To whistle or not to whistle? Determinants and consequences

DOIhttps://doi.org/10.1108/JFC-10-2017-0090
Pages260-276
Date07 January 2019
Published date07 January 2019
AuthorAnuar Nawawi,Ahmad Saiful Azlin Puteh Salin
Subject MatterAccounting & Finance,Financial risk/company failure,Financial crime
To whistle or not to whistle?
Determinants and consequences
Anuar Nawawi
Faculty of Accountancy, Universiti Teknologi MARA, Shah Alam, Malaysia, and
Ahmad Saiful Azlin Puteh Salin
Faculty of Accountancy, Universiti Teknologi MARA,Perak Branch Tapah Campus,
Tapah, Malaysia
Abstract
Purpose Many corporate scandals that occurred recently have indicated the importance of a whistle-
blowing mechanismin preventing fraud and malpractices from damaging the organizations.By selecting one
organization that has experienced a corporate scandal, this study aims to examine factors that inuence
employees intentionto blow the whistle to prevent malpractices in the company.In addition, this study also
examines the perceptions of employees regarding the business culture in their organization and how this
cultureimpacts their intention to whistle-blow.
Design/methodology/approach This study engages in a mixed method of data collection, namely,
survey questionnaireand interviews to gather the data.
Findings It is found that retaliation is the mostimportant factor that inuences the employees intention
to whistle-blow, followed by the burden to prove the malpractices, cost implications as a result of the
wrongdoing and the action taken by the authority as a result of the fraud reporting. In terms of business
culture, a large number of employeesare reluctant to become a whistle-blower, although a securedand safe
whistle-blowingmechanism is in place, indicating that Asiancustoms of collectivism and assertiveness play a
major part in shapingthe whistle-blowing mechanism in Malaysian organizations.
Research limitations/implications The results provide further conrmation of the determinants
that inuenceemployees to report wrongdoings in the organizations. This study however may subject to self-
reported data biasness because of sensitivityof the research that related to fraud and immoral behaviours
that occur in the company. Owing to this sensitivity, the study only focuses on employeesinternalwhistle-
blowingintentions rather than their actual intentions.
Practical implications This study helps the management to understand the working culture in the
company so that they can identifythe weak area of governance which needs improvement such as whistle-
blower protection.
Originality/value This study is original, as it focuses on the employees in a big organization such as
government link companies that have experienced corporate scandals albeit having whistle-blowing
mechanism in place. In addition,the nding of this study contributes to the theory and body of the literature
on the whistle-blowingdeterminants, currently scarce in the context of a developingcountry like Malaysia.
Keywords Malaysia, Fraud, Whistle blowing, Integrity, Prosocial behaviour,
Government link companies
Paper type Research paper
Introduction
In general, whistle-blowing is disclosure by the members of organization on any immoral
and malpractices to the relevant persons or organizations that may be able to take the
suitable and appropriate action (Near and Miceli, 1985). This denition acknowledges that
whistle-blowing is an action that leads to the exposure of unethical behaviours. Many
companies that went through bankruptcy are exposed to unethical behaviour like abuse of
JFC
26,1
260
Journalof Financial Crime
Vol.26 No. 1, 2019
pp. 260-276
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-10-2017-0090
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm
power, poor governance, lack of transparency and manipulation of the accounting gures
for the unfair benets of oneself or the company without consideration of the benet of the
stakeholders (Nor et al.,2017;Salin et al., 2017;Ahmad et al., 2016;Khadijah et al.,2015;
Hashim et al.,2014;Jaafar et al.,2014;Manan et al.,2013;Hamid et al., 2011). Whistle-
blowing usually involves employees who are trusted enough to not report any illegal,
immoral or illegitimate practices nestled withinthe organization (Ponnu, Naidu and Zamri,
2008). Those who take steps in acting as whistle-blowers often receive threats especially
when an accusation is leviedagainst those with inuence.
To prevent this threat, a whistle-blower needs protection. Thus, many countries
introduced regulatory requirements to encourage whistle-blowing action. In Malaysia, the
Whistleblower Protection Act 2010 (Act 711) was enacted with the aim to protect people
from any detrimental action aftermaking disclosures of improper conduct in the public and
private sector withthe intention to combat corruption and other wrongdoings.
Unfortunately, although many efforts have been taken by the Malaysian Government
and related agencies to encourage whistle-blowing actions, the willingness of the individual
or members of the organizations to become a whistle-blower is still uncertain. Ngui (2005)
for example suggests that whistle-blowing action is not popular among Malaysian
organizations. This is supported by the survey conducted by the prominent international
audit rm, PriceWaterhouseCoopers (PwC), which reported that only 10 per cent of the
reported fraud was discovered via whistle-blowing (PricewaterhouseCoopers, 2007). In
addition, Joseph et al. (2016) also found that anti-corruption measures are still very low
among the Malaysian companies.
One of the reasons is the weaknesses of the Whistleblower Protection Act 2010, which is
not up to the standard of the other international practices like in the UK and USA. For
example, Whistleblower Protection Act 2010 excludes internal whistle-blowing from its
scope. Meaning, only individuals that reported malpractices to a regulatory body will be
protected but not for those who reported to the authorities inside their organization (Meng
and Fook, 2011). This is not benecial because employees who decide to blow the whistle
internally have a higher level of trust in the management of their organization rather than
employees who decide to report to external authority (Lewis, 2011). In contrast, the
nonexistence of sound internal reportingmechanisms will risk that employees do not report
any fraud and malpractices they discover in the organization, and hence place the
organization in danger(Near and Miceli, 1985).
The other factor that seldom gets attention from the literature is culture. Culture and
environment in the organization play signicantfactors whether the whistle-blower will be
labelled as a wrongdoer or good-doer (Camerer, 1996). Malaysian public-listed companies
are unique because of concentrated shareholding, and hence controlling powers are
controlled by only a few shareholders (Husnin et al.,2016;Thillainathan, 1999) that come
from family and state with a high standing in the society and politically connected person
(Asmuni et al., 2015;Husnin et al.,2013). Thus, a large power distance culture is established
(Hofstede, 2001) in which the less powerful people (like employees) have very high respect
for more powerful people (likeboard of directors).
Apart from power distance, collectivism and assertiveness also inuence the whistle-
blowing action in Malaysia. Malaysian society is known has a very high collectivism in
which that individual has pride and show loyalty to their in-groups more often than not
represents their family members and close group (Rachagan and Kuppusamy, 2013). Thus,
a sense of belonging to an in-groupis very important.As a result, any conicts are swept
under the carpet (Triandiset al., 1988) and not exposed.
To whistle or
not to whistle?
261

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