Whistleblower Policies in Corporate Governance

 Whistleblower is an individual who intimates the authority about illegal activities. They play a critical role in Corporate Governance.

Corporate governance is a system by which companies are directed and controlled. It involves regulatory and market mechanisms, and the roles and relationships between a company’s management, its board, its shareholders and other stakeholders, and the goals for which the corporation is governed.

Role of the whistleblower in enhancing the effectiveness of corporate governance is to report the following issues:

•  a violation of rules and regulations
•  alleged dishonest activities
•  illegal activities
•  a direct threat to public interest
•  fraud
•  safety violations
•  corruption
•  an abuse to authority
•  waste of funds
•  a substantial danger to public health
•  mismanagement

 

  

Following are the points which should be taken into consideration while preparing whistle-blowing policies:

• People especially employees, will assume that they may be victimized by losing their job or damaging their career, unless culture, practice and the law indicate that it is safe and acceptable for individuals to raise a genuine concern about corruption or illegality.

• It is important to note that internal whistle-blowing is more ideal, as alleged malpractice will not become public knowledge and therefore may not inform unwarranted public debate.

• The policy should be promoted effectively and should ensure that individuals understand that reprisal for whistle-blowing is not tolerated. Such policy would allow the ordinary worker, for example, to appreciate and embrace good governance as well as enhance the self-regulation concept.

• The whistleblowers also have a responsibility to make the disclosure in good faith. They should show some substantive basis for their concerns, especially for external disclosures; they should take steps to ensure that issues are raised internally or with the prescribed regulator before any wider public disclosure.

• Embracing the corporate governance ideology involves empowering individuals to get involved when rules are being violated. Regulators, therefore, must erect the necessary safeguards in the event of reprisals.

• There should be a moral and legal obligation, to protect those who have made responsible disclosures to the appropriate authorities. This obligation will encourage companies to foster a culture which is open to hear and address the individual’s concerns about practices that contravene the law.

• A practical balance should be struck between self-regulation and effective regulatory oversight. Internal and external whistle-blowing policy or regulation should signal that there is a safe alternative to silence.

• There is some reason to believe that people are more likely to take action with respect to unacceptable behavior, within an organization, if there are complaint systems that offer not just options dictated by the planning and control organization, but a choice of options for absolute confidentiality.

• In light of the ongoing public debate on corporate governance, it is fitting to call on the relevant authorities, especially those in the financial services, to consider adopting appropriate procedures for whistle-bowing when developing a robust corporate governance framework. 

• Give whistleblower protections to employees who are not currently covered, including Transportation Security Administration officers.

The False Claims Act, also called the "Lincoln Law" is an American federal law that imposes liability on persons and companies who defraud governmental programs. Thomas Alured Faunce(an academics) feels that whistleblowers should be entitled to a controversial presumption that they are attempting to apply ethical principles in the face of obstacle. Also, whistle-blowing would be more respected in governance systems if it had a firmer academic basis in virtue ethics.

India

In the lights of Indian context, the Government over here has been considering to adopt a whistleblower protection law for several years. India is about to join an elite club of just four democracies (USA, UK, Australia and New Zealand) which have whistleblower protection. These democracies have not had these laws in place for too long. The US had its law in place only in 1989 and the other countries have followed after that.




 
Why there is a need of Whistleblower & law to protect their identity?

This question can be answered using the below mentioned two examples:

 

• Manjunath Shanmugam, a young manager with Indian Oil Corporation (IOC) and an IIM graduate, was shot dead on November 19, 2005. This incident happened just because of whistle-blowing regarding irregularities in the quality of fuel being marketed in some petrol pumps of Lakhimpur Kheri in UP.

• Satyendra Dubey was a project director at the National Highways Authority of India (NHAI) on November 27, 2003. He was murdered in Gaya, Bihar after whistle-blowing regarding corruption in the Golden Quadrilateral highway construction project.

Few of the steps taken by Indian Government are chronologically stated as follows:

• 2003

The Law Commission of India recommended the adoption of the Public Interest Disclosure (Protection of Informers) Act, 2002.

• 2004

The Central Vigilance Commission (CVC) was designated to receive public-interest disclosures through government resolution.

• 2010 (August)

The Public Interest Disclosure and Protection of Persons Making the Disclosures Bill, 2010 was introduced into the Lok Sabha, lower house of the Parliament of India.

• 2011 (June)

The Public Interest Disclosure and Protection of Persons Making the Disclosures Bill, 2010 was approved by the cabinet. It was  renamed as The Whistleblowers' Protection Bill, 2011 by the Standing Committee on Personnel, Public Grievances, Law and Justice.

• 2011 (December)

The Whistleblowers' Protection Bill, 2011 was passed by the Lok Sabha on 28 December 2011. However, the Bill is currently pending in the upper house of Parliament (Rajya Sabha) for discussion and further passage.

• 2012 (March)

The Bill was introduced in Rajya Sabha on 29 March 2012 by V. Narayanasamy, Minister of State for Parliamentary Affairs.