I read the recent news of the Satyam CFO and External Auditor getting bail after over a year in judicial custody for the Rs 7000 crore fraud conducted by Ramlinga Raju the then Chairman of the organization. It got me thinking that since the fraudulent representation of financial statements continued for seven years, it is highly unlikely that qualified and highly trained chartered accountants were unable to identify these transactions. In this kind of a scenario where the Chairman is involved in the fraud and has so much of political and financial clout would a mere employee be in a position to whistle blow?
The whistle blower is expected to highlight to the audit committee or external legal authorities about the irregularities, fraudulent and unethical practices being adopted by the organization. The expectation is that the whistle blower will have the moral courage and character to go against the senior management of the organization for the greater good of the company and society. In the legal spirit the requirement definitely is justified.
In recent years the challenges mentioned on failure of whistle blowing procedures is that there is no protection against retaliation, socially the individual is ostracized and professionally the individual does not get another job thereby simply reaching a dead end in their careers. However, I think we are unable to see the forest from the trees.
My concern is that the basic premise of whistle blowing – “a person having a moral character to go against authority figures” -is something to be questioned. I am bringing here the various psychological studies conducted which prove that normally a person will not undertake a whistle blowing activity. The percentage of human beings who will have this level of moral development are insignificant.
1. Miligram Experiment
In the Miligram experiment it has been proved that people comply to authority figures instructions without coercion to the point of causing another unknown innocent individual’s death. It clearly indicates that ordinary people simply doing their job can participate in tremendously destructive activities which are against their personal value system because they are temperamentally geared towards complying to authority.
Extract from Wikipedia on Milgram Experiment – “The Milgram Study indicated that intelligent individuals who thought they were administrating deadly electric shocks onto a subject, continued to administer perceived deadly shocks at the prompting of an authority figure. There was no violent coercion in this experiment. However, the presence of a person who was perceived to be in authority, was sufficient for most test subjects to continue administering perceived deadly electric shocks. The test subjects first questioned the viability of the experiment only when the shocks were of 135 volts. In Milgram’s first set of experiments, 65 percent (26 of 40) of experiment participants administered the experiment’s final massive 450-volt shock, though many were very uncomfortable doing so; at some point, every participant paused and questioned the experiment, some said they would refund the money they were paid for participating in the experiment. Only one participant steadfastly refused to administer shocks below the 300-volt level”
2. Kohlberg’s Stages of Moral Development
Lawrence Kohlberg, in his 1958 dissertation, established the pre-conventional, conventional and post conventional stages of moral development. In my opinion, in the present materialistic society , most of us are in pre-conventional and conventional stages of moral development. The egoistical pride which we have for professional and financial success even if it requires bending the rules for personal gain, indicates a lack of moral consciousness. Altruism and social consciousness are attributes which are not held in high regard by the society in general. Intrinsically, the assumption of whistle blowing that employee will sacrifice their self interest for the greater good of the society is questionable.
Below is an Extract of Kohlberg’s theory from a report on Organi-Cultural Deviance: Socialized Deviance In Corporate America (Authors: Christie Husted, Ph.D and Renée Elaine Gendron, MA) which clearly indicates that the present day attitudes and attributes are of pre-conventional stage.
“In Kohlberg’s pre-conventional stage, individuals see morality as being external to themselves. Kohlberg found these individuals have a sense of right and wrong, believe in reciprocal relationships, view relationships as a means of exchanging favors, lack identification with family and societal value. What is seen as being right to an individual is what satisfies the individual’s self-interest. Thus, the individual’s desire to satisfy their needs is egoistic. In this stage, the individual is looking to satisfy their need for belongingness, safety, security and esteem through their association with the group. The group reinforces their ego, supports, justifies and encourages the individual’s behavior and provides them anonymity.
The next stage of Moral Development, the conventional stage, individuals see morality as living up to the expectations of family and community. There is a shift from unquestioning obedience to a relativistic outlook and to a concern for good motives. The individual attempts to understand the feelings and needs of others. There is a concerted effort to help others (Crain, 1985). The individual becomes altruistic.
In the last stage, the post conventional stage, individuals are attempting to determine what a society should be like. They are working toward a concept of “good society”. Kohlberg found these individuals believe just decisions can be reached by looking at a situation through one another’s eyes. However, Kohlberg admitted the highest stage of post conventional development is theoretical. Kohlberg found very few individuals attain this high level of moral development”
Even while studying the six stages of Heinz dilemma : Obedience, Self-interest, Conformity, Law-and-order, Human rights and Universal human ethics, there would be very few who would respond according to stage 5 and 6. Although, we consider crime as a relation to opportunity, rewards and rationalization, if the moral development has not taken place rationalization for participation in any crime would be without any conscious dilemmas. This indicates that employees as such do not need to be coerced into illegality, and the reward of being in a favorable position with the boss would be sufficient to actively participate in illegal activities.
In the book “Moral responsibility of the holocaust- A study of ethics of character” written by David H. Jones, he has analyzed that – “while genocide is obviously immoral how people were able to actively participate in mass slaughter with seemingly a clear conscience.” He has explained the fact how humans escape individual moral responsibility by participating in group consciousness and collective thinking. If the social structure sanctions mass slaughter, the group thinking will become so. He has mentioned less than 10% Germans helped Jews although without coming forward and doing it behind the back of Nazis.
Considering the above case and the psychological studies, are we setting unrealistic expectations from employees to whistle blow and come forward to protect the society. The above studies results show that on an average less than 10% of the human population has moral development to put social needs over self and be altruistic enough to look at the greater good of humanity.
In such a situation what is the possibility of whistle blowing becoming a successful tool for identifying corporate wrong doing? Is this not just a theoretical concept with minimal practical viability? Should we be considering the psychological angle of the law to determine whether it can be effective in the long run?