Whistle-blowing and Conflicts of Interest

Normative Division of Labor

There are some moral challenges that are endemic to human life in institutions. Since firms are one kind of institution, we should zoom out a bit and take account of the moral challenges that firms share with other institutions (such as universities, religious organizations, and state institutions). We are going to focus, in particular, on two kinds of morally challenging institutional situations: conflicts of interest, and whistle-blowing.

Why are these challenges consistently found in human institutions? It’s not because institutions are filled with bad actors, with corrupt and malevolent intentions. (Although, you probably will encounter a few bad actors along the way!) One key factor is the simple fact that institutions involve a normative division of labor—they involve the creation of roles that require the individuals occupying the roles to focus on some values and goals and ignore others.

Here is a simple example to illustrate this. Imagine that you and a few friends decide to organize a food drive for a local food pantry. Instead of each of you individually soliciting, collecting, and delivering items for the food drive, you realize that you should combine your efforts and assign each other different roles to more efficiently use your time and energies. One of you is the Marketer, two are Collectors, and one is the Distributor. The Marketer focuses on raising awareness of the food drive and ensuring that the right people know about it, so they can contribute the needed items. The Collectors design and implement a system for gathering all of the donated items. And the Distributor ensures that the items end up at the food banks with the greatest need. In this arrangement, the Marketer should not worry about whether the donations arrive at the right food banks—that’s the job of the Distributor. Similarly, the Collectors shouldn’t worry about whether the right potential donors know about the food drive—that’s the job of the Marketer. Even though each of you would agree that all of these goals are important, each of your roles requires focusing only on some goals and ignoring others, which are within the purview of the other jobs.

Such a normative division of labor, while advantageous, creates some moral challenges. It is advantageous because it allows persons to specialize and more efficiently use their time and energies. But it creates moral challenges because, first of all, it places persons in relations of normative dependence, in which they are expected to depend on the advice and decisions of those in different roles. This is especially true when roles are professionalized, as in the medical, legal, and financial professions. If I leave the management of my personal finances to a financial advisor, then I need to trust the financial advisor’s advice and oversight about where I should or should not invest my money. The discretion I entrust to my advisor can be abused, especially when they encounter a conflict of interest (discussed below). Second, a normative division of labor allows for wrongdoing to emerge in one part of an organization without being immediately relevant to, or noticed by, workers in other parts of the organization. Without reliable and responsible reporting practices, including whistle-blowing, serious organizational wrongdoing can persist and grow as those whose jobs are unrelated to it go on with their day-to-day lives in the organization. Related to both of these is the fact that normative divisions of labor can reinforce preexisting, unjust social divisions and hierarchies, as when executive positions are predominantly held only by members of privileged social groups.

Conflicts of Interest

Let’s dive into each of these general moral challenges a bit further, starting with conflicts of interest. First, we need a workable definition of what a conflict of interest situation is. It won’t do much good to reflect on the term “conflict of interest,” because conflict of interest situations are not best understood as situations involving conflicting interests (which is what the term itself seems to suggest). The term “conflict of interest” refers to facing a particular kind of fraught situation in which one or more persons are depending on you to use your role-based judgment to help them in some way, and you have a separate commitment, loyalty, or interest that compromises the reliability of your role-based judgment. (Davis 1982)

For instance, you might be a lawyer, and a new client comes to you seeking advice about whether to bring a wrongful termination suit against their former employer, Bad Corporation (BC). They suspect that they were wrongfully fired due to religious discrimination. Unbeknownst to your client, you work on retainer for BC. This is a conflict of interest situation: Someone is counting on you to use your role-based judgment—as a lawyer—to help them in some way, and you have a separate commitment, loyalty, or interest—to BC—that compromises the reliability of your judgment.

Why are conflict of interest situations morally challenging? It is not necessarily a problem merely to have a conflict of interest. Sometimes they arise due to factors outside our control. If you’re the lawyer in the above example, it’s no fault of yours that a new client walks into your office seeking advice about potential legal action they want to bring against your corporate client. The challenge lies in how persons and organizations respond to conflicts of interest.

One potential problem in how persons respond to conflicts of interest is that, if they dispense advice or make decisions when facing a conflict of interest, they are liable to give bad advice or make bad decisions. The lawyer in the above example might nudge the client to not bring a lawsuit against BC when, in fact, the client would have a very good chance of winning in court against BC. If the client listens to the lawyer, they would be deferring to bad legal advice.

A second, deeper problem is that, even if good advice is given, those facing conflicts of interest induce others to take risks without their knowledge. Think about it this way: If you face a conflict of interest, then you are, by definition, an unreliable source of advice and decisions. If someone comes to you seeking your advice without knowing you face a conflict of interest, and you go ahead and dispense your advice, then you are leading them to take a risk in accepting your advice that they do not know they are taking. As we will see when we study Kantian ethical reasoning, this is a clear example of disrespecting someone’s human agency.

This means that the first step to take when persons face conflicts of interest is some sort of disclosure. They need to reveal that they have a conflict of interest. A potential second step is recusing themselves from giving advice or making decisions about matters at hand, as when judges recuse themselves from cases involving their family members.

Whistle-blowing

Turn now to whistle-blowing situations. These arise, again, when an organization, or some significant subpart of it, is engaged in serious wrongdoing, and someone internal to the organization knows about this and could report it. To bring this idea home, try to recall a time when you were in a group setting and something offensive was said, and no one confronted the speaker. You might have had the following thought: “Someone should speak up!” But this might have been paired with an additional thought: “But why should it be me that says or does something?”

Within organizations or institutions, whistle-blowing occurs when someone who is standardly obligated to be loyal to, and keep confidentiality for, an organization goes outside the normal chain of command to deliberately report some substantive wrongdoing done by some part of the organization to someone whom they hope will raise public awareness of and/or correct the wrongdoing (Brenkert 2015). There are a few important things to notice about this definition.

• First, whistle-blowing is done by insiders—those who are somehow internal to the organization and thus privy to information inaccessible to outsiders (those who fall outside the organization’s normative division of labor).
• Second, whistle-blowing involves going outside the chain of command. It occurs when reporting to one’s boss isn’t an option or hasn’t worked.
• Third, whistle-blowing is done with a specific intention—the intention of raising awareness and/or correcting the wrongdoing.

For these reasons, whistle-blowing brings many risks. It may not work (many whistle-blowers fail to bring about the change they’re hoping for). It may cost one’s job. It may isolate one from friends and colleagues, who now view one as a “snitch.”

When should it be done? It is important to keep a few considerations in mind.

• First, do you have solid (but not necessarily foolproof) knowledge of the wrongdoing? Do you have enough of the bigger picture of what’s going on?
• Second, have you tried to utilize the normal chain of command and internal forms of reporting, such as telling your boss and using your company’s ethics hotline? Have you given the organization a chance to respond?
• And third, what additional responsibilities do you have that may be compromised if you become a whistle-blower, and how, if at all, do they weigh against whistle-blowing? For instance, if you are likely to lose your job when you blow the whistle and you have young mouths to feed, will you be able to secure another source of income or support? (Brenkert 2015)

With those questions in mind, return once more to the Purdue Pharma case. Think specifically about the sales representatives who spoke directly with doctors, trying to convince them to prescribe more and more OxyContin. As these sales reps heard back from doctors about the worrisome signs of addiction associated with OxyContin, and as they read reports of rapidly increasing numbers of overdose deaths, did they have a responsibility to push back against the “pseudo-addiction” message pushed by Purdue Pharma and, if nothing changed, to blow the whistle? Would you have been willing to do so if you were a sales rep, potentially foregoing tens of thousands of dollars in sales bonuses?

References

Davis, M. (1982). Conflict of interest. Business and Professional Ethics Journal, 1, 17-27.

Brenkert, G.G. (2010). Whistle‐blowing, moral integrity, and organizational ethics.  In F. Allhoff, A. Sager, A.J. Vaidya. (Eds.), Business in Ethical Focus: An Anthology (2nd ed.).