Whistleblowing in the Workplace: An Evaluation of the Effectiveness of Sox

Published: 2021-09-10 23:40:11
essay essay

Category: Business

Type of paper: Essay

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Hey! We can write a custom essay for you.

All possible types of assignments. Written by academics

GET MY ESSAY
Whistleblowing in the Workplace: An Evaluation of the Effectiveness of SOX
Before the establishment of the Sarbanes-Oxley Act in 2002, employees were wary of the repercussions and consequences of whistleblowing. They felt that they were either forced to keep any knowledge of illegal activity within a company a secret or risk unknown and negative consequences. The law in place in the United States before 2002 was the Lloyd-La Follette Act of 1912, which specifically protected and guaranteed whistleblowers the right to provide any information to the United States Congress. However, as events such as the WorldCom and Enron scandals prove, this law is outdated and not specific enough for the scope of influence that today's corporations have. The United States Department of Labor also has an Office of the Whistleblower Protection Program but the actions of this office are vague and the steps to report whistleblowing through this channel are not practical for most whistleblowing situations.
The beginning of the WorldCom scandal that resulted in employee whistleblowing was in 1999. Between 1999 and 2002, the company used fraudulent accounting methods to mask declining earnings and made it seem as though WorldCom was experiencing financial growth. The public was seeing an increased stock price and employees within the company were seeing promising earnings on the surface. However, after looking closely at WorldCom's numbers, a small team of auditors discovered that the company was underreporting line costs and inflating revenues. Because the team of whistleblowers led by Cynthia Cooper feared for their jobs and possible retribution, they worked at night and in secret to gather the necessary evidence against their employer. The investigation eventually revealed that the company's assets had been inflated by an estimated $11 Billion. Because the Sarbanes-Oxley Act had yet to be passed, these auditors had to work in fear and at night to undercover their employer's fraudulent acts.
The Enron scandal developed a similar set of whistleblowers. Sherron Watkins, who was the vice president for corporate development, sent an anonymous letter to Enron's CEO about the company's fraudulent accounting practices. Because Texas law at the time did not protect company whistleblowers, Watkins was risking her position within the company by revealing her discovery of the fraudulent practices. As in the WorldCom situation, the whistleblower was forced to choose between maintain a position within the company or informing the public about the fraudulent practices. Before the Sarbanes-Oxley Act of 2002, whistleblowers lacked support in most companies and were usually risking their own jobs and professions for the sake of the public.
Throughout the 1980s and 1990s, there was a dramatic increase in the number of whistleblowers. With the culmination of the Enron and WorldCom scandals, Congress passed the Sarbanes-Oxley Act, which changed many of the standards that publicly traded companies had to comply with. One of the major changes affected by Sarbanes-Oxley were the new protections that whistleblowers were guaranteed under the law.
Within Sarbanes-Oxley, there were three sections that specifically addressed protections for whistleblowers: Section 806, Section 301, and Section 1107. Section 806 is perhaps the most important protection for individual whistleblowers, as it prevents companies from taking retaliatory actions against a whistleblower, including firing, demoting, threatening, or harassing an employee who reports any suspected wrongdoings to an investigatory agency. If the company takes retaliatory action against an employee, the employee may file a civil suit against the company. A whistleblower does not have to be correct in order to receive these protections. Instead, they only need a reasonable suspicion that they have information concerning a covered violation. However, the whistleblower must go to a government agency, such as the SEC, a law enforcement agency, or a member of Congress in order to receive these protections. If a whistleblower goes to a member of the media first, they will not be afforded these protections.

Warning! This essay is not original. Get 100% unique essay within 45 seconds!

GET UNIQUE ESSAY

We can write your paper just for 11.99$

i want to copy...

This essay has been submitted by a student and contain not unique content

People also read