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A tool to good corporate governance
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Mechanism for Whistle Blowing
Safeguards & Reach
“Corporate governance is…
…the application of best management practices, compliance of law in letter and spirit and adherence to ethical standards for effective management and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders”
Institute of Company Secretaries of India
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Corporate Governance - The basic Framework
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Output – Input = Wealth Created ?
Sustainability
Happiness andProsperity of all
Stakeholders
Reinvestment
Distribu- tion
Research and Development HR Development Infrastructure Risk Management
SUPPLIERS Adequate Returns HUMAN ASSETS Adequate Remuneration CUSTOMERS Affordable Prices PUBLIC Payment of Taxes and Partnership in National Development Projects
Wealth Creation Wealth Management Wealth Sharing
EnhancedCapabilities
Best Management Practices are Vital Here Law and Ethics are Vital Here
Corporate Governance Value Chain
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Investors
Lenders
Customers
Suppliers
Employees
Government
Regulator
“Corporate Governance is not related to investors only, though they are most important Beneficiary.”
The Stakeholders
The Stakeholders’ Value Chain
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SUPPLIERS CUSTOMERSHUMAN RESOURCE
Supply Funds, Materials and Services
Value Addition and Management of Resources
Give Opportunity to Co. to Satisfy their Needs
Adequate Returns for Funds, Material and Services Supplied
Adequate Salary and Security for leading a Happy Life
Best Quality Products and Customer Care at Minimum Prices
ROLE OF STAKEHOLDERS
EXPECTATIONS OF STAKEHOLDERS
Potential Suppliers, Human Resources and Customers
Biological, Economic and Cultural EnvironmentPUBLIC
PUBLIC EXPECTS PARTNERHIP FOR SUSTAINABLE DEVELOPMENT
An indispensible ingredient of ensuring Good Corporate Governance in Spirits
Whistle BlowingThe Internal Regulator
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Whistle Blowing … the key concerns
• Reporting and investigation of allegations of suspected improper activities/unethical practices by a Whistle Blower.
• A whistle-blower is a member or former member of an organization and not an outsider.
• The information revealed is non-public and not already known.
• The information concerns significant misconduct by the organization or some of its members.
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Whistle Blowing … the key concerns
• The information is revealed outside the normal channels of corporate communication with the organization, to a designated Independent person .
• The information is revealed voluntarily and not by a legal mandate.
• The information is revealed as a moral act or protest in order to correct some perceived wrong.
• Maintaining confidentiality in identity of Whistle Blower and his security are the key areas of concern and encouragement.
Area of Whistle Blowing
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• Internally (to other people within the accused organization)
Internal Whistle Blowing
• Externally (to regulators, law enforcement agencies, to the media or to groups concerned with the issues).
External Whistle Blowing
Whistleblowers may make their allegations
Area of Whistle Blowing
The Board & Senior
Management The Executor Staff
The Subjects of Concern
Focal Areas for a person before whistle Blowing?
1. Is the situation of sufficient moral importance to justify whistle-blowing?
2. Do you have all the facts and do you properly understand their significance?
3. Have all internal channels and steps short of whistle-blowing been exhausted?
4. What is the best way to blow the whistle?
5. What is my responsibility in view of my role within the organization?
6. What are the chances for success?
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Legal Provisions governing Whistle Blower in India
The law that a government enacts to protect such persons who
help expose corruption is called a whistleblower protection
law.
At present India Statues does not make the Establishment of
Whistle Blower Mechanism Mandatory nor is there any law
for protection of whistleblowers in India.
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Initiatives towards Whistle Blowing
IN INDIA INTERNATIONALLY
Reference of Whistle Blower in Indian Statues
Committee Reports
Listing Agreement
Voluntary Guidelines to Corporate Governance
Committees recommending Whistle Blowing as an element of Corporate Governance
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Committee Year
Confederation of Indian Industry code on corporate governance
1998
Kumar Mangalam Birla Committee 1999
Naresh Chandra Committee 2002
N. R Narayana Murthy 2003
What does the Listing Agreement provides for Whistle Blowing?
• Provides for establishment of mechanism of whistle blowing
• Adequate safeguards to be established
• Proper communication of mechanism
• Power of audit committee to ensure proper functioning
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RECOMMENDATIONS ON WHISTLE BLOWER BY THE CORPORATE GOVERNANCE
VOLUNTARY GUIDELINES2009
• Institution of a mechanism for employees
• Establishment of adequate safeguards against victimization of employees
• Direct access to the Chairperson of the Audit Committee
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Do other countries have similar laws to protect whistle blowers?
Several Countries have initiated towards or are initiating towards
WHISTLE BLOWER PROTECTION LAW. The Level of Whistle Blower
Protection however, differ from Country to Country.
Some of the Countries which have formulated such law are:-
• US
• UK
• Norway
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Instrument of effecting Whistle Blowing
An effective Whistle Blower Policy
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The Aims of the Policy
• To raise confidence of Stakeholder.
• To pluck the in ethical/improper practices misconduct,
• To lay proper mechanism of systems
• To establish confidentiality/security maintenance system
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Components of an effective whistle-blowing policy
A clearly laid Whistle Blower Policy.
Effectively communicated statement of responsibility
A clearly-defined procedure for reporting.
Trained personnel to receive and investigate reports.
A commitment to take appropriate action.
An effective Safeguard of the Whistle Blower
Specifying steps toward Abused protection by false whistle blowing
Procedural Aspects of Whistle Blowing
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Providing confidence to person to blow the whistle
Mechanism to aid anonymous reporting - email, telephone numbers.
Independent Ombudsman or Chairman of Audit Committee for handling such information
Whistle Blower need not inform the supervisors
Ensuring confidentiality and security of the Whistle Blower
Specifying specific flow of work to Audit teams –internal and external
Review and affirmation of process by Board/Audit Committee
How to encourage Whistle Blowing
• Management addressing to organization to provide confidence
• Ensuring confidentiality of Whistle Blower by Providing
anonymous Telephone facility for communication or e-mail ID.
• Providing Security of the whistle blower.
• Management positive participation.
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Risks involved in the process
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May contribute to an environment of
mistrust and uncertainty
Administrative time and cost may increase
May bind employers to treat small misconduct issues more extensively
than is warranted
BENEFITS
May avoid public disclosure by allowing the
misconduct to be solved internally
Can help insure that reports are
investigated, action taken, and
retaliation prevented
Can identify problems early
before they escalate
Consistent with an ethical
corporate climate
Some of the Biggest Corporate Collapse
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International
The fall of Arthur Anderson –
Chicago
The Enron Corp – Houston
Bank of Credit and Commerce
International
National
The Satyam Defeat
The Subhiksha fall
The fate of millions to stakeholders could have been protected if the Whistle Blower was effective…
The Satyendra Dubey Fate …(2003)
The National Highways Authority of
India (NHAI) engineer Satyendra Dubey
was killed after he wrote a letter to the
office of then PM A B Vajpayee
detailing corruption in the construction
of highways.
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History Repeated in the Manjunath Shanmugham Incident (2005)
Manjunath Shanmugham, an IIM
graduate and a sales manager of
the IOC, was murdered on Nov 19,
2005 for exposing the racket of
adulteration of petrol and the mafia
behind it.
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Other Setbacks to Whistle Blowing
The Jayaraman, Incident…(2008)
The mark sheet forgery racket in Pondicherry University was found murdered on May 20, 2008.
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The Bombay Stock Exchange Scandal… (2001)
Whistle Blowing - The missing links
• Ineffective mechanism • Failure to Impart Proper confidence• Lack of Independent ombudsmen • Non maintainability of whistle blower confidentiality • Ineffective Security of whistle blower • Improper Inquiry and investigation procedure • Inappropriate punishment• The Fear of Isolation
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Recommendations
• Whistleblower policy be made mandatory, with clear cut guidelines
for prosecuting intimidation of or retaliation against the complainant
• Inclusion of other stakeholders, such as vendors, shareholders and
customers, in the list of eligible complainants
• Strict assurance on maintenance of confidentiality
• Fast and Time bound disposal of cases
• Imposition of fines/ penalties for frivolous or mischievous complaints
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Thank You !!!
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