10091412 Topic 10 Loyalty to a Company

7/29/2019 10091412 Topic 10 Loyalty to a Company

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TTooppiicc

Loyalty to aCompany1100LEARNING OUTCOMES

By the end of this topic, you should be able to:

1. Define loyalty to a company;2. Explain internal and external whistle-blowing;3. Explain circumstances under which internal and external

whistle-blowing is morally permissible, if not obligatory; and

4. Discuss the impact of improper loyalty on a company's day to dayoperations.

INTRODUCTIONWhat do you see in Figure 10.1 below? Obviously, it is a scene from a weddingceremony; the bridegroom and the bride running away to celebrate thiswonderful occasion. During the ceremony, the bridegroom and the bride willhave to make marriage vows which among others include the question ofwhether they will be loyal to each other. Hence, loyalty is vital for a happymarriage.


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TOPIC 10 LOYALTY TO A COMPANY 137

Figure 10.1: Wedding ceremonySource: http://www.nomoho.org/wp-content/uploads/2010/05/marriage5.jpgDo you think loyalty is important in the workplace? In business too, employersvalue and expect loyalty from their employees. Loyalty here designates the moralobligation of employees to discharge their duties competently, to obey thelegitimate orders of their superiors, to keep proprietary information and tradesecrets confidential, and to avoid any conduct that is in conflict with thecompanys rightful interests.

In this topic, we will look into these aspects that are related to the concept ofloyalty:

(a) Loyalty to employer(b) Whistle-blowing(c) The morality of terminating whistle-blowers(d) Improper loyalty

WHAT LOYALTY MEANS10.1As mentioned earlier, loyalty is something that is required from an employee bythe employer. However, what does loyalty to employer mean? Let us look atwhat it means.


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TOPIC 10 LOYALTY TO A COMPANY138

Loyalty indicates the moral obligation of employees to do the following:

Discharge their duties competently Obey the legitimate orders of their superiors Keep company information and trade secrets confidential Avoid any conduct that is in conflict with the companys rightful interests

Do you know that loyalty is a prized virtue, at least as far as employers areconcerned? Once a person accepts a job with a company, he is considered to owehis loyalty to the company, both while employed and under certain conditions,even after leaving the company.

Is loyalty to ones employer a moral obligation? The answer depends on how youdefine loyalty. If it means that people are expected to do their jobs at someacceptable level of competence or to do what their supervisors tell them to do,whether in terms of their job descriptions or day-to-day directives, then loyalty isa matter of moral obligation because these expectations are the very essence ofthe employment contract.

Furthermore, doing ones job includes understanding that the employee willkeep the trade secrets, marketing plans, strategic decisions and personnelinformation confidential. It also means that the employee will not share the

confidential information with outsiders, whether friends, family members or themedia.

Any manager who violates these terms of the employment contract is subject todisciplinary action by the company up to and including dismissal, as officialcompany documents frequently caution. A manager who discloses companyinformation to outsiders may even face a lawsuit by the company for damages.Clearly, loyalty in this sense involves a moral obligation.

Managers may not carry on activities that conflict with their companies interests,unless directly permitted by the companies for good reasons. Furthermore,managers should not provide off-hours consulting services to competitors, norattempt to patent inventions or sell technical processes they may have developedlargely from information derived directly from their employment or by usingcompany materials and facilities.


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Future managers may ask the following questions in order to shed light onmatters related to loyalty:

(a) Are these restrictions limited?(b) Can companies compel managers to sign agreements that appear to be

all-inclusive in restricting outside activities?

It is doubtful that companies have the right to insist on such sweepinglimitations. It seems perfectly acceptable for an accountant, managementspecialist, engineer or personnel specialist to offer his professional expertise topeople or organisations who are not competitors or potential clients of hiscompany.

ACTIVITY 10.11. In your opinion, what is the most effective way for a

company to ensure its employee remain loyal to thecompany?

2. Visit the website below for more information on the LoyaltyContract: Employee Commitment and CompetitiveAdvantage:

http://www.ups.com/europe/ch/news/speech/gerloyalty.html

Analyse how workplace loyalty can translate into better overallcompany performance.

SELF-CHECK 10.1

What does loyalty to employer mean? Explain briefly.


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WHISTLE-BLOWING10.2

Who is whistle-blower? Read the explanation below in order to learn more about

whistle-blower.

A whistle-blower, in the business world, is one who reports on fellowemployees, supervisors or company officers illegal or immoral actions.

Figure 10.2 shows how a whistle-blower can have a very significant position inan organisation.

Figure 10.2: A illustration on whistle-blowerSource: http://www.cartoonstock.com/directory/w/whistle_blowers.asp

Whistle-blowing can be divided into two category:

(a) Internal Whistle-blowingThe first category occurs when the accusation is made through the lines ofsupervision or other designated channels within the company.

(b) External Whistle-blowingMeanwhile, this second category occurs when the accusation is reported topeople or agencies outside the company, like government authorities or themedia.

The most likely justification for blowing the whistle is in situations wheresomebody in a company is engaging in or tolerating an activity that will harmemployees, stockholders or the public. The only way to stop the activity is toinform the appropriate supervisors in the company or, if that channel is blocked,
http://www.cartoonstock.com/directory/w/whistle_blowers.asphttp://www.cartoonstock.com/directory/w/whistle_blowers.asp


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one can go to the authorities or the media. So you need to answer these twoquestions.

(a) When is whistle-blowing morally justified?(b) Is it morally obligatory?

Since the answers to these questions vary depending on whether the whistle-blowing is internal or external, each variety will be treated separately in thefollowing sections.

10.2.1 Internal Whistle-blowing

Imagine yourself as an executive in a big company. Supposedly, you have goodreasons to suspect that the manager at your firm is doing any one of thefollowing offences:

Falsifying expense accounts, or Taking bribes from the suppliers, or Using companys resources or equipment for personal use, or Stealing supplies and materials from the company, or

Working for a competitor

You may consider it as a mark of loyalty to your company to blow the whistle onyour manager who is obviously doing an illegal action. However, is itpermissible for you to blow the whistle on this person; who is a manager of thefirm where you are working at?

The answer is certainly Yes, provided he observe caution, as outlined inTable 10.1.

Table 10.1: Criteria of Justification for Internal Whistle-blowingCriteria ofJustification Explanation

Significant harm It should be evident that the harm to the company is significant.

Accurate facts The whistle-blower has to be sure of his facts. Wrongful accusation

may seriously damage the reputation of the accused, even if it is

proved later that the allegation is false.


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Already known

by the

management

The whistle-blower should try to find out whether the suspects

activity is already known by the higher management, perhaps as a

result of audits or discrete investigations carried out by the company

security.

Reasonable

expectation

There should be some reasonable expectations that blowing the

whistle will be effective; that the suspects supervisor will put a stop

to what is going on because he believes that the offence is as serious

as the whistle-blower thinks it is.

Impact on

oneself

The whistle-blower has to consider the possible damage to his own

reputation and prospects in the business. Will the action be seen as a

mark of loyalty, or trivial talk, or an act of spite, or simply, a chance to

smear a rival for promotion? Will the whistle-blower be labelled as a

troublemaker, however good his intentions may be?

Moral obligation

Finally, the whistle-blower might discover that, in some instances

such as using company equipment for personal use, simply

confronting the guilty employee with his wrongdoing might be

enough to stop it.

Is it morally obligatory to blow the whistle on a manager? The answer

to this question begins with establishing who has the primary

obligation to watch out for and investigate any questionable action by

any employee.

Let us say that if a manager signs an agreement with the company

acknowledging a responsibility to report, through the proper lines ofsupervision, all instances of possible wrongdoing he or she might

encounter. Then, there would be a moral obligation to blow the

whistle whenever the need arises. However, such explicit formal

agreements are rare.

What actions would you take if you suspect disloyalty of a

manager in your company?

ACTIVITY 10.2

10.2.2 External Whistle-blowing

A manager who reports company wrongdoing to government authorities or themedia is engaging in external whistle-blowing. when do you think the externalwhistle-blowing is permissible? Is it ever obligatory?


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In addition to the criteria of justifications listed earlier for the internal whistle-blower, several others are required before external whistle-blowing is justified asshown in Table 10.2.

Table 10.2: Criteria of Justification for External Whistle-blowingCriteria ofJustification Explanation

Internal report

of wrongful

conduct

It must be ensured that effort has to be made to report wrongful

conduct internally, through proper lines of organisation. The

company concerned should have a chance to clean up its act before

the whistle-blower goes public.

External

agencies

It must be evident that external agencies like the auditors or the

public regulatory bodies are unable or unwilling to report what isgoing on.

Significant case

of harm

A significant case of harm to stockholders, employees or the public

has to be at issue, such as fraud, embezzlement, unsafe working

conditions or illegal dumping of hazardous materials.

Degree of harm The degree of harm that the company will suffer as a result of the

whistle-blowing should be proportionate to the harm its wrongdoing

is causing. Only when these conditions are satisfied, would external

whistle-blowing be justified.

We have looked at the required criteria of justification for external whistle-blowing. However, when would it be morally obligatory?

The primary obligation for preventing and stopping wrongdoing lies with thedegree of supervision. The more responsibilities a manager has for companyoperations, the stronger that obligation is. A manager would be obliged to reportwrongdoing to outsiders only if serious harm is at issue and if it is evident thatappropriate levels of supervision are unable to stop it.

In the United States, government employees who blow the whistle are protectedby law against retaliation. The government appears to think that whistle-blowersare demonstrating a high degree of loyalty when they report wrongdoing. In theprivate sector, however, whistle-blowers seem to be regarded as a little betterthan informers.


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Explain briefly on the two types of whistle-blowing.

SELF-CHECK 10.2

Enhance your understanding by attempting the exercise below.

Differentiate between internal and external whistle-blowing. Whatwould be the causes for their necessity?

EXERCISE 10.1

THE MORALITY OF TERMINATINGWHISTLE-BLOWERS

10.3

Do you think that companies are justified in firing, demoting or cutting short thecareers of whistle-blowers? The answer is No. As long as the whistle-blowershave reported a genuine case of misconduct through appropriate channels, or

have gone outside the company (as a last resort), there are no legitimate groundswhatsoever to discipline them.

However, a company would be justified in taking action against an employee(the whistle-blower) for the following reasons:

(a) Lied about a case, knowingly misrepresented it so that it looked moreserious than it really was,

(b) As an act of revenge on a fellow employee or supervisor(c) As a protest over an unfavourable company policy(d) To discredit a rival for the purpose of promotionA whistle-blower, whether internal or external, performs a morally praiseworthyact if he steps in to prevent serious harm to the people or the environment, aharm that could not be justified by company officials. Therefore, it would be aclear case of injustice or immoral act, to punish that person for doing what ismorally right, just to get revenge on him or to please higher levels ofmanagement who might dislike the truth from being exposed.


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IMPROPER LOYALTY

Sometimes managers believe that loyalty to the boss means covering up for hisserious mistakes or even wrongdoing. That belief is simply false. A manager hasa fiduciary duty to the owners of the business. Thus, it would be a violation ofthat duty to cover up actions by a supervisor who is harming the ownersinterests in any serious way.

A subordinate has to carry out the legitimate orders of his supervisor and keephim informed about the progress of his work or task . The subordinate may even

be obliged to tell the supervisor about actions of other persons or groups thatmay adversely affect boss's operations. However, wrongdoing by his boss shouldnot be ignored.

Let us now see how much you have understood from your reading byattempting the following exercise.

10.4

1. Define the term loyalty to a company. What does loyalty notentail?

EXERCISE 10.2

2. Under what circumstances, would internal whistle-blowing bemorally justified?

3. It is a false belief that loyalty is taken to mean covering up forerrors or wrongdoing committed by our superior. Do youa ree with the statement? Discuss.

Employers value and expect loyalty from their employees. Employees have a moral obligation to be loyal to their employers by doing

their job competently, obeying the legitimate orders of supervisors, keepingcompany information and trade secrets confidential, and avoiding acts thatconflicts with a companys rightful interests.

Employers should not ask managers to show their loyalty by committingillegal or immoral actions, engaging in deceitful advertising, or harassing,demoting, or even firing employees for non-job-related reasons.


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The obligation to blow the whistle internally depends on who has primaryresponsibility for discovering and investigating an employees questionableactions.

An employees immediate supervisor has to be alert to any seriouslyquestionable actions a subordinate might perform. A companys securityorganisation, if it has one, is responsible for helping to protect the companysassets.

A decision to blow the whistle externally, to some outside party, is justifiablewhen all the conditions for internal whistle-blowing have been satisfied, andif the company supervision knows about but refuses to take action to remedythe harm posed to the interests of the shareholders, employees or the public.

There is no moral justification for firing whistle-blowers who uncover casesof wrongdoing that involve serious harm to people or the environment thatcould not have been prevented through the usual company channels. To doso would be to unjustly punish someone for doing what is morally right.

Loyalty is sometimes mistakenly taken to mean covering up for asupervisors errors or wrongdoing.

Loyalty

Whistle-blower

Whistle-blowing

10091412 Topic 10 Loyalty to a Company

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