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“2016 Best Research paper” awarded by the A.G.R.H (French Speaking Academy of Research in Management and Human Resources) to Dr. Thierry Nadisic and Dr. Tessa Melkonian of emlyon business school.

Reference for quotation: Nadisic, T., & Melkonian, T. (2016). Senior executives’ two circles of justice: Why do firms reject whistleblowers? Presented at the 27th congress of the A.G.R.H. in Strasbourg.

Full article available on request from Thierry Nadisic nadisic@em-lyon.com

ABSTRACT:

Senior executives are also citizens. Our study shows that when placed in a situation where they must recruit a whistleblower, they reason in terms of fairness. They feel torn between a corporate circle of justice (what they consider fair as an employee) and a societal circle of justice (what they think is fair as a citizen). Regarding anti-competitive collusion practices, they acknowledge whistleblowing is fair from society’s point of view, but unfair for the firm (they indeed think these practices are common and acceptable). In this case, they are unlikely to recruit a whistleblower. Where there is an ethical breach deemed to be more serious on the company’s part, they may consider  the whistleblower acted fairly if he/she followed a procedure whereby he/she approached the problem internally first and allowed the firm time to rectify the breach. However, before agreeing to recruit a whistleblower, senior executives add one last condition: that the whistleblower be capable, like them, of navigating between organisational and societal justice circles in a flexible way.

Summary of the research findings

How do senior executives see their role as citizens? Are the two identities always compatible? And, if they encounter a situation where their role as an organizational member is in conflict with their role as a member of society, how do they decide? We conducted research to explore this question by considering what kind of treatment whistleblowers receive, which is currently a “hot topic” in the media. Stéphanie Guibaud for example, who revealed the fiscal fraud practiced by her employer (UBS), was fired in 2012, and the company was later convicted of harassment by an industrial tribunal in 2015. We wanted to know what happens afterwards, when whistleblowers seek employment elsewhere. Studies show it is very difficult to convince a company to recruit them. What is at stake for the company? How do senior executives decide to hire or reject such a candidate? Do they judge the candidate to be too unprofessional, disloyal or rebellious to be selected? Or, on the contrary, do they believe that because the candidate showed courage they would be an asset to the company?

We chose to approach the question through the prism of justice judgments. Research in organizational behaviour shows this is one of the strongest factors explaining and predicting decisions made in the workplace. Between two people of equal skill, we are more likely to choose the one who acted with equity, listened to others, and showed ethicality and respect, which (according to research) constitute the key elements of fairness at work. We would expect  senior executives who consider the whistleblower to have been fair would recruit him/her and those who did not, would reject these applicants. Yet our results show that things are not always so simple. We performed in-depth qualitative interviews with 12 senior executives, all board members within their companies (director of human resources, director of change management, director of strategy etc.). We gave them several scenarios and asked them to decide whether or not they would hire a person who was perfectly qualified for the job, but had reported a firm in the past for ethical breaches of varying degrees.

The first result of our study shows that senior executives react differently depending on their perception of the severity of the ethical breach. Where an employee reported the company to the authorities because it had colluded on prices with its competitors (to the detriment of consumers), the senior executives did not consider the breach to be serious enough and therefore they perceived the whistleblowing as unfair. Their reaction was almost unanimously negative: “nobody died”, “collusion practices are normal”, “I think it’s disloyal to the company”, “it’s not cool and it’s disloyal; it’s not fair to the firm as a whole”. In this case, they believed the company had made decisions that were in its best interests and that the whistleblower should have shown solidarity: “the company does me a favour by paying me and allowing me to progress, in turn, I should support its growth.” However, their justice reasoning changed for ethical breaches deemed to be severe. When the scenarios raised the issue of an immoral human resources management policy, conscious environmental damage or the sale of products that were dangerous for consumers, the participants were largely in favour of the breach being reported: “Yes, this should be reported”, “to do nothing would be a failure to assist a person in danger”. However, they still did not find whistleblowing to be always fair: “It would be fairer if it was flagged internally first” – “It’s airing one’s dirty laundry in public”- “I would try to find a solution before reporting the company. If the company is running a risk, at some point it is going to have to stop, so I would ask ‘when?’ If the C.E.O tells me ‘In three months’, I’d let it drop.” To their minds, it seems that if the way in which the whistle is blown seems fair, then the fact of having blown it becomes fair and in those cases: “they have nothing to reproach themselves for” and “it’s OK to report it to an external body.”

The second result revealed that senior executives consciously navigate between the two circles of justice i.e.  justice from the standpoint of the company and justice from the standpoint of society: “the two compete for loyalty. There is the law of the company and then the overarching law of the land in which we live and there is a potential conflict between the two.” When the whistle is blown, they feel torn between two contradictory notions of justice: “it’s fair, it’s the law, the company will be punished and so it should be. But my gut feeling is that it is unfair!”- They also felt a certain amount of pressure: “my position may seem paradoxical” – “I feel quite torn.” – “It’s tricky because I think there is conflict between one’s role as an employee and one’s role as a citizen; it all depends on how guilty the company is.” They are aware of the boundary separating the two circles: “You have to draw a line somewhere” – “how far is the employee prepared to go? The limit has to be when people are in danger.” For them, the passage from one circle of justice to the other is a question of “personal ethics” and “value systems.” However, the notion of harm being inflicted through unethical practices was not the only factor to push them from one circle to the other. They also took into account the negative consequences that such a red flag could cause the company: “OK, it’s good to inform authorities, but then what if the company gets closed down and 200 people lose their jobs?” The respondents made a comparison between the damages to the society due to the ethical breach and the damages to the company due to the red flagging of that breach. If they found the breach to be insignificant and the damage to society negligible, they found the whistleblowing to be unfair because of its damages to the company.

This could lead us to believe that if the breach reported by the whistleblower is deemed insignificant by the senior executive, then the latter would refuse to hire him or her, but that if the breach is deemed severe, the senior executive would hire the whistleblower on the proviso that they had followed a fair procedure. However, our third result shows that whistleblowers must pass a final test before a firmwould agree to hire them.  They must prove they possess an ability that the act of whistleblowing throws into doubt: the ability to recognise the difference between organisational and societal justice and to act accordingly. “They must know how to play by the rules, to navigate troubled waters; without entering into the red zone, they have to be able to navigate and hold tight for a while at least.” – “sometimes it can be a fine line to walk. From time to time you have to be accommodating, otherwise we won’t get anywhere” – “You need to avoid the zealots. It doesn’t matter how many times you explain to them that you’re trying to straighten out a borderline situation, they’ll just mess everything up.” Therefore, senior executives want the person they are hiring to be capable of walking the fine line between the two circles of justice: the organisation and the societal just as they do.

Our research provides surprising answers to the question: how do senior executives manage their dual identity as both employees and citizens? Particularly when faced with a whistleblower. They are fundamentally aware that their companies’ activities contribute  to society. They also know that their activities could also cause damage. They consciously weigh the costs and benefits. The actions of a whistleblower will be accepted if the damages caused by the ethical breach were severe enough to warrant the damage to the company if found guilty. Equally unexpected was the fact that, despite stricter laws on collusion, executives still do not find this practice particularly detrimental to society. Moreover, they only consider whistleblowers to have acted fairly if they followed an internal procedure first and allowed the company time to fix the problem. Finally, none of the mitigating circumstances are convincing enough if the whistleblowers cannot prove that they understand and are capable of walking the fine line between the two circles. They must be able to make the same cost/ benefit calculations as the senior executives themselves and they must never leave the organisation’s circle of justice in favour of society’s circle unless certain limits have been crossed, i.e. endangerment. Senior executives believe that it is their personal value system that will enable them to set this limit. One might wonder how we can ascertain whether or not this limit is defined in a safe and acceptable manner for society. From this perspective, it is advisable to inform and train senior executives about the damage caused to society by ethical breaches and negligence.  As for whistleblowers, it will not be easy to erase the doubt surrounding their ability to walk the fine line, which can largely explain why they struggle to find a new position.

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