Business Ethics: A European Review Volume 20 Number 1 January 2011

Whistleblowing in a changing legal climate: is it time to revisit our approach to trust and loyalty at the workplace?
David Lewis
Law Department, Middlesex University, London, UK

This article suggests that the introduction of employment protection rights for whistleblowers has implications for the way in which trust and loyalty should be viewed at the workplace. In particular, it is argued that the very existence of legislative provisions in the United Kingdom reinforces the notion that whistleblowing should not be regarded as either deviant or disloyal behaviour. Thus, the internal reporting of concerns can be seen as an act of trust and loyalty in drawing the employers attention to wrongdoing. Equally, external whistleblowing may result from a workers belief that he or she also has a loyalty to the wider society. Given that the interests of employees do not necessarily coincide with those of their employer and that whistleblowers sometimes suffer reprisals, the author concludes that it is inappropriate to impose a contractual duty to report concerns. Instead, employers should endeavour to promote a culture of openness and create condence in the mechanisms they provide for whistleblowing.

Introduction
For decades, sociologists, psychologists, management theorists, etc., have written about whistleblowing and its impact on society, the business enterprise and the individual (see Nader et al. 1972, Westin 1980). However, it is only relatively recently that we have seen the introduction of legislation that recognises the importance of whistleblowing and the need to protect those who engage in it.1 In the authors opinion, this has created a new legal climate and raises important questions about the continuing validity of the common laws traditional and simplistic approach to notions of trust and loyalty. It is suggested that such an approach fails to acknowledge the reality that different forms of trust and conicting loyalties exist at the workplace. It will also be argued that the UK case law has

unacceptably blurred the distinction between duciary obligations and the implied duty of good faith or delity. Thus, in many situations, it is assumed that employees have agreed to act solely in the interests of the employer, and the obligation of loyalty has been viewed accordingly. This article develops the argument that, in many situations, whistleblowing can be regarded as an act of loyalty, organisational citizenship and prosocial behaviour rather than disloyalty or deviation. Nevertheless, given that employees are entitled to have regard to their own interests and the serious risks involved in being a whistleblower, it is maintained that employers and the courts should not be encouraged to impose contractual duties to report.2 Instead, they should endeavour to promote trust and condence in the whistleblowing process through the provision of and adherence to codes of
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ethics, the negotiation and maintenance of effective whistleblowing procedures and the promotion of a general culture of openness at the workplace. While it is accepted that society has an interest in requiring people to report serious wrongdoing, for example risks to life posed by terrorism or lapses in workplace safety systems,3 it must also be acknowledged that duties to disclose raise signicant practical difculties. For example, should people be punished if, anxious to full their obligation, they make a report without having reasonable grounds to suspect wrongdoing? Is it desirable or feasible to discipline all those who fail to disclose obvious wrongdoing? The existing literature tends to focus on the right to disclose and less attention has been paid to the consequences of imposing legal duties to whistleblow (see Tsahuridu & Vandekerckhove 2008: 107). It is hoped that this article will contribute to the debate on this subject. Its structure is as follows: the rst three sections discuss the nature and seriousness of wrongdoing, the fourth section deals with loyalty and trust from a legal perspective, the fth and sixth sections discuss other approaches to loyalty and trust and the seventh section offers some conclusions.

The nature and seriousness of wrongdoing

Although there is no universally recognised denition of whistleblowing, researchers have frequently relied on the following, which covers anonymous reporting and the use of both external and internal channels: the disclosure by organisation members (former or current) of illegal, immoral or illegitimate practices under the control of their employers, to persons or organisations that may be able to effect action (Near & Miceli 1985). For these purposes, voluntary workers and contractors are regarded as organisation members. Although the relevant UK legislation only applies to workers,4 in the authors view, clients and customers should also be included. Not only would this be important in principle but it would also reect the scope of many condential procedures in the United Kingdom (Lewis 2006). Part IVA ERA 1996 species what can be reported by providing a denition of qualifying

disclosures.5 An extremely wide spectrum of wrongdoing is covered, ranging from criminal acts or omissions causing extreme public harm to technical breaches of contract that only affect one individual.6 However, it seems clear that how organisations and individuals react to revelations of wrongdoing will depend to some extent on its nature and seriousness7 as well as the amount of evidence available.8 For example, an organisation may be particularly resentful if relatively minor wrongdoing is reported to an external agency, especially if the matter was not raised internally rst. Signicantly, Part IVA ERA 1996 enables disclosures to be made both internally and to specied external persons irrespective of the seriousness of the alleged wrongdoing.9 By way of contrast, external disclosures in other cases must reect the seriousness of the relevant failure or the failure must be exceptionally serious.10 Apart from any statutory denition, what is perceived to be wrongdoing (as well as whether to report it) will be affected by a variety of factors.11 At a personal level, values will be shaped by moral perceptions and ethical reasoning (Trevino 1986), which, in turn, may be based on religious beliefs or cultural perspectives (Chiu 2002). It almost goes without saying that the employers approach, which may manifest itself, for example, through a code of ethics and/or a whistleblowing policy, is likely to inuence an individuals attitude to wrongdoing. Indeed, there appears to be a greater incidence of whistleblowing where the individual perceives a high congruence between personal and organisational values (Near & Miceli 1996). On the other hand, conicts may exist between internal codes of ethics and those applied by professional bodies (Brennan & Kelly 2007). This could give rise to a clash of loyalties, which is a matter considered further below. From a potential whistleblowers perspective, it may not be enough merely to identify wrongdoing, it may also be relevant to assess the amount of harm and the probability of its recurrence. Thus, the anticipation of serious physical harm may be more likely to result in whistleblowing than the expectation of more modest consequences. On the other hand, the fear that reports of very serious organisational wrongdoing might lead to retaliation might act as a deterrent (Dozier & Miceli 1985). Related

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factors in the whistleblowing process may be the identity of the wrongdoer and who is harmed. According to Miceli et al. (1991), the identity of the person engaged in wrongdoing may be directly relevant to the decision of whether or not to report. For example, misdemeanours by workers may be easier to terminate than organisational wrongdoing, which may be more pervasive. Indeed, for this reason, concerns about an individual workers behaviour are less likely to be perceived by recipients as threatening to the organisation (see Miceli et al. 2008). As regards who is affected, Miceli et al. (1991) suggest that observers of wrongdoing may be more likely to ignore it if they do not think colleagues will be harmed. Thus, it makes sense for employers, wherever possible, to distinguish between different types of wrongdoing and to indicate how they wish their staff to react. Categorising wrongdoing will clearly require some effort, but templates are readily available and thought merely has to be given to their application to the particular organisation. For example, most employers will wish to channel personal grievances through a grievance rather than a whistleblowing or condential reporting procedure.12 Equally, some organisations may want to encourage the internal reporting of immoral or unethical conduct that is not covered by Section 43B(1) ERA 1996. In order to agree on the circumstances in which whistleblowing is regarded as valid, it is vital to reach a consensus about what amounts to wrongdoing. This might appear to be a tall order but it may well be achievable through consultation or negotiation with trade unions or other employee representatives.

Whistleblowing as deviation, dissent or protest

In the light of the above discussion, it might seem inappropriate to classify whistleblowing as deviant behaviour. However, to the extent that whistleblowers depart from workplace norms or belong to groups that are opposed to whistleblowing, the notion of deviation makes some sense (see Greenberger et al. 1987). The fact that the whistleblower may be conforming to the values of society at large

raises the question deviation from what? In discussing constructive and destructive deviance, Warren suggests an answer. She refers to hypernorms, i.e. globally held beliefs and values . . . (which) encompass basic principles needed for the development and survival of essential background institutions in societies.13 Thus, whistleblowing can be viewed as benecially deviant if it is behaviour that adheres to hypernorms but departs from the norms of the organisation or the work group.14 The emergence of whistleblowing policies and procedures has helped to counter the notion that reporting wrongdoing is in itself deviant, although in one sense, statutory intervention has not been entirely helpful here. It could be argued that, to the extent that legislation protects certain types of reporting in specied circumstances but not others, it endorses the view that some forms of whistleblowing remain aberrational. Additionally, the requirement to act in good faith15 suggests that having an improper motive may be regarded as deviant.16 Perhaps equally relevant today is whether a failure to report, where there is clear evidence of wrongdoing and a suitable procedure for doing so, should be regarded as deviant behaviour and dealt with as such. The desirability of imposing a duty to whistleblow is discussed later. Whistleblowing has also been described as principled organisational dissent (Miceli et al. 2008), civil disobedience or protest (Elliston 1982b), and ethical resistance (Glazer & Glazer 1989). It is not difcult to categorise the raising of a concern as a type of dissent or protest that may be expressed internally or externally. For example, Jubb categorised whistleblowing as a form of dissent that publicly implicates the organisation by the external disclosure of wrongdoing (Jubb 1999). By way of contrast, Elliston regarded anonymous reporting as a protest at wrongdoing and the inability to raise the matter publicly (Elliston 1982a). To the extent that a disclosure is about government wrongdoing and is not protected by law, whistleblowing would also fall within Rawls denition of civil disobedience.17 According to Rawls, such an act would be laudable because it would set an example to others with the aim of encouraging them to create a more just society.18 From a more managerial perspective, as organisations require obedience, internal or external

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whistleblowing might be viewed as a challenge to their authority structure (Weinstein 1979). Yet, this will not be the case where the organisation encourages the reporting of concerns and provides procedures for doing so. Under these circumstances, whistleblowing may not be viewed as a violation of the chain of command principle, but rather an upward form of communication (Miceli & Near 1992: 9).

Whistleblowing as prosocial behaviour or organisational citizenship

According to Brief & Motowidlo (1986: 711), prosocial organisational behaviour is: (a) performed by a member of an organisation; (b) directed towards an individual, group, or organisation with whom he or she interacts while carrying out his or her organisational role; and (c) performed with the intention of promoting the welfare of the individual, group or organization toward which it is directed. Whistleblowing ts comfortably within this denition and the very existence of protective legislation emphasises its potentially prosocial nature. The creation of a supportive organisational culture by providing suitable whistleblowing policies and procedures can reinforce this. Nevertheless, it must also be acknowledged that some forms of whistleblowing can be anti-social and/or organisationally dysfunctional for example, where a person makes malicious and unfounded allegations of wrongdoing or discloses to the media without raising their concern internally beforehand. The reporting of wrongdoing would also seem to be covered by the following denition of organisational citizenship: individual behaviour that is discretionary, not directly or explicitly recognised by the formal reward system, and that . . . promotes the effective functioning of the organisation (Organ 1988). Indeed, the Whistling While They Work project recorded that Internal and external whistleblowers indicated high levels of organisational citizenship behaviour, further challenging the stereotype of an external whistleblower as a disgruntled, organisationally unhappy employee (Brown 2008: xxvi).

We should also not ignore the fact that, as well as being internal stakeholders, organisation members are public citizens and have rights and obligations as such. For example, Article 10(1) of the European Convention on Human Rights gives everyone the right to impart information and ideas without interference by public authority and regardless of frontiers. Article 10(2) provides that this may be restricted in the interests of public policy for the protection of the reputation or rights of others, for preventing the disclosure of information received in condence and for other prescribed legitimate aims. This provision highlights the balance that has to be achieved between the right of individuals to report wrongdoing and the ability of organisations and the state to inhibit disclosure. Any potential conict between the roles of organisational citizen and public citizen again raises questions about to whom loyalty is owed.

Employment laws perspective on loyalty and trust

Traditionally, the case law of England and Wales has adopted a unitary view of loyalty and trust at the workplace. The assumed common interest of employers and employees inhibited the acknowledgement of obligations towards the family, the workgroup, a professional body or trade union to consumers or the wider society. Thus, employees were required to give work priority over domestic demands and had no right to take industrial action to further trade union interests. In addition to obeying lawful and reasonable orders,19 the implied duty of loyalty requires employees to adapt to new working methods20 and to render faithful service.21 However, there has been some confusion about the distinction between duciary obligations and good faith or delity terms implied into contracts of employment.22 Flanagan (2008) has analysed the development of the duty of delity and commented on its duciary and breach of contract origins. He notes that Robb v Green23 was the rst case to refer to a duty of delity and like faith, faithful and good faith, it is a synonym for loyalty and duciary accountability (p. 281). Flanagan observes that, in reality, the duty of delity is not distinct from a

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duciary obligation or duty of condence but is merely another description of it. Fiduciary obligations are not mutual but derive from equitable principles that require a person to act solely in the interests of another. According to Millett L.J., a duciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and condence. The distinguishing obligation of a duciary is the obligation of loyalty.24 By way of contrast, the duty of delity (or good faith) requires a party to take into consideration the interests of another but they do not have to act in that others interests.25 Thus, in theory, duciaries have a positive duty to disclose information that is not imposed on ordinary employees via implied contractual terms. However, whether or not it is desirable in principle, it is clear that the distinction between senior and ordinary employees is difcult to maintain in practice. According to the literature on law and economics, duciary relationships have been created to deal with lack of control and the resulting problems of detection of wrongdoing (Simms 2001: 107). It is clear that employees must not put themselves in a position where their interests conict with those of their employer. In Boston Deep Sea Fishing & Ice Company v Ansell,26 it was held that an employee who took a commission of which his employers were unaware was lawfully dismissed. Although the defendant had duciary obligations as a managing director, this case has been treated as authority for the general proposition that employees who improperly exploit their position to make a secret prot will be in breach of the duty of delity. In Nottingham University v Fishel, the claimant attempted to recover damages from a scientist who had used other employees to undertake private work without informing the university. This case provides a useful discussion about the circumstances under which it is appropriate to imply duciary obligations. As it was well established that directors had such duties to the company even before the enactment of sections 170180 Companies Act 2006,27 it is the position of other employees that needs to be examined. In Fishels case, the EAT asserted that, although a contract of employment does not in itself establish such a duciary relationship, duciary duties

might be imposed under a range of circumstances. According to Elias, J., for such duties to exist, there must be evidence that the employee has undertaken specic commitments to act on the employers behalf. It follows that, in addition to company directors, senior managers are most likely to have duciary obligations but these do not exist simply because of their position in the organisation. In Sybron Corporation v Rochem Ltd,28 which was argued on the basis of contractual rather than duciary obligations, the Court of Appeal held that a senior employee was in breach of duty in not disclosing that fellow employees had established rival organisations and were trading in competition with Sybron. This case provides authority for the proposition that there may be an implied contractual obligation to report the wrongdoings of others even if that requires the disclosure of ones own impropriety.29 However, the common law principle remains intact that employees generally do not have to disclose their own breaches of contract.30 Exceptions to the employees duty of delity have been recognised, where an organisations activities conict with the public interest. For example, where unreasonable restraints of trade offend the principle of competing on a level playing eld or where information is disclosed about employer iniquity.31 More recently, legislation has been introduced that acknowledges that workers may have loyalties towards both their dependants and the general public. This takes the form of family friendly rights32 and protection for those who make specic types of disclosure in the public interest.33 The employees implied obligations of loyalty or delity have evolved over the centuries and currently manifest themselves in the form of a duty to cooperate. This is clearly based on the premise that workers are engaged to promote the commercial interests of the employer.34 The reciprocal obligation on employers is a duty to maintain trust and condence and this is regarded as a fundamental term in contracts of employment.35 The term is frequently expressed negatively in the form of not acting in a manner likely to seriously damage the employment relationship without good cause.36 Pertinent case examples are the failure to: investigate a health and safety concern;37 afford a reasonable opportunity to obtain redress of a grievance;38 or

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deal properly with it.39 A more positive application is an obligation to maintain the condentiality of information supplied by employees.40 Both the positive and the negative aspects of the duty of trust and condence are relevant to whistleblowing. Indeed, the author endorses Hepples view that the duty of trust and condence could be construed in a way that requires employers to take all those steps which are necessary to achieve the purposes of the employment relationship . . . this broader, functional view . . . embraces . . . those psychological conditions which are essential to the performance by an employee of his part of the bargain (Hepple 1981). Subsequently, in Malik v BCCI SA,41 where employees claimed that their prospects had been damaged by the banks fraudulent conduct, Lord Nicholls regarded the implied term of trust and condence as a vehicle for dealing with harsh and oppressive behaviour or any other form of conduct which is unacceptable today. Thus, it is suggested that employers who impose a contractual duty on workers to report wrongdoing without indicating when and how this should be done will potentially undermine trust and condence when a concern arises, the lack of an appropriate reporting policy or procedure will have the effect of preventing the performance of the employees duty. In a sense, this duty is being used as a background gap-lling principle, which moves into the foreground where an employee is not protected by more specic statutory rights (Boyle 2007: 651). The fact that this line of reasoning can be applied in a variety of contexts is an argument in its favour.42 Put simply, employees who have contractual duty to report need information about how to do so and it is irrelevant whether the issue is bullying, discrimination, nancial or other forms of wrongdoing. It is not being argued that a failure to provide a suitable procedure would in itself amount to a repudiation of contract but that it could constitute a breach if certain circumstances arose.

Non-legal approaches to loyalty and trust43

In 1933, Allport suggested that loyalty in organisations involved a selection of values, an adherence to

some principle of conduct we consider good. Thus, loyal employees make moral judgements before action. More recently, Randels argues that, although loyalty is often perceived as an obligation owed by an employee to an organisation or as a virtue of a good employee, . . . loyalty is not a duty or a virtue. Loyalty involves a complex of passions and character traits such as commitment, with outward actions springing from them. It is thus more readily identied by character-based ethics (Randels 2001).44 Commitment, then, is not synonymous with loyalty and has been described as the psychological attachment of workers to their organisations (Allen & Meyer 1990). The process of internalisation results in normative commitment, i.e. feeling obliged to remain with the organisation: In the case of normative commitment, what gets internalised is a belief about the appropriateness of being loyal to ones organisation (Meyer & Allen 1997). According to Coughlan (2005), normative commitment differs from loyalty in that it does not examine ongoing behaviour during the employment relationship that is in line with a workplace communitys moral principles. We have seen above that the common law in the United Kingdom has adopted a simplistic view that workers have a duty to be loyal to their employer and an obligation to safeguard their interests. The result is a rather negative view of those who raise concerns about wrongdoing. Since employers very rarely approve of whistleblowing and generally feel that it is not in their interests, it follows that whistleblowing is an act of betrayal on the part of the employee . . . (Larmer 1992). However, it would be wrong to assume that those who feel a sense of loyalty or attachment will always see whistleblowing in these terms. As Randels (2001) put it: Actions may be classied as loyal or disloyal . . . but do not necessarily manifest loyal or disloyal motives. Indeed, several researchers have found a signicant relationship between whistleblowing and organisational commitment (see, e.g., Miceli et al. 1991). Some workers may feel morally obliged to raise concerns and believe that they are performing their jobs in the way that the organisation expects of them if management is unaware of the wrongdoing, informing them demonstrates greater loyalty than remaining silent. Thus, denigration of their activities

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will cause shock as well as undermine trust in the organisation. In offering his exit-voice-loyalty framework, Hirschman dened voice as either an individual or a collective attempt to change an organisation in response to a perceived problem. Thus, if workers think that they can bring about change by raising a concern they are more likely to use voice rather than exit.45 This process of change could occur through direct approaches to management, by appeals above their heads or by other forms of protest, for example, mobilising public opinion (Hirschman 1970). Hirschman asserted that loyalty46 might combine with satisfaction to cause voice and predicted that observers of wrongdoing who were loyal and dissatised would be more likely to report wrongdoing than others.47 In criticising Hirschmans framework, Barry suggested that loyalty may be unrelated to the exercise of voice (Barry 1974). He saw loyalty as an explanation of why some people who might have been expected to exit did not do so and pointed to the existence of an additional choice between voice and silence. Boroff and Lewins subsequent study of employees who experienced unfair treatment concluded that, instead of exercising voice, loyal employees remained silent (Boroff & Lewin 1997: 60). Indeed, their nding that the fear of reprisal for using the grievance procedure was signicantly negatively associated with the use of the procedure has a clear parallel with the empirical research on whistleblowing.48 Westin reported that the majority of whistleblowers regarded themselves as loyal employees who endeavoured to use direct voice (internal whistleblowing) but when they suffered reprisals, many used indirect voice (external whistleblowing) (Westin 1981).49 Thus, it might be suggested that a worker will have less loyalty to the organisation if there is no positive outcome from internal reporting. He or she might choose to remain silent on future occasions when wrongdoing is perceived. Alternatively, loyalty to the public might lead to external disclosures. More recently, Vandekerckhove & Commers (2004) have observed that a loyal person is one who is true to obligations. Workers are likely to have other commitments, for example to their

family, workgroup, profession, consumers of their employers products or services, or to society in general,50 which may conict from time to time with organisational loyalty. For example, an employee may be a member of a professional body that promotes the reporting of wrongdoing but belong to a workgroup that is opposed to whistleblowing.51 Similarly, workers may feel torn between loyalty to an immediate supervisor who is suspected of wrongdoing and the organisation itself. Given the obvious potential for different loyalties to clash, priorities will have to be established. Simply asserting that loyalty to the organisation overrides all other obligations is unacceptable; thus, some other method must be invoked. Where loyalties compete: the choice is not between loyalty and disloyalty but between competing ways of being loyal . . . The question is how we balance them, not how we choose between them (Wolfe 1997). According to Duska (1990): A company is an instrument, and an instrument with a specic purpose, the making of prot. To treat an instrument as an end in itself . . . gives the instrument a status it does not deserve. Not surprisingly, this view that organisations are not proper objects of loyalty is regarded as highly contentious.52 Building on Corvinos assertion that loyalty is a virtue only to the extent that the object of loyalty is good,53 Vandekerckhove & Commers (2004) introduce the concept of rational loyalty. According to them, the object of such loyalty is not the physical aspects of the company buildings, executives, boards, hierarchies, colleagues but the explicit set of mission statement, goals, value statement and code of conduct of the organization which is judged as legitimate. Thus, if the organisation departs from its mission, goals and values, rational loyalty would justify whistleblowing: the employee does not owe any loyalty towards the organization identied through organizational behaviour that runs counter to the kind of behaviour described in its mission statement (Vandekerckhove 2006).54 Although the concept of rational loyalty provides a convincing justication for external whistleblowing,55 we still need to consider how loyalty issues impact on the process of internal reporting. Four specic questions will be discussed here. First, what difference does it make that employees have an

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obligation to report wrongdoing by virtue of their position in the organisation, either because of their seniority or their particular function?56 As will be the case where a contractual duty to report is imposed on all staff, whistleblowing cannot be regarded as disloyal if it is a requirement of the job. However, this might not be the case if a person with a particular role discloses information outside their specialist area for example, the nancial auditor who raises concerns about safety defects at the workplace. Indeed, it is arguable that making a disclosure when there is no obligation to do so demonstrates greater loyalty than when reporting is required. Second, assuming that it has not been designated as a potential recipient in a whistleblowing procedure, is it disloyal for workers to raise concerns with a trade union? Such disclosures may well seem natural to the individual member, especially where fellow workers have similar evidence of wrongdoing. Using this channel of communication offers several advantages. For example, the union might act as a lter for allegations and members may feel more condent that they will not suffer reprisals. In addition, it will sometimes be the case that wrongdoing cannot be stopped without innocent workers suffering adverse consequences perhaps a plant closure is needed in order to rectify physical defects or stop pollution. Ideally, the precise details of the shutdown should be the subject of negotiation with employee representatives. One interpretation of such discussions could be that the organisation is demonstrating its loyalty to the workforce and that the union is showing loyalty to both the organisation and its members. Third, is anonymous reporting disloyal? Anonymity might affect the credibility of the information received and may have a detrimental effect on the organisations ability to investigate. However, it could also be seen as a manifestation of loyalty to the disclosers family and a desire to protect dependants as well as ones self. As Elliston (1982a, b) observed, anonymity may reect the power imbalance between the individual and the organisation. More practically, anonymity may reect a lack of trust in the organisations ability to maintain condentiality57 or to protect the discloser from victimisation.58 Thus, while anon-

ymous reporting may not be welcomed, it should not be regarded as disloyal especially if the alternative is for the individual to remain silent about suspected wrongdoing.59 Indeed, it is worth noting that, while Part IVA ERA 1996 affords no protection to those who disclose information anonymously, Section 301(4) of the US Sarbanes-Oxley Act 2002 contemplates the anonymous submission of concerns about questionable accounting and auditing.60 Fourth, is external reporting disloyal if no attempt has been made to raise the concern internally beforehand?61 Perhaps the answer lies in the following potentially valid objections to internal disclosure: the whistleblower is unaware of how to raise the concern internally; has reason to believe that there will be a cover up and that no remedial action will be taken; or that retaliation will occur. Indeed, the need to bypass internal channels under certain circumstances is generally recognised in legislation.62

Whistleblowing and transactional trust and loyalty

We have already suggested that the concepts of loyalty and trust are related, and for these purposes, the following denition of trust will be adopted: one partys willingness to be vulnerable to another based on the condence that the latter party is benevolent, reliable, competent, honest and open (TschannenMoran & Hoy 2000). However, in relation to employees, the willingness to be vulnerable to another must be seen in its proper context. Most people cannot freely choose whether or not to work, because they require remuneration to support themselves and their families. Thus, they become vulnerable to the actions of an employer as a result of entering into a relationship built on unequal bargaining power. Similarly, the condence needed is not necessarily in the employers benevolence but in its ability to run the organisation in a way that offers decent terms and conditions of employment and a degree of job security. This may be characterised as a form of calculative trust, i.e. the acceptance of a certain level of vulnerability based on calculating the relative cost of maintaining or ending a relationship (Williamson 1993). However,

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many employers seek unconditional trust, a situation where the employee identies with the interests of the organisation. In The Republic, Plato (1974) recounts Glaucons view that we should trust others only if we are condent that they fear detection and punishment sufciently to deter them from harming us. On this reasoning, the ability of workers to identify and report wrongdoing can be seen as a deterrent to malpractice. It thereby facilitates trust in the organisation rather than undermining it. More recently, Fox (1985) has pointed out that where people have a common purpose, leaders may be trusted and disagreements handled in a problemsolving manner.63 Because they trust each other, the parties to the employment contract do not conceal information but communicate openly64 and take loyalty for granted. This high-trust pattern is not based on personal attitudes but is institutionalised, i.e. expressed in and through roles, rules and structured relations which we apply to others or have applied to ourselves. By way of contrast, where workers submit to superior power in being directed towards the pursuit of ends they do not fully share, we are likely to observe the characteristics of low-trust relations, for example, suspicion, defensiveness and distorted communications. Increasingly, employers have introduced what staff perceive as low-trust patterns of work65 but have sought a high-trust response in the form of willing compliance, loyalty and a ready condence in . . . leadership. To the extent that the common law rarely enquires into the bases or the dynamics of trust in the employment relationship, it endorses a unitary approach. To put it in Foxs terms, the contract of employment requires a high-trust response from workers in what is often regarded as a low-trust situation. Clearly, this has implications for whistleblowing. If only those in high-trust relationships are likely to report perceived wrongdoing voluntarily, those in low-trust relationships may have to be encouraged or coerced into doing so, for example by a legal obligation. Another perspective from which whistleblowing can be approached is that of the risk society. Social theorists like Beck (1992) and Giddens (1990) have suggested that in contemporary society, there is a

new urgency about safety and security risks. In this context, Giddens argues that issues of trust are central. He observes that society increasingly relies on experts to manage risk but that there is a declining trust in such experts and in our social institutions. Thus, in relation to whistleblowing, both legislation and procedures could be regarded as attempts to regain trust by deterring wrongdoing and controlling the risk of damaging consequences. In a sense, this is a form of risk management and is consistent with Becks view that individuals are increasingly required to be skilled at decision making in respect of risk. Whereas in the past measures to encourage whistleblowing might have been regarded as obsessive efforts to control risk, today, few would doubt that such measures could survive costbenet analysis. In giving prominence to expectations at the workplace, the implied duty of trust and condence (see fourth section) has added a psychological dimension to the contract of employment. The expression psychological contract has been dened as an individuals belief regarding the terms and conditions of a reciprocal exchange agreement . . . key issues here include the belief that a promise has been made and a consideration offered in exchange for it (Rousseau 1989: 125). Whereas workers may have little involvement in the formation of the legal contract of employment, the psychological contract focuses on the reality of the situation as perceived by the parties. In developing psychological contract theory, Rousseau distinguishes between relational contracts which rely on trust, loyalty and job security, and transactional contracts which focus more exclusively on the wage/work bargain.66 Morrison & Robinson (1997) distinguish between psychological contract breach and violation. Perceived breach is the cognition that ones organisation has failed to meet one or more obligations, whereas violation is an emotional and affective state that may follow from the belief that ones organisation has failed to adequately maintain the psychological contract (p. 230). According to Guest et al. (1996), such a violation may result in a variety of attitudinal and behavioural responses, which might include cynicism and diminished trust. Worker cynicism may lead to a belief that the organisation lacks integrity and that critical behaviour is justied.

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Breaches or violations of the psychological contract in relation to ethical behaviour may have implications for whistleblowing.67 However, it must be acknowledged that not only will employees have different perceptions of their psychological contracts but they will also respond differently to contract violation some will feel obliged to report wrongdoing, while others will not.68 As Pate et al. (2006: 46) put it, violation of the psychological contract invokes adjustment in employee attitudes towards the organisation, but not necessarily behavioural change. It is widely accepted that trust is necessary for effective communication and co-operation in organisations (Baier 1986).69 At the workplace, both formal and informal pressures are exerted through social networks in order to encourage staff to behave in a trustworthy manner (Coleman 1998). However, if trust in the organisations ability to handle concerns properly is lacking, workers may choose not to disclose wrongdoing or may report it in a way that could be perceived by the organisation as disloyal. Indeed, researchers have consistently found that the most commonly cited reason for not reporting concerns is a lack of condence that anything would be done about them (Miceli & Near 1992).70 Organisations can encourage trust by introducing suitable whistleblowing policies and procedures,71 but these may be of limited effect if top management does not reinforce ethical behaviour. In this context, an employees experience of what happens when concerns are raised may well be more important than the existence of proper procedures. In the same way as internal whistleblowing can reect a degree of loyalty to the organisation, it can also be seen as a display of trust in its management.72 Thus, studies have revealed that trust is positively associated with internal reporting and negatively associated with external reporting. For example, Near & Miceli (1985) found that workers who trust their supervisors were more likely to communicate their concerns upwards compared with colleagues who used external channels (see also McLain & Keenan 1999). More recently, the Whistling While They Work researchers found higher trust in management among employees who only ever reported wrongdoing internally and lower trust in manage-

ment among those reported externally at any stage, including after having reported internally in the rst instance (Brown 2008: xxvi).

Conclusion: making the legal duties of trust and loyalty compatible with whistleblowing
According to Near & Miceli (1987), whistleblowing can be viewed as a power struggle between social actors. Indeed, resource dependency theory rather obviously implies that if whistleblowers rely on their employer for income, that employer is relatively powerful.73 Thus, it is argued that, in its approach to obligations of loyalty and trust in contracts of employment, the law must recognise the reality of power relationships. In particular, it must acknowledge that workers are likely to have more than one object of loyalty (e.g. their family, workgroup, professional body and wider society as well as the organisation); may not perceive that they are engaged in a common endeavour with their employer; and may be subjected to low-trust patterns of work. Under these circumstances, to expect unquestioning loyalty and high trust in the organisation is both unrealistic and unfair. Using the terminology of psychological contract, historically, the law has assumed that contracts of employment are relational (i.e. reliant on trust and loyalty)74 when in reality the approach of many workers is more transactional (i.e. focused on the wage/work bargain). It is contended that the implied duty of delity in contracts of employment is perfectly adequate to protect employers in the twenty-rst century. Not only does it safeguard organisations against unfair competition but it imposes wide obligations on employees to co-operate at the workplace. Thus, it is argued that the imposition of an express or an implied legal obligation to whistleblow is inappropriate even if proper procedures for doing so exist.75 Even accepting Flanagans thesis that courts have been imposing duciary obligations on all employees on a statutory basis for the past two centuries (Flanagan 2008: 288), it does not follow that a duciary duty to whistleblow is necessarily desirable.76 Such a duty would automatically place the employers interest above that of staff who may

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feel that loyalty to their dependants demands that they do not run the risk of reprisals. Unfortunately, whatever protection is offered on paper by the employer and/or legislation, the reality is that social, economic and sometimes physical sanctions are imposed on whistleblowers (see Miceli et al. 2008). Indeed, it is important to note that whistleblowing legislation itself does not generally oblige individuals to report wrongdoing. However, resistance to a legal duty to report wrongdoing to the employer does not deny the possible existence of a moral duty under certain circumstances. Sometimes, loyalty to ones peers, profession and the organisation will require concerns to be raised internally. On other occasions, loyalty to the wider community might point to the external disclosure of wrongdoing. Although employers cannot be expected to facilitate potentially damaging external revelations,77 given the existence of statutory protection under specied circumstances, it is in the organisations interest to identify who it believes are appropriate external recipients of concerns. Thus, instead of relying on a contractual duty to report, which would require an employer to prove precisely when an employee had knowledge of wrongdoing,78 employers should endeavour to promote trust in the principle and practice of condential reporting as a mode of communication or voice.79 This can be fostered in many ways. Not only should a code of ethics or whistleblowing policy be produced after consultation or negotiation with employee representatives but senior management must be seen to act in accordance with it.80 Staff should receive a copy of both the ethics code or policy and a condential reporting procedure.81 This could boost trust by emphasising that whistleblowers will be protected against retaliation and that allegations that are both false and malicious will lead to disciplinary proceedings. The procedure might also stipulate that anonymous reporting of wrongdoing is undesirable but better than remaining silent. Workers will need to be instructed in how to apply the ethics code/policy and how to invoke the procedure, while recipients of concerns must be trained in how to handle them. If proper feedback is delivered and condentiality seen to be maintained, this will also generate trust in the future operation of the procedure.82 Although

regarded by some as morally contentious, the provision of rewards for reporting can be seen to endorse the view that those who report concerns are being loyal.83 This leaves unanswered the question of what can be done about organisations that do not see the provision of whistleblowing procedures as a form of enlightened self-interest. We have indicated above that imposing a contractual duty to whistleblow on staff without suggesting how this should be done might lead to a breach of the employers duty of trust and condence. It is more difcult to argue that this duty compels employers to have a whistleblowing procedure where there is no legal obligation on employees to report wrongdoing. Nevertheless, for the following reasons, it seems sensible to insist that employers should have whistleblowing procedures.84 First, some staff will have assumed duciary obligations (either as directors or otherwise) that require them to raise concerns. Second, an undened category of senior employees will have the same obligation stemming from the duty of delity (see above). Third, other staff may feel compelled to report because of specic statutory obligations or their broad duty of care towards others. Finally, the implied duty to afford employees a reasonable opportunity to redress a grievance (see above) will oblige employers to make proper arrangements. As it is evident that some grievances will constitute qualifying disclosures under Section 43B ERA 1996, workers who are not satised with how their grievance has been handled may be protected if they take it to an external body. In order to avoid such an eventuality, employers will need to identify clearly what matters should be processed as a grievance and how that relates to any whistleblowing procedure. In the same way that disciplinary and grievance procedures are not required by law but it is difcult to operate a business fairly without them, it is hard to see how trust and condence can be maintained in an organisation that does not provide a mechanism for reporting concerns. If legislation that obliges employers to have a whistleblowing procedure is not introduced,85 other indirect forms of pressure might need to be exerted. For example, in relation to the directors common law duty of care, Parker J. has stated that, Directors have, both collectively and

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individually, a continuing duty to acquire and maintain a sufcient knowledge and understanding of the companys business to enable them properly to discharge their functions as director.86 More recently, Section 172(1) of the Companies Act 2006 introduced a general duty to promote the success of the company for the benet of its members as a whole, and in doing so have regard (amongst other matters) to . . . (b) the interests of the companys employees, . . . (d) the impact of the companys operations on the community and the environment, (e) the desirability of the company maintaining a reputation for high standards of business conduct . . ..87 Thus, it might be argued that, in order to full their duties under both the common law and the Companies Act 2006, directors must ensure that a proper procedure is available for staff to raise concerns about wrongdoing.

Notes
1. For example, the UKs Public Interest Disclosure Act 1998 states that it is An Act to protect individuals who make certain disclosures of information in the public interest; to allow such individuals to bring action in respect of victimisation; and for connected purposes. The Preamble to South Africas Protected Disclosures Act 2000 refers to creating a culture which will facilitate the disclosure of information by employees relating to criminal and other irregular conduct in the workplace in a responsible manner . . . . 2. At least in non-unionised workplaces, it is relatively easy to introduce a contractual obligation to disclose and there is evidence that this is occurring more frequently (see Hassink et al. 2007). 3. Legislative duties to report are imposed in different contexts. Apart from terrorism and money laundering, Regulation 14 of the Management of Health and Safety at Work Regulations 1999 requires employees to inform employers about serious and immediate dangers to health and safety. 4. The Public Interest Disclosure Act 1998 inserted Part IVA into the Employment Rights Act 1996 (henceforward ERA 1996). Part IVA ERA 1996 only applies to workers as dened by Section 230 (3) ERA 1996.

5. According to Section 43B(1) ERA 1996, this is any disclosure of information that a worker reasonably believes tends to show one or more of the following: (i) a criminal offence; (ii) a failure to comply with any legal obligation; (iii) a miscarriage of justice; (iv) danger to the health and safety of any individual; (v) damage to the environment; and (vi) the deliberate concealment of information tending to show any of the matters listed above. 6. See Parkins v Sodexho Ltd [2002] IRLR 109. Indeed, Part IVA would appear to cover the situation where a supervisor simply reports wrongdoing by one of his or her subordinates so that disciplinary action can be taken. It almost goes without saying that few would regard this as a typical whistleblowing scenario! 7. The Whistling While They Work project found that: Public employees decisions about whether to blow the whistle appear to be inuenced much more strongly by their organisational context, the seriousness of the wrongdoing and their beliefs about whether reporting the wrongdoing will serve any good purpose (Brown 2008). See also Near & Miceli (2004), who record that wrongdoing involving legal violation was more likely than many others to be reported. 8. The Whistling While They Work study recorded that The likelihood of reporting increases when employees assess wrongdoing to be more serious and frequent, when they have direct evidence of the wrongdoing (as opposed to simply observing it) and when it affects them personally (Brown 2008: xxiv; see also Miceli et al. 2008). 9. See Sections 43CF ERA 1996. 10. See Sections 43G & H ERA 1996, respectively. A similar approach is adopted in South Africas Protected Disclosures Act 2000. By way of contrast, New Zealands Protected Disclosures Act 2000 only applies to serious wrongdoing. 11. For the purposes of the Whistling While They Work project, 38 different types of wrongdoing were placed into the following seven categories: misconduct for material gain; conict of interest; improper or unprofessional behaviour; defective administration; waste or mismanagement of resources; and perverting justice or accountability, personnel or workplace grievances (see Brown 2008). 12. It is worth noting that the Foreword to the ACAS Code of Practice on Disciplinary and Grievance Procedures 2009 states: It is good practice to

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13.

14.

15. 16.

17.

18.

19. 20. 21. 22.

23. 24.

25. 26. 27. 28.

consider dealing separately with issues involving bullying, harassment or whistleblowing. These hypernorms incorporate the values and beliefs belonging to multiple cultures as well as multiple ethical theories and can be identied by examining the standards supported by global organisations or international industry standards (Warren 2003: 628). Warren would classify behaviour that complies with both group norms and hypernorms as constructive conformity. By way of contrast, adherence to workgroup norms (e.g. refusing to report obvious wrongdoing) that deviate from hypernorms is described as destructive conformity. Contained in Sections 43C and 43EH ERA 1996. The author would argue that a bad motive should not taint what would otherwise be a lawful disclosure (see Lewis 2001). [A] public, non-violent, conscientious yet political act contrary to law usually done with the aim of bringing about a change in the law or policies of the government (Rawls 2005: 364). Rawls stated that civil disobedience should only be used for the special case of a nearly just society, one that is well ordered for the most part but in which some serious violations of justice nevertheless occur (see Rawls 2005: 363). See Laws v London Chronicle Ltd [1959] 1 WLR 698. See Cresswell v Board of Inland Revenue [1984] IRLR 190. See Ticehurst v British Telecom plc [1992] IRLR 219. See Neary v Dean of Westminster [1999] IRLR 289, where the duty of trust and condence (see below) was treated as creating a duciary relationship. The fact that directors have duties arising from their contracts of employment as well as duciary obligations derived from equity may have added to the confusion. [1895] 2 QB 315. Bristol and West Building Society v Mothew [1998] 1 Ch 1 at p. 18. Flanagan (2008: 275) points out that the words trust and condence have been used separately, interchangeably and conjunctively throughout the course of the jurisprudence. Nottingham University v Fishel [2000] IRLR 471. (1888) 39 Ch 339. Bell v Lever Brothers Ltd [1932] AC 161. [1984] Ch 112.

29. See also Tesco Ltd v Pook [2004] IRLR 618, where a senior manager had a duty to reveal the bribe he had taken. 30. See BCCI SA v Ali [1999] IRLR 226 and Item Software Ltd v Fassihi [2004] IRLR 928, where a director was obliged to disclose the secret prot he had made. 31. See Lion Laboratories Ltd v Evans [1985] QB 536. 32. For example, to paid leave for parents and time off to attend to the needs of dependants. 33. See Part IVA ERA 1996. To date, there is no evidence in the United Kingdom that legal protection either increases the incidence of whistleblowing or inhibits the occurrence of reprisals. On research in the United States, see Miceli et al. (1999). 34. See Secretary of State for Employment v ASLEF (No. 2) [1972] QB 455. 35. In Johnson v UNISYS Ltd [2001] IRLR 279, Lord Steyn described trust and condence as an overarching obligation implied by law as an incident of the contract of employment. On the relationship between trust and social solidarity, see Macneil (1986: 568). 36. See Woods v WM Car Services Ltd [1981] IRLR 347. 37. See British Aircraft Corporation v Austin [1978] IRLR 332. 38. See Goold Ltd v McConnell [1995] IRLR 516. 39. See Abbey National plc v Fairbrother [2007] IRLR 320, which involved bullying by colleagues. 40. See Dalgleish v Lothian and Borders Police Board [1991] IRLR 422, which concerned data protection. 41. [1997] IRLR 462 at 465. 42. It would also be consistent with Macneils notion of contractual solidarity, i.e. the belief in the ability to depend on another. See generally Macneil (1983). 43. It is readily acknowledged that views about organisational loyalty in general and whistleblowing in particular are subject to cultural differences. 44. Miceli and Near (1992) conclude that loyalty is not a personality characteristic, but it is more properly viewed as a function of the interactions between employer and employee. 45. This is consistent with the research in both Australia and the United States, which shows that people are less likely to raise concerns if they think that no change will result (see Brown 2008; Miceli et al. 2008).

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46. Loyalty is not expressly dened by Hirschman but Boroff & Lewin (1997: 51) suggest that At the low end of the loyalty spectrum would be the exit point, and at the high end would be the voice point. 47. According to Luchak (2003), the principles of voice are now heavily entrenched in the labour market policies of many advanced industrial countries. He draws a distinction between direct or individual voice and representative voice, which involves communication through a third party, for example, a trade union. 48. According to Brown (2008: xxv): The main reasons for not reporting, given by respondents who did not report, were a belief that no action would be taken or a fear of reprisal. 49. The research in both Australia and the United States suggests that most whistleblowers who report externally have previously attempted to make an internal disclosure (see Brown 2008; Miceli et al. 2008). 50. Thus, it might be anticipated that there would be more whistleblowing in the public sector as this may be viewed as consistent with public service rather than disloyalty to the employer. 51. In a situation of conict, professionals may be more loyal to their profession than to their employer (see Pater & van Gils 2003). 52. Duska acknowledges that workers have got obligations towards their employer but believes that loyalty is not one of them. 53. Corvino (2002) contends that loyalty to companies is appropriate but does not conict with a duty to blow the whistle: proper loyalty may require public criticism. 54. In the authors opinion, this approach has some similarity to Warrens notion of constructive deviance: see the second section. 55. The Whistling While They Work researchers found that: Ofcials who reported externally at any stage indicated higher levels of initiative and lower levels of loyalty than purely internal whistleblowers. It is possible, however, that slightly lower loyalty is simply a result of the conditions that lead an ofcial to report externally, having rst reported internally in most cases (Brown 2008: xxvi). 56. On the obligation of senior employees to report wrongdoing, see the fourth section. 57. It is acknowledged that in some situations, it may be impossible to maintain condentiality if concerns are to be properly investigated.

58. As Larmer (1992) puts it: Loyalty . . . cannot imply that one takes no steps to protect oneself from the immorality of those to whom one is loyal. 59. On the question of whether anonymity promotes whistleblowing, see Miceli et al. (2008: 458). 60. In Queensland, Section 27(1) of the Whistleblower Protection Act 1994 expressly provides for anonymous reporting. 61. According to Larmer (1992): Loyalty requires that, whenever possible, in trying to resolve a problem we deal directly with the person to whom we are loyal. 62. See, for example, Section 43FH ERA 1996. 63. According to McEvily et al. (2003: 94): by increasing openness in knowledge transfer and by speeding the circulation of knowledge, trust facilitates co-operation and joint problem solving. 64. McEvily et al. (2003: 97) observe that a senders trust in a receiver inuences the senders degree of openness in sharing knowledge with the receiver . . . . From the standpoint of the receiver, trust affects the perceived veracity of knowledge. 65. The use of surveillance is frequently cited as a technique that lowers the level of trust. In the same way that trust begets trust . . . formal control mechanisms can foster attitudes of ill-will, skepticism and distrust by signaling suspicion (McEvily et al. 2003: 99). 66. Another variation of this theme is the emergence of compliance contracts, which imply a mutual understanding that employees will do whatever is necessary to retain their jobs (see Smithson & Lewis 2006). 67. According to Bruce (2006: 157): We create a psychological contract based on assumptions that organizational actors will act morally and at the very least, do no harm. 68. Robinson & Rousseau (1994) identify exit, voice, silence and destruction/neglect as possible responses to violations of psychological contracts. 69. Equally, it might be argued that effective communication and co-operation are needed to promote trust in organisations. 70. More recently, the Whistling While They Work project found that: The most important reasons nominated by employees for reporting wrongdoing, when motivated by the circumstances to do so, were condence that action would be taken on their report, followed by knowledge and condence in the process they were meant to follow (Brown 2008: xxiv).

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71. The Whistling While They Work project found that there is a modest positive relationship between the comprehensiveness of an agencys procedures and the proportion of staff members who report the serious wrongdoing they observe (Brown 2008: 256). 72. It may also indicate a degree of trust in legislation to deter reprisals or at least provide compensation for any detriments incurred. 73. On resource dependency theory, see Pfeffer (1981). 74. See generally Boyle (2007). The Whistling While They Work project found that managers had higher levels of trust in management: see Brown (2008: 169). 75. Tsahuridu & Vandekerckhove (2008: 115) argue that implementing organisational mechanisms ensuring the right to blow the whistle implicitly impose the duty to blow the whistle. 76. However, the author acknowledges that, for a variety of reasons, the judiciary may well be tempted to move in this direction. 77. In a global information society, people are increasingly aware how easy it is to post damaging allegations anonymously or on social networking websites. 78. In addition, the principle of consistency of treatment in unfair dismissal law would require consideration to be given to other employees in a similar position. 79. This might encourage workers to have high expectations about the ability of the organisation to deal with concerns and protect whistleblowers. The consequences of not fullling such expectations may be reduced trust and loyalty. 80. In 2008, the British Standards Institute produced a Code of Practice entitled Whistleblowing arrangements, which sets out good practice for the introduction, revision, operation and review of effective whistleblowing arrangements. 81. Section 1 ERA 1996 requires information about any disciplinary or grievance procedures to be supplied at the commencement of a persons employment. 82. The Whistling While They Work project found that more comprehensive internal disclosure procedures were positively associated with . . . higher staff trust in managements likely response if they blew the whistle (Brown 2008: xx, xvi). 83. Whatever ethical stance is adopted, there is evidence that nancial incentives do have an impact. In the United States, the qui tam lawsuit

84.

85.

86. 87.

means the whistleblower brings a case on behalf of the Federal government and receives 1530% of any payout, under the False Claims Act 1983 (as amended). Between 1986 and 2007, d5.6 million has been awarded in judgements. It is acknowledged that such procedures could be seen as another management tool to control employees and protect organisations from them (Tsahuridu & Vandekerckhove 2008: 107). In New Zealand, Section 11 of the Protected Disclosures Act 2000 requires public sector bodies to have such a procedure. Re Barings plc (No. 5) [2000] 1 BCLC 523 at p. 535. Section 174(2) (a) of the same Act requires a director to exercise the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company.

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