phase, the cars would emit US-accepted standards of Nitrogen Oxide. However, they were found to emit nearly forty times more Nitrogen Oxide in real driving. 

This scathing revelation was brought to the forefront by scientists, Peter Mock and John German who had worked alongside scientists from West Virginia University to determine if clean emission technology could influence a car’s driving performance. What they found was a huge discrepancy between VW’s nitrogen oxide emissions in the laboratory and such emissions during real world driving. 

After this discovery was made, VW confessed that it had used a ‘defeat device’ in more than 11 million cars. At the moment, these cars are being recalled so that they could be refitted with the right software. VW had to fire some of its top managers in order to prove that the company was remorseful for the deception. In addition, the company is being investigated in every single country that it currently operates in. its share price has crumbled and there are more than 100 class-action lawsuits against the company in Canada and the US. 

Justification for Whistleblowing

The scientists who became whistleblowers in this case had every right to blow the whistle on VW’s criminal activities. At best, this is a case of criminal negligence because the perpetrators caused more than 50 premature deaths due to the excess pollution created by the cars from 2008 to 2015. There are also environmental and health consequences of the company’s actions including increase in respiratory diseases, acid rain, and smog. The whistleblowers were justified in reporting the company’s activities because the use of the ‘defeat devices’ could have and did have serious ramifications on human life and the environment. 

Sarbanes-Oxley Act and the protection of whistleblowers

The Sarbanes-Oxley Act of 2002 provides whistleblowers with ample protection against ramifications from their employers. The law states that all public traded companies need to have an independent audit committee with structures that promote internal whistleblowing. The structures also need to ensure the anonymity of the whistleblower. 

Secondly, the law brought forth new ethical standards for the attorneys who work closely to the Securities and Exchange Commission. The attorneys are mandated by law to whistle blow on their employers or ‘clients’ under certain circumstances (Kohn, 2012).

The law has also criminalized retaliation against whistleblowers that have provided truthful information to any law enforcement individual about the ongoing or possible commission of a Federal offense. However, this law is not restricted to employees of publicly traded organizations; it covers all employees across the country.

Finally, Section 3 (b) of the SOX gives permission to the SEC to enforce every rule of the SOX including the provisions on whistleblower protections. All those found to have contravened the provisions of the whistleblower protection act will be persecuted by SEC and any other judiciary outfit found fit to the full extent of the law (Kohn, 2012). 

References

Alford, C.F. (2001). Whistleblowers: Broken lives and organizational power. New York, NY: Cornell University Press. 

Fernando, A.C. (2011). Who is a whistle-blower? Business Environment, pg. 365.

Melnick, M. (2014, Oct 7). What motivates a whistleblower? The Huffington Post. Retrieved on 19/1/2016 from http://www.huffingtonpost.com/2014/10/07/psychology-whistleblower_n_5889630.html?ir=India&adsSiteOverride=in 

Kohn, S.M. (2012). Sarbanes-Oxley Act: Legal protection for corporate whistleblowers.