Tuesday, October 5, 2010
The Costs of Whistle-blowing
The man in the video is Ilya Eric Kolchinsky, former executive of Moody's Investors Service. At Moody’s, Mr. Kolchinsky oversaw the ratings assigned to subprime mortgage collateralized debt obligations, many of which turned out to be troublesome despite their triple-A ratings.
Mr. Kolchinsky has testified before Congressional panels twice in the last year about his concerns over Moody’s ratings. Since then, Kolchinsky says, Moody’s has tried to damage his reputation through its statements in the media, which have caused him to be “blacklisted by the private sector financial industry.” Last month, he filed a suit against Moody's.
You can find here a link to the NYT coverage and details about the lawsuit.
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Andrew Yacyshyn- I am one who believes that whistle-blowing is wrong because it is disloyal act to one's company. Though a whistle-blower may believe what they are is doing the right thing or a utilitarian thing by exploiting their company for illegal or immoral conduct, that person must first demonstrate loyalty to their company that they signed a contract to work for. As an employee of a company, their first priority should be to the company where they accepted a job and receive compensation for it. However, in the case of Eric Kolchinsky, I find his actions respectable. In the link to the New York Times article that explains the lawsuit in more depth, it states that Kolchinsky's conflict with Moody's first began in 2007. It was then that he first filed internal complaints with the company, not public complaints. In 2008, he expressed to the company's credit policy team that their rating system was "irresponsible." It was not until 2009 that he went public with his concerns. Therefore, though I believe whistle-blowing is wrong, I feel that Kolchinsky went about his concerns with the company in a respectful way. For two years, he raised his issues within the company, not publicly, which shows he was only trying to help. I guess he was getting annoyed that the company wasn't respecting his concerns or taking them into consideration, so he felt he needed to go public with his statements and concerns. I can respect him for that.
ReplyDeleteI agree with whistle-blowing to a certain extent. The person who is blowing the whistle must feel what is happening is truly wrong and can harm many people. In Eric Kolchinsky's case, I feel that he is doing the right thing by reporting this. He originally filed the claim with his company and then years later filed it publicly. It was very fair that initially he did not go public because he did not want to expose the company to external sources. According to the information shared with us, Kolchinsky is justified in blowing the whistle. He has met the criteria set forth by Boatright and he would be considered a loyal agent. It is obvious he is not trying to ruin anyone else's reputation because during the interview he would not speak poorly about anyone by not commenting to the question if anyone should be let go. He simply wants Moody's to "clean up their act" and get back on their feet so they will not create any harm for the country. I think Eric Kolchinsky is right in this situation in the course of action that he took and the company is wrong by talking about him in a negative way. He should not be blacklisted by the private sector for doing the right thing.
ReplyDelete-Kevin Linnane
I believe that Erich Kolchinsky is handling his whistle-blowing in a moral manner. First of all, Kolchinsky went through the appropriate whistle-blowing procedure by first raising the issue to the executives within the company before going pubic with the information. In his interview with Bloomberg News, Kolchinsky was very vague about specific issues within Moody's Investors Service that caused him to blow the whistle. Instead, he addressed the issue from a more broad, rule-based perspective in that he believes that more policies and standards need to enforced in the industry in order to streamline and give credibility to ratings. Furthermore, when Kolchinsky was asked about individuals at Moody's who he thinks should be fired, Kolchinsky completely avoided calling out names or giving details. Kolchinsky even went so far as to say that Moody's is a "good company with many good people in it".
ReplyDeleteI think that this is the correct, moral approach to whistle-blowing because it stems from a genuine belief/concern regarding the principles and rules within a business. In other words, it does not appear that Kolchinsky used his whistle-blowing to mask some sort of discontent with individuals at Moody's or personal issues within the industry.
-Claire Smith
I believe Eric Kolchinsky's whistle blowing act is not only benefiting society, but also the business world. This benefit outweighs his loyalty to Moody's. One of the causes of the whole Financial Crisis of 2008 is these mortgage-back securities having higher ratings than they deserved. That act alone almost lead to a collapse of our whole economy.
ReplyDeleteAnd as Claire said he is taking the proper steps and used whistle blowing as the last resort. He believes that people need and have the right to know that these securities are not triple A quality.
Jenna Salandra
Whistle Blowing is an act of extreme courage and of moral responsibility towards the society that we live in. Even though, as Andrew mentioned in the comment before mine, whistle blowers are not usually loyal employees of a company, i believe that they are doing the right thing for society; by doing so usually they end up paying for it too, Mr Kolchinsky in fact was cut loose, let go, but once again he did the right moral thing in a very moral just and appropriate manner. Why did he do the right thing? Because he personally believed that what they were doing at Moody's was not right, and the situation had to be addressed. He followed the right steps, he left a private memo to Moody's executives before going public, and he did not quit, he simply blew the whistle, and then he was fired for it, but as we read, the more loyal employees the end up whistle blowing do not leave the company unless fired, while the less loyal whistleblowers leave on their own, they quit. If Mr. Kolchinsky felt that what was going on was not right he had every right to do what he did, since now whistle blowing is also protected by the law. So once again, mr. Kolchinsky blew the whistle and he did following the right guidelines.
ReplyDeleteThis is unbelievable. Any company that markets itself as a source of information on which people's money rely, has a fiduciary obligation to provide accurate information to the best of their ability. There should be only one methodology to analyze the health of an institution so that there is no confusion for investors. People are beginning to forget that companies only make money because they provide goods or services. In Moody's case, they are in the business of creating a wealth of knowledge from which people can make huge decisions that affect the status of their retirements, and thus, their lives. If Moody's is able to pick and choose which companies will "rate well" it is in effect, STEALING money in the same way a car company would be in accepting money for a vehicle that does not work. What makes the situation worse is that you cant tell if the info is good or bad. If the information was always bad, people would never use them and could avoid basing decisions off of faulty analysis; but because it is sometimes reliable, people may put stake in something that has no potential. The worst part is that they black listed Kolchinsky. Moody's has now ruined his chances of ever being hired in the area of finance again. There needs to be legal regulation of this industry much in the same way that investors needed the Generally Accepted Accounting Principles and some heads need to roll at this company.
ReplyDeleteThis is unbelievable. Any company that markets itself as a source of information on which people's money rely, has a fiduciary obligation to provide accurate information to the best of their ability. There should be only one methodology to analyze the health of an institution so that there is no confusion for investors. People are beginning to forget that companies only make money because they provide goods or services. In Moody's case, they are in the business of creating a wealth of knowledge from which people can make huge decisions that affect the status of their retirements, and thus, their lives. If Moody's is able to pick and choose which companies will "rate well" it is in effect, STEALING money in the same way a car company would be in accepting money for a vehicle that does not work. What makes the situation worse is that you cant tell if the info is good or bad. If the information was always bad, people would never use them and could avoid basing decisions off of faulty analysis; but because it is sometimes reliable, people may put stake in something that has no potential. The worst part is that they black listed Kolchinsky. Moody's has now ruined his chances of ever being hired in the area of finance again. There needs to be legal regulation of this industry much in the same way that investors needed the Generally Accepted Accounting Principles and some heads need to roll at this company.
ReplyDelete