Whistleblowing and Sarbanes-Oxley Due

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Introduction

If something happens in the organization, for example, a worker is thought to be engaged in illegal activities, then a whistleblower reports on this to the legal institution. As a rule, a whistleblower is an employee, so to encourage him/her to disclose the information and to assure that one is making the right step the Whistleblower Protection Act was adopted (Ethics and corporate social responsibility, 2009).

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Main body

The things whistleblowers do are very serious. One should always remember that such actions may lead to the loss of money and reputation by the company or particular workers. Not everybody is ready to accept these; that is why the whistleblower might be threatened and compelled to leave the working place. The employees have different views on who the whistleblowers are. Some belief them to be disloyal workers, who are ready to betray the organization at any moment; others treat them as a helping hand in the eliciting of truth and putting things right in the company.

Corporate governance and whistleblowing are working side by side. Sometimes malpractice by an employee cannot be reported in an ordinary way. Typically this happens when a problem is related to the person who usually assists the whistleblower or to whom he or she reports (Ethics and corporate social responsibility, 2009).

If the culture of ethical conduct is present in the organization, then it is likely to give encouragement to whistleblowing. Corporate governance can occur only if the company supports ethical behavior. To show this, it usually provides the workers with an opportunity to report some complaints and suspicions through the arranged channel. If such things are not motivated, a whistleblower might be afraid that his actions will be considered as misconduct and some kind of punishment will proceed. However, this person seems to be stigmatized in ethics and shows a high level of understanding and respect for the rights of others. A whistleblower is also a person of courage and moral principles, as the revolt against some violations presupposes such qualities.

A culture of loyalty is a common thing for many companies that believe a whistleblower to be a traitor. That is why the workers might think twice before reporting, as they would like to avoid punitive actions. Of course, the laws made for protection exist now, but in such cases, the information is likely to be passed to people without the company.

Taking into account the risks of being a whistleblower, the government adopted some laws for protection that guarantee freedom of speech. The problem that is related to this aspect is that the reports made in such areas as national security and defense may have an adverse effect on the operation of national services and public debt. That is why the protection of the sphere of government employment is limited (Ethics and corporate social responsibility, 2009).

To understand the issue better, the instance of whistleblowing in a publicly-traded company will be examined. According to Lane v. Franks, the exposure of employer fraud was the reason for the whistleblower to be fired. The worker considered this to be an act of revenge, which was done after his testimony at the hearing, where the factum of corruption was disclosed.

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The director of the Community Intensive Training for Youth, Edward Lane, found out that Susanne Schmitz was on the payroll of his company in what can be referred to as the “no show” job. Lane told her to come to work, but she disagreed. Steve Franks, the president of the college, where the company was located, warned Lane that if he fires Schmitz they might have problems. However, Lane ignored his words and Schmitz was dismissed. While talking to her coworker, Schmitz said she wanted to get the director back for that. She was sentenced to “thirty months in prison and ordered to make restitution of over $177,000” (Schweitzer, 2015, p. 334). After this had happened, Franks fired Lane. Lane claimed this to be retaliation and sued him.

The Federal District Court supported Franks. The Eleventh Circuit held that there was no remedy when the employee was fired in revenge “for turning in a “no show” officeholder who was tried, convicted and imprisoned” (Schweitzer, 2015, p. 333). However, the Court rejected this statement as in the majority of cases there was broader protection of the free speech rights of public workers. Lane’s actions led to his dismissal and attracted public attention to the case of corruption. The lower courts claimed that Lane did not experience the irrevocable mistake, and the testimony against Schmitz was a part of his official duties and was not related to public concern.

Conclusion

Section 806 of the Sarbanes-Oxley Act (SOX) protects whistleblowers who can prove the act of fraud and are employees of public companies. It is forbidden for any other employees of the organization to be engaged in retaliation (Martin, Hoffman, & Casey, 2004). Unfortunately, the employee is not defined in the Act; thus, the defendant was able to find a loophole and won an action.

References

Ethics and corporate social responsibility. (2009). Web.

Martin, D., Hoffman, B., & Casey, E. (2004). Whistleblower protection under the Sarbanes–Oxley Act. Wall Street Lawyer, 8 (5), 1-9. Web.

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Schweitzer, T. (2015). Lane v. Franks: The Supreme Court clarifies public employees’ free speech rights. Touro Law Review, 31 (2), 333-341. Web.

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Premium Papers. (2022, January 26). Whistleblowing and Sarbanes-Oxley Due. Retrieved from https://premium-papers.com/whistleblowing-and-sarbanes-oxley-due/

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"Whistleblowing and Sarbanes-Oxley Due." Premium Papers, 26 Jan. 2022, premium-papers.com/whistleblowing-and-sarbanes-oxley-due/.

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Premium Papers. (2022) 'Whistleblowing and Sarbanes-Oxley Due'. 26 January.

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Premium Papers. 2022. "Whistleblowing and Sarbanes-Oxley Due." January 26, 2022. https://premium-papers.com/whistleblowing-and-sarbanes-oxley-due/.

1. Premium Papers. "Whistleblowing and Sarbanes-Oxley Due." January 26, 2022. https://premium-papers.com/whistleblowing-and-sarbanes-oxley-due/.


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Premium Papers. "Whistleblowing and Sarbanes-Oxley Due." January 26, 2022. https://premium-papers.com/whistleblowing-and-sarbanes-oxley-due/.