How Should Employees Deal with Unethical Behavior?

Far too often the desire for stock options, bonuses, and promotions drives managers
to take unethical actions such as fudging the books to make profits in the
manager’s division look good, holding back information about bad products that
would depress sales, and failing to take costly but needed measures to protect the
environment. Generally, these acts don’t rise to the level of an Enron or a World-
Com, but they are still bad. If questionable things are going on, who should take
action and what should that action be? Obviously, in situations such as Enron and
WorldCom, where fraud was being perpetrated at or close to the top, senior
managers knew about the illegal activities. In other cases, the problem is caused by
a mid-level manager trying to boost his or her unit’s profits and thus his or her
bonus. In all cases, though, at least some lower-level employees are aware of
what’s happening; they may even be ordered to take fraudulent actions. Should
the lower-level employees obey their boss’s orders; refuse to obey those orders; or
report the situation to a higher authority, such as the company’s board of directors,
the company’s auditors, or a federal prosecutor?
In the WorldCom and Enron cases, it was clear to a number of employees that
unethical and illegal acts were being committed; but in cases such as Merck’s Vioxx
product, the situation was less clear. Because early evidence that Vioxx led to heart
attacks was weak and evidence of its pain reduction was strong, it was probably not
appropriate to sound an alarm early on. However, as evidence accumulated, at some
point the public needed to be given a strong warning or the product should have
been taken off the market. But judgment comes into play when deciding on what
action to take and when to take it. If a lower-level employee thinks that a product
should be pulled but the boss disagrees, what should the employee do? If an
employee decides to report the problem, trouble may ensue regardless of the merits
of the case. If the alarm is false, the company will have been harmed and nothing will
have been gained. In that case, the employee will probably be fired. Even if the
employee is right, his or her career may still be ruined because many companies (or
at least bosses) don’t like “disloyal, troublemaking” employees.