While societies depend on whistleblowers to publicize wrongdoings in government and commercial institutions, such employees occupy an ambivalent position in organizations. Some see them as courageous heroes but for others they are antisocial traitors. Whistleblowing is often a last resort, even for individuals who have a contractual and legal duty to report misconduct and unlawful activities. Risk managers, compliance personnel and anti-money laundering officers are amongst the highest-profile whistleblowers in cases in the banking and finance industry. Their jobs in the U.S. are not easy these days, not only because they are required to “keep up with increasingly strict and complex regulatory systems around the world, and sometimes elicit skepticism or hostility from colleagues," but also because their disclosures can sometimes threaten to overturn deeply-embedded corrupt practices that benefit their colleagues.
If it is difficult enough to be a compliance officer in the U.S. banking sector following the Dodd-Frank Act, how easy might it be for internal auditors in the government agencies in Indonesia to carry out their job?
The level of corruption in Indonesia is high. Corrupt practices are habitual and routinized; the country was ranked 107 (out of 175) in the Transparency International Corruption Perception Index 2014 (this indicates how corrupt a country’s public sector is perceived to be). Internal auditors in Indonesia are duty-bound to report any misconduct and illegal activity in order to detect early, and counteract, cases of individual and collective wrongdoing in government agencies. In a way, they act as role-prescribed whistleblowers. Yet the “speaking up” procedures protecting whistleblowers cannot be easily implemented due to cultural challenges and legislative constraints. Collectivism and paternalism are still dominant features of Indonesian culture, while harmony is emphasized in social interactions. There is no direct whistleblower protection statute in Indonesia, although there is some protection for individuals who have revealed information leading to criminal prosecution. The danger that internal auditors may be displaying high level of intolerance towards corrupt activities committed by their external clients while being unwilling to report wrongdoing committed by their fellow auditors is high. The question therefore is: can internal auditors act with probity when discharging their duty while preventing normalized forms of corruption from taking hold within their own agency? And how would they respond if they came across evidence of wrongdoing in their organization?
A recent World Bank-funded study examined factors influencing internal auditors’ decisions to report wrongdoing that occurred within their own internal audit units, and the experience of actual and intentional whistleblowing. Specifically, it examined people’s willingness, preferred channels, motivation and justification, perceived risks and expected benefits of whistleblowing. Using the ethical climate, the wrongdoer’s power status, and the whistleblower’s job level as control variables, the study considered the moderating effect of perceived seriousness of wrongdoing and organizational commitment in relation to the ethical judgment and whistleblowing intentions of internal auditors. The research was carried out in seven offices in six government agencies dealing with finance, education, religion, health and public works, and two subsidiary offices of the national internal audit agency, by an internal auditor from Indonesia, Ide Humantito, seconded to complete his PhD degree at the University of Warwick. A total of 816 questionnaires containing case scenarios were distributed (365 of which were returned), followed by five focus groups attended by 112 participants and thirteen interviews with auditors, audit managers, and human resource officials in addition to participant observations.
Working together, Ide and I developed a theoretical framework by integrating insights from pro-social organizational behavior and ethical decision-making perspectives. This enabled us to capture both micro-individual and macro-organizational phenomena to explain whistle-blowing. Prosocial behavior theory suggests that there are three phases influencing the individual’s decision to speak up, in which one evaluates: 1) the wrongfulness and seriousness of the act in question and one’s own responsibility for it; 2) organizational responsiveness to wrongdoing and its demoralizing effects; and 3) alternatives to a disclosure decision and cost-benefit analysis. According to ethical decision-making, the main dilemma a potential whistleblower faces relates to the difficulty in balancing values, multiple loyalties and obligations (Hersch, 2002); there are also necessary conditions required, such as ethical sensitivity, ethical competence, and ethical perseverance, for an individual to disclose wrongdoing. We assumed that ethical judgment would be positively related to whistleblowing intention and that this intention would be positively moderated by the seriousness of the wrongdoing and organizational commitment.
The study found that responses to wrongdoing did not represent a dichotomous “either/or” in relation to whether to blow the whistle. When dealing with the whistleblowing dilemma, respondents used various intermediary measures such as direct reprimand of the wrongdoers, informal discussion with the wrongdoers’ managers, and gossiping or consulting secretly with managers about whom to trust to report the wrongdoing. The study also found that while many respondents have observed organizational corruption, the majority decided not to report it. The results of the survey indicated that overall less than one third of wrongdoing committed by peer auditors was reported, while this percentage was significantly lower when superiors were involved. Respondents who actually reported wrongdoing were more likely to do so internally rather than using external government agencies’ channels or making a public disclosure. Those who were aware that the wrongdoing was unethical and wrongful but decided not to report it put forward excuses that such activities were not in fact illegal. When there was evidence of serious corruption taking place, potential whistleblowers often felt that speaking up was an obligation rather than an option. Still, the intention to blow the whistle did not necessarily lead to an actual decision to do so, which was partly due to normalization of corruption in the organizations studied and only partly due to insufficient ethical perseverance of individuals.
Regarding the factors influencing the actual whistleblowing decision, the personal, legal, or professional responsibility of the respondents were the most important considerations. Personal values of fairness, honesty, and integrity competed with organizational values of togetherness, esprit de corps, and submissive obedience (follow the father’s rule), often leading to compliance. The conflict of multiple loyalties was mainly between obligations owed to the organization and to other parties such as the whistleblowers’ co-workers, leaders, their families, friends, and themselves. The study also found that the risk of broken relationships in the office was feared even more than the risk of being assigned less desirable duties, job transfer reassignment, denial of promotion, and poor performance appraisal. Leaders in the organizations studied often promoted the attitude of silent acquiescence to wrongdoing through various reward systems.
What can we learn from this experience? In addition to researching the role of internal auditors as anticorruption agents in an international context, the study has implications for the debate on what constitutes an organization of corrupt individuals as opposed to a corrupt organization (Pinto et al. 2008). While helping us to capture the meaning and experience of corruption in different settings, the study also explains how individuals may contribute to further the normalization of wrongdoing in organizations. Corruption and disclosure of corruption are both social constructs that depend on the interaction of people within an organization and its social setting (Vandekerckhove, 2010), but such behaviors are not limited to distant geographical locales.
Using legality to rationalize the ideology of corruption and offering the justification that the wrongdoing was permitted, understandable, or authorized is not uncommon across the commercial and public institutions in the U.S. and the industrialized West (Ashforth and Anand, 2003). Observations of a high level of tolerance and normalization of corruption, for example as demonstrated in this research, support the need for a clear distinction between individual and systemic corruption, as developed by political philosopher Dennis Thompson (1995). “The abuse of entrusted power for private gain” by individuals (in the widely circulated Transparency International definition), must be seen as different from perverting the function of an institution under conditions that may promote personal benefit, albeit that the two forms of corruption may coexist and mutually reinforce each other. The exclusive focus on what motivates individual whistleblowers is therefore unhelpful. Any policies aimed at counteracting corruption should combine macro-level interventions such as regulation and changes in organizational cultures where such behaviors can be best observed.
Blake E. Ashforth and Anand Vikas, “The Normalization of Corruption in Organizations,” Research in Organizational Behavior 25 (2003): 1–52.
M.A. Hersh, “Whistleblowers - Heroes or Traitors?: Individual and Collective Responsibility for Ethical Behaviour,” Annual Reviews in Control 26 (2002): 243-262.
Jonathan Pinto, Carrie R. Leana, and Fritz K. Pil, “Corrupt Organizations or Organizations of Corrupt Individuals? Two Types of Organization-Level Corruption,” Academy of Management Review 33.3 (2008): 685–709.
Dennis F. Thompson, Ethics in Congress: From Individual to Institutional Corruption (Brookings, 1995).
Wim Vandekerckhove, “The Perception of Whistleblowing Worldwide,” in Marek Arszulowicz and Wojciech V. Gasparski, eds., Whistleblowing: In Defense of Proper Action (Transaction Publisher, 2010), 21-32.