Leadership & People
Opinion Article
November 16, 2022
16. Peace, justice and strong institutions

16. Peace, justice and strong institutions

Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.

“Snitches get stitches” — The impact of corruption and whistle blowing

Nurturing ethical virtues in companies has benefits for stakeholders and corporations and creates positive impacts on the companies’ financial performance. Nevertheless, in recent years, we witnessed reports of ethical misconduct and corruption seems to arise as one of the most perpetuating issues in our society.

Nowadays, there is a common perception that ‘Good Ethics is Good Business.’ Nurturing ethical virtues in companies has been linked to benefits for stakeholders, for instance, decreasing turnovers, as well as for the corporation, through positive impacts on companies’ financial performance [1]. Nevertheless, in recent years, we witnessed an increasing amount of corporate scandals making headlines around the world. And these are major companies with whom we interact on a daily basis — Alphabet and Facebook, Samsung, Volkswagen… to name a few. Amongst these reports of ethical misconduct, corruption arises as one of the most perpetuating issues in our society.

Corporate misconduct can damage the reputation and potentially impact the company’s financial performance[2]. Reputation is especially key since it influences how consumers perceive companies and may negatively affect consumer behavior, which ultimately impacts the corporation’s financial situation[3]. Yet, the public’s attitude towards corruption is not as linear as one may expect. Despite media attention towards ethical misconduct, specifically, corruption, society seems to accept its existence broadly. It has been suggested that stakeholders are so accustomed to hearing about these scandals that their attention towards the problem has been decreasing[4]. In fact, despite Volkswagen’s emissions scandal, the company clinched record sales in 2018[5]. This worrisome reality highlights a major challenge: the apparent clash between business and ethics across different sectors.

In the midst of this environment, the whistleblower emerges as an important protagonist to address the ethical challenges in the business world. His actions define the ethical boundaries of businesses by denouncing the wrongdoing in organizations. And the benefits of whistleblowing are known. Companies that embrace whistleblowing can improve their ethical decision-making, their effectiveness, and reduce potential financial and reputational costs[6]. Fighting corruption creates a “win-win situation” that ultimately benefits society and businesses[7]. While ethics may not frequently be perceived as a relevant subject for management studies, the knowledge of business ethics is essential because it helps to fight corruption, maintain trust, and incentivize innovation[8]. Ultimately, it contributes to guarantee the sustainable economic development of organizations.

Given its key role, it would be expected that whistleblowing is highly perceived practice amongst stakeholders. After all, whistleblowing contributes to a better society overall. Nevertheless, whistleblowing is still very controversial. In fact, we discovered that when a manager engages in whistleblowing, it actually harms external stakeholders’ trustworthiness, and additionally, it impacts the organization’s reputation negatively. This is hardly motivating for whistleblowers. The poor perception regarding whistleblowing seems to add to the lack of positive whistleblowing cases, which contributes to the endurance of corruption in Europe[9]. These findings highlight the need to promote ethical values within organizations, which translated into ethical decision-making that can actively fight misconduct. If companies focus on nurturing business ethics and establishing limits to avoid ethical failures that are reputationally and financially costly, in this sense, the role of the whistleblower becomes key, for companies, for stakeholders, and society in general.

But as long as the practice of whistleblowing upholds its negative costs for those who engage in it, the business environment is losing a powerful mechanism to fight ethical wrongdoing. Albert Einstein stated: “The world is a dangerous place, not because of those who do evil, but because of those who look on and do nothing.”

This content was originally published in Nova SBE - Medium.

[1] Van Beurden, P., & Gössling, T. (2008). The worth of values — A literature review on the relation between corporate social and financial performance. Journal of Business Ethics, 82(2), 407– 424. https://doi.org/10.1007/s10551-008-9894-x

[2] Miller, S. R., Eden, L., & Li, D. (2018). CSR Reputation and Firm Performance: A Dynamic Approach. Journal of Business Ethics, 1–18. https://doi.org/10.1007/s10551-018-4057-1

[3] Huber, F., Vollhardt, K., Matthes, I., & Vogel, J. (2010). Brand misconduct: Consequences on consumer-brand relationships. Journal of Business Research, 63(11), 1113–1120. https://doi.org/10.1016/j.jbusres.2009.10.006

[4] Zyglidopoulos, S., Hirsch, P., Martin de Holan, P., & Phillips, N. (2017). Expanding Research on

Corporate Corruption, Management, and Organizations. Journal of Management Inquiry, 26(3), 247–253. https://doi.org/10.1177/1056492617706648

[5] Despite emissions scandal, Volkswagen clinches record sales, The Local — Germany’s News in English, 2018

[6] Near, J. P., & Miceli, M. P. (2016). After the wrongdoing: What managers should know about whistleblowing. Business Horizons, 59(1), 105–114. https://doi.org/10.1016/j.bushor.2015.09.007

[7] Hess, D., & Dunfee, T. W. (2003). Taking Responsibility for Bribery: The Multinational Corporation’s Role in Combating Corruption. Business and Human Rights: Dilemmas and

Solutions, 260–271. https://doi.org/10.9774/GLEAF.978-1-909493-38-4_21

[8] Wilhelm, P. G. (2002). International Validation of the Corruption Perceptions Index. Journal of Business Ethics, 35(3), 177–189. https://doi.org/10.1023/A:1013882225402

[9] Transparency International. (2015). Speaking Up Safely Against Corruption In Europe. Retrieved rom https://www.transparency.org/news/feature/speaking_up_safely_against_corruption_in_europe

Maria Ana Campos
Nova SBE Alumna, currently working in Sustainability & Development at the World Business Council for Sustainable Development in Geneva (WBCSD), Switzerland.

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