Giving confidence to whistleblowers to ensure better corporate governance

Illustration by Binay Sinha
In recent months, India Inc saw Infosys, Sun Pharmaceuticals, Jet Airways, and ICICI Bank battling corporate governance issues, which were flagged by some whistle blowers. Letters written and issues highlighted by these unnamed, unmarked faces have resulted in the resignation of the top boss in at least two Nifty-50 companies. Though the whistle blower is hailed as a hero by many for upholding principles of responsible corporate governance, corporate India remains ambivalent towards the adoption of whistle blowing policies. Despite the protection accorded by law, the whistle blower continues to remain vulnerable due to the slack implementation of the Whistle Blower Protection Act.

Yet, legal experts and anti-corruption activists are wary of the government’s intentions in strengthening the ‘protection’ provisions in the existing laws, with many saying more amendments to Act could further endanger the whistle blower. 

In 2014, the government introduced The Whistle Blowers Protection Act, 2014, which enabled a person to anonymously report acts of corruption, willful misuse of power, or criminal offences by public servants. After the Bill was passed in the Lok Sabha, the government circulated some amendments to the Bill when it was due for discussion in the Rajya Sabha. These amendments were, however, not moved.

A year later, the government introduced The Whistle Blowers Protection (Amendment) Bill, 2015, which sought to prohibit information under 10 categories from being disclosed to the competent authority. These include information related to sovereignty, strategic, scientific or economic interests of India, or something which could incite an offence.

Records of deliberations of the council of ministers, as well as information received from a foreign government, have also been prohibited to be released to the competent authority under the amendments. The amendments will end up making this law dull and useless, experts said.

“Increasing restrictions on the disclosure of information would in effect lead to diluting the effectiveness of the Whistle Blowers Protection Act and would render it a toothless tiger. Therefore, Parliament must re-think the aforementioned amendments,” said Ashish Bhan, partner at law firm Trilegal.

The proposed amendments to the Bill also talk of creating a government authority above the competent authority which whistle blowers are supposed to approach. The government authority will be entrusted with deciding whether the disclosure of information shared or a complaint made is prohibited or not. It is another way to stifle the law, said experts.

“Where the underpinning requirement for safety is anonymity, it’s baffling as to why the law should require the competent authority to ascertain the identity of the person making the disclosure (unless that person is forthcoming),” said Avik Biswas, partner at law firm IndusLaw.

This very amendment will make matters even more complex if the government authority receives a complaint against their professional senior, several experts said.

The Indian corporate sector, too, has not been enthusiastic about the presence of whistle blowers amidst itself. A recent survey conducted by FTI Consulting revealed that nearly 20 per cent of the top 100 listed companies in India do not have an express mechanism, such as a phone number or an email ID where a whistle blower can make an anonymous complaint. Though this number improved in 2018, compared to 2016, the top 100 listed Indian companies together scored just about an average of 6.3 out of 10 on voluntary disclosures.

What could improve such rankings for India Inc, said Arun Duggal, a board member and independent director, is that it should ensure the company’s whistle blower policy is implemented and employees are aware of the policy and how to report.

“There should be an annual sample survey by an independent agency to confirm that employees are aware of the policy and feel comfortable reporting misdeeds without fear of retribution. Once a year the chair of the audit committee should report to the board the effectiveness of the whistle blower policy and propose any improvements as required,” Duggal said.

Additionally, the Securities and Exchange Board of India (Sebi) could also look up at setting up an office for whistle blowers, as done by the US Securities and Exchange Commission (SEC), he said.

Shriram Subramanian, founder, InGovern, a corporate governance advisory firm suggests that like in the US, where the SEC gives a reward for successful whistle blowing, Sebi should institute such rewards.

The fear of law being misused by a disgruntled employee will always remain, but shutting the door on corporate whistle blowers will not help the case either, experts said.  Pavan Kumar Vijay, founder, Corporate Professionals suggests that employees be governed a policy in which “if an employee, under the garb of whistle blowing, deliberately makes any malicious or unfounded allegation with mala fide intent, he/she may be subject to disciplinary action, which may include dismissal.” 

“Any person who carries out any motivated false campaign against any company or its promoters and the allegations are malicious and unsubstantiated, he should be liable for defamation,” said Vijay. 

 “An effective mechanism shall not only protect genuine whistle blowers but shall also ensure that a competent and designated authority conducts an effective and neutral adjudication/inquiry following the due process. It will ensure that the disclosure is only perused by the competent agency without the risk of ad-hoc leak of confidential and proprietary information to third parties,” Bhan said.

The fear of all such situations notwithstanding, the current law needs to be corrected to encourage disclosures and guarantee safety, add experts.
SORRY STATE OF AFFAIRS

 
  • The Whistle Blowers Protection Act, 2014, was notified on in May 2014
  • Citing the need to safeguard against disclosures affecting sovereignty and security of the country, the government introduced the Whistle Blowers Protective (Amendment) Bill, 2015
  • This was passed by the Lok Sabha in May 2015 and is still pending in the Rajya Sabha
 

Key criticism of the amendment Bill:

 
  • Presence of government authority defeats the purpose of whistle blowing
  • Independence of junior competent autho­rity at risk if complaint is against senior official
  • Restrictions on disclosing information will lead to dilution of the law
  • Corporate India has been ambivalent about the adoption of whistle blowing policies as part of ethical business behaviour and corporate governance regulations


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