by Ethics Newsline contributor Kim Strom-Gottfried, PhD

Sally is the business manager at a nonprofit agency. She detected financial irregularities and reported them to her immediate supervisor, the vice president for Finance and Operations, Jack. With the help of the agency’s external accountants, the team determined that Belinda, the company’s president, had been misusing agency funds, in part to conceal an extramarital affair with another staff member. Preliminary estimates placed the embezzlement at $50,000. The board of directors’ executive committee met with Belinda and gave her the opportunity to resign “for personal reasons” instead of being terminated. She accepted the offer and remains in the community, interviewing for other leadership positions. Belinda holds a state license in her profession. She also serves as the president-elect of the state consortium of nonprofit organizations.

Sally is dismayed that the board gave Belinda the option to select a gracious exit. She does not know the terms of the departure, but wonders if the theft should be reported to the police, the accrediting agency, or the licensure board? In raising these concerns with Jack, Sally was told that the board felt that negative publicity would compound the damage to the agency and that it was “best to do things quietly. If other organizations want to hire Belinda,” they said, “it will be up to them to do their own due diligence in screening her for a job.”

The characters and the organization are fictitious, but the dilemma is all too real. A company experiences a data breach. A student is caught drinking beer against team rules. A search committee member asks a job candidate questions that violate nondiscrimination laws. All of us have encountered scenarios in which we had to address infractions in policies, rules, or laws.

Even in cases of egregious behavior, it can take courage to call attention to the problem and to speak truth to power. But is speaking up sufficient? Is it enough to educate, castigate, or terminate the individual involved? Is it enough to report it up the chain of command, even if the hierarchy does nothing?

My last year on the pedophilia scandal and cover-up at Penn State keep coming back to these questions. Assistant coach Mike McQueary observed a sexual assault in the Penn State locker room and reported it to his superiors; although the allegations made their way to the administration, no change was forthcoming and McQueary has been excoriated for his . On at least two occasions (in 1998 and 2001) Jerry Sandusky was confronted about inappropriate contact with young boys. Promises were extracted that he would cease his behavior, his locker room keys were taken away, and he was prohibited from bringing youth to campus. Still, more than a decade would pass before he was brought to justice.

Sandusky’s accusers, like Sally and Jack in the vignette, likely were deterred by considerations of justice versus mercy, truth versus loyalty, individual versus other, and short-term versus long-term implications. Let’s look at the vignette through the lens of these tensions.

Belinda’s behaviors were clearly inappropriate and illegal. Action had to be taken to right the financial wrongs and discipline her misdeeds. But how much “justice” is required? Sally, Jack, and the board are clearly at odds over the sufficiency of the punishment rendered. Those who want to keep the scandal “in house” may reason that Belinda was an excellent leader in other respects and conclude that the fraud was an atypical lapse in judgment for which she has paid a price. Sally may contend that Belinda violated standards (legal and professional) that are bigger than just the organization.

Personnel matters, including separation agreements, are typically confidential. Sally is in a bind between her desire to make the facts of Belinda’s case more widely known and her obligations of loyalty to her employer and the law. Does it make a difference if her motives are honorable (to protect other organizations from malfeasance) or malicious (to shame Belinda for her behavior and the trouble she caused the business office)? Does it make a difference if the Board fails to recoup the misspent funds?

There are many stakeholders in the case. Allowing Belinda to resign is sensitive to her as an individual, but does the secrecy of the process jeopardize the organization by failing to report a crime and thus allowing the behavior to continue elsewhere? Sally may decide to speak up on her own, but it will be at her own peril if she is countermanding the board and her supervisor in doing so.

Scandals often give rise to short-term thinking. How can an incident be handled swiftly with minimal cost to the organization? In this case, as in others, silence in the short term is intended to spare the organization bad PR, circumvent scrutiny about its use of funds or governance practices, and avoid protracted proceedings to terminate a problem employee. Negotiating to “make the problem go away” can be driven also by the fear of rebound litigation. All of these consequences have long-term financial and reputational costs for the organization.

Unfortunately, negative long-term costs can accrue also from short-term compromises and cover-ups. The recent public outcry about the aptly demonstrates how personnel actions may seem reasonable until viewed with fresh perspectives. In Belinda’s case, news accounts that the organization just “passed along” a problematic employee will have reputational costs. Funders who feel doubly defrauded by the stolen money and the concealment may create grave financial consequences.

When is enough, enough? And who gets to decide? Ethical considerations abound on both sides. A sound decision at Sally’s agency requires thorough deliberation of the options and alignment with the “principle of publicity” to appreciate the view that stakeholders may take on the decision. A knee-jerk effort at self-preservation is neither ethical nor sufficient, because even if Belinda is no longer the agency’s employee, she could still be their problem.

©2013 Institute for Global Ethics

, is the Smith P. Theimann, Jr., Distinguished Professor of Ethics and Professional Practice at the University of North Carolina, Chapel Hill, School of Social Work.