Whistleblowing – A Tool to Corporate Good Governance

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Written By:- Sreshta Satpathy

Whistleblowing as a tool and corporate good governance are closely linked. In an open and transparent corporate environment where policies regarding wrongdoing and whistle-blowing are made clear, it becomes easy to catch any malpractice early.

Let us first understand both these terms. Good corporate governance is the processes of disclosure and transparency followed so as to provide regulators and shareholders and the general public precise and accurate information about the financial, operational and other aspects of the company. Whistle blowing is the act of reporting wrongdoing within an organization to internal and external parties.

Whistleblowing is an important tool and it does play a relevant role in good corporate practices. In the era of globalization, where economic motives are overall virtues and traditions; protection of the interest of the larger public from great corporate scandals has become a matter of great importance. Whistleblowing in the corporate field worldwide is considered to be one of the best tools to ensure good corporate governance. This practice has been recognized as one of the basic and important features of corporate governance. The circumstances may be different like having knowledge of inappropriateness, Bad claims like unrealistic date projection, advertising hype, etc Knowledge of impending failure, etc.

Whistleblowers are the employees in any organization who exercise their free speech right in order to confront organizational abuse of power or illegality or wrongdoing that is against the public interest. They can disclose the wrongdoing either internally or externally if they feel it is necessary.  Because of the efforts of whistleblowers more corporate wrongdoings are being exposed around the world. Employees who are aware of any corporate malpractice practice the right to disclose anything that they know if it is in the public interest to do so.

Practices that come under this might include any illegal or unethical practices that can affect the public, as well as any attempts to cover these events up2. These can be events that have already happened in the past, or are happening now, or even planned activities for the future. Spreading out whistle-blowing policy is a sign of strong and clean corporate governance and a company culture that takes such claims seriously can be an advantage. It may act as a deterrent to those who think that committing wrongdoing within the company may also minimize the likelihood of false accusations because employees understand more firmly the consequences of their disclosure. On the other hand, it will also deter people from going straight to the media making these revelations instead of dealing with them in the correct ways.

In the present situation, the need of good standards of corporate governance is more needed than ever. Despite the supremacy of organizational employees in contemporary social life, law is badly short of doctrines, institutions, and regulatory techniques that are effective in controlling corporate entities.

It has become crucial to implement a dynamic mechanism of good corporate governance, which protects the interests of general stakeholders without obstructing the growth of an enterprise.

India earlier had indirect whistleblower protection laws compared to other countries. The companies Act, 1956 firstly provided provisions through which mismanagement can be discussed but does not expressly provide any protection for whistleblower as such. However after the Companies Act, 2014 came into existence there came a provision to protect the Whistle Blower. Each and every company is urged to establish a monitoring mechanism to look after the genuine concern of the employees regarding the organization. It aims for directs access to the chairperson of the higher committee in exceptional cases .It also aims provide required protection to the employees suffering victimization as a result of disclosure mad.

Whistleblower Protection Bill Act;

Whistle-Blowers Protection Act, 2011 (renamed as Whistle Blowers Protection Act, 2014 by the second schedule of the Repealing and Amending Act, 2015 is an Act of the Parliament of India which provides a mechanism to investigate alleged corruption and misuse of power by public servants and also protect anyone who exposes alleged wrongdoing in government bodies, projects, and offices. The wrongdoing might take the form of fraud, corruption, or mismanagement. The Act will also ensure punishment for false or frivolous complaints.

The Law Commission of India in 2001 did recommend that a law to protect

whistleblowers were needed in order to eliminate corruption. It had also first drafted a bill to address this particular issue. The action was taken when In 2004, in response to a petition filed after the murder of an NHAI Official, the Supreme Court of India asked the Central government that the administrative machinery should be put in place for acting immediately on any complaint received from whistleblowers till a law is enacted. After which in 2007, the report of the Second Administrative Reforms Commission also supported by recommending that a specific law was needed to be enacted to protect these whistleblowers.

Conclusion

Whistle blowing as a tool and good corporate governance do not always go hand in hand and there have been many debates, amendments etc regarding the same. The important part is that a healthy and open culture in an organization is where people are never discouraged to speak out, confidently that they can do so without the fear of adverse repercussions.

They should be assured that they will be listened to, and that appropriate action will be taken about their concern. The company should provide different appropriate development programs and training in order to create a healthy corporate culture and should also strengthen whistleblowers by making strong and effective whistle-blowing policies. This is to the benefit of organizations, individuals, and society, or the larger public as a whole. Scandals like Satyam, Tyco, and AIG, etc have raised the need for more ethical governance.

Whistleblowing has been already labeled as one of the basic ladders for good Corporate Governance, but in India, there are no definite laws regarding Whistle Blower. If this is used as a tool for Corporate Governance in the true spirit, it can be the best way for protecting the stakeholders and the larger public interest. For the survival of corporate, build their brand image, which will support in raising funds this could be a great asset. It can be an effective tool in curbing and reporting corporate frauds, which earlier used to go unreported due to the fear in the minds of people.


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