By GAP President Louis Clark.
In recent years, we have learned about a number of corporate horror stories. A major toy company had sold and widely distributed toys manufactured in China with lead-tainted paint. A pharmaceutical company had manufactured a vaccine for babies with a compromised quality assurance program. Government contractors employed in Iraq to provide infrastructure were instead padding their profits and cutting corners while the buildings they constructed crumbled.
In each instance, scores of employees knew about the problems but for whatever reason did nothing to end the faulty practices. It is no wonder that so many of those in the know about wrongdoing chose job security over courage. No one should rely on public anti-corruption assurances from corporate public relations operatives until effective systems are in place so that everyday workers who spot potential disasters in the making will report them – putting public health and other significant concerns above corporate profits. Sadly, this right to blow the whistle, free of retaliation and harassment, has steadily eroded over the last five years.
Following a wave of massive corporate fraud, exemplified by the Enron and WorldCom scandals, Congress passed the 2002 Sarbanes-Oxley (SOX) Act. Our legislators were reacting to the revelations of a tiny handful of brave whistleblowers who exposed the massive corruption – a few out of hundreds and hundreds who were aware of the wrongdoing. Others did not come forward with incriminating information, either out of fear or the knowledge that whistleblowing is futile in a culture where fear of reprisal is so pervasive. To address this need, within SOX Congress included provisions that would hopefully ensure that whistleblowers within publicly traded companies would no longer remain defenseless.
The law clearly was designed to provide protections extending across industry boundaries to employees who reported company malfeasance. Corporate whistleblowers would no longer have to rely on a patchwork of inconsistent and largely ineffective laws for their protection. These new protections would also protect investors through providing a safer environment for workers to use the new channels provided by law to help corporate board members learn about serious problems within the company. Workers who took their concerns to government regulators also would qualify for legal protections.
These SOX provisions, however, have failed miserably to live up to their expectations. They have been gutted by the interpretations handed down by Department of Labor bureaucrats, administrative judges, and various federal judges. Now, as a result, private employees who expose wrongdoing are likely to suffer punishment and get the cold shoulder from the federal government.
While the act was intended to shield employees against threats, decision-makers and judges have determined varied definitions for retaliatory actions. One judge found that any employment action that deters employees from making disclosures qualifies. Others have taken extremely narrow interpretations which have dramatically eroded the power and intent of the law, allowing employers to punish workers at will for reporting misconduct.
Worse yet, the types of companies covered by the law have been diminished. Many judges have decided that SOX doesn’t extend to wholly owned subsidiaries. Corporate interests have persuaded decision-makers to take this narrow perspective, exploiting a gaping loophole to reduce the number of covered employees.
The bottom line is now measurable. Earlier this month, a University of Nebraska College of Law study concluded that only 3.6 percent of cases brought by whistleblowers under Sarbanes-Oxley are won by employees. That’s less than 1 in 25.
Employees who report illegal activity are crucial to society’s protection when greed trumps public health and safety and encourages corrupt business practices. Strong whistleblower protections are the backbone of a transparent corporate environment that deters corruption. Whistleblowing should be risk-free, accessible to all employees and standard practice across the country.