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Mechanism for Whistle Blowing: Safeguards and Reach


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Whistle Blower: A tool to good Corporate Governance
Mechanism for Whistle Blowing- Safeguards and Reach

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Mechanism for Whistle Blowing: Safeguards and Reach

  1. 1. Mechanism for Whistle BlowingSAfeguArdS & reAch A tool to good corporAte governAnce 1
  2. 2. “Corporate governance is……the application ofbest management practices,compliance of law in letter and spirit andadherence to ethical standardsfor effective management and distribution of wealth anddischarge of social responsibility for sustainabledevelopment of all stakeholders” Institute of Company Secretaries of India 2
  3. 3. Corporate Governance - The basic Framework Wealth Creation Wealth Management Wealth Sharing ? Distribu- tion Happiness and Output – Input Prosperity of all = Wealth Created Stakeholders SUPPLIERS Adequate Returns Reinvestment HUMAN ASSETSEnhancedCapabilities Adequate Remuneration CUSTOMERS Sustainability Affordable Prices PUBLIC Research and Payment of Taxes and Partnership in National Development Development Projects HR Development Infrastructure Risk Management Best Management Practices are Vital Here Law and Ethics are Vital Here 3
  4. 4. Corporate Governance Value Chain The STakeholderS“ Corporate Governance is not related to investors only, though they are most important Beneficiary.” 4
  5. 5. The Stakeholders’ Value Chain ROLE OF STAKEHOLDERS Supply Funds, Value Addition and Give Opportunity to Materials and Management of Co. to Satisfy their Services Resources Needs SUPPLIERS HUMAN CUSTOMERS RESOURCE Adequate Returns for Adequate Salary and Best Quality Products Funds, Material and Security for leading a and Customer Care at Services Supplied Happy Life Minimum Prices EXPECTATIONS OF STAKEHOLDERSPotential Suppliers, Human Biological, Economic andResources and Customers PUBLIC Cultural Environment PUBLIC EXPECTS PARTNERHIP FOR SUSTAINABLE DEVELOPMENT 5
  6. 6. An indispensible ingredient of ensuringGood Corporate Governance in Spirits WhiSTle BloWing The Internal Regulator 6
  7. 7. 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. 7 Cont…
  8. 8. 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.
  9. 9. Area of Whistle BlowingWhistleblowers may make their allegations 9
  10. 10. Area of Whistle Blowing The Subjects of Concern
  11. 11. 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? 11
  12. 12. Legal Provisions governing Whistle Blower in IndiaThe law that a government enacts to protect such persons whohelp expose corruption is called a whistleblower protectionlaw.At present India Statues does not make the Establishment ofWhistle Blower Mechanism Mandatory nor is there any lawfor protection of whistleblowers in India. 12
  13. 13. Initiatives towards Whistle Blowing
  14. 14. Reference of Whistle Blower in Indian Statues
  15. 15. Committees recommending Whistle Blowing as an element of Corporate Governance Committee Year Confederation of Indian Industry code on corporate 1998 governance Kumar Mangalam Birla Committee 1999 Naresh Chandra Committee 2002 N. R Narayana Murthy 2003 15
  16. 16. 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 16
  17. 17. RECOMMENDATIONS ON WHISTLE BLOWER BY THE CORPORATE GOVERNANCE VOLUNTARY GUIDELINES 2009• Institution of a mechanism for employees• Establishment of adequate safeguards against victimization of employees• Direct access to the Chairperson of the Audit Committee 17
  18. 18. 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 18
  19. 19. Instrument of effecting Whistle Blowing An effective Whistle Blower Policy 19
  20. 20. 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 20
  21. 21. Whistle Blowing in India Inc. 21
  22. 22. Components of an effective whistle-blowing policy
  23. 23. Providing confidence to person to blow the whistle Mechanism to aid anonymous reporting - email, telephone numbers.Procedural Independent Ombudsman or Chairman of AuditAspects of Committee for handling such informationWhistle Whistle Blower need not inform the supervisorsBlowing 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 23
  24. 24. 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. 24
  25. 25. Risks involved in the process 25
  26. 26. Some of the Biggest Corporate Collapse The fate of millions to stakeholders could have been protected if the Whistle Blower was effective… 27
  27. 27. Whistle Blower…The Actual Reward!!! 28
  28. 28. The Satyendra Dubey Fate … (2003)The National Highways Authority ofIndia (NHAI) engineer Satyendra Dubeywas killed after he wrote a letter to theoffice of then PM A B Vajpayeedetailing corruption in the constructionof highways. 29
  29. 29. 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. 30
  30. 30. Other Setbacks to Whistle BlowingThe Jayaraman, The Bombay StockIncident… Exchange Scandal…(2008) (2001)The mark sheetforgery racket inPondicherryUniversity was foundmurdered on May 20,2008. 31
  31. 31. 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 32
  32. 32. 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 33
  33. 33. Our services Thank You•Investment Banking•Corporate Restructuring•Forex & OverseasTransaction Pavan Kumar Vijay Managing Director•Stock Exchange Services Corporate Professionals (India) Pvt. Ltd. D – 28, South Ext- I,•Global Business Set up New Delhi 1100049• Securities law and capital Tel: +91.11.40622200,market advisory Fax: +91.11.40622201•Corporate Compliance & Email: info@indiacp.comDue Diligence•Corporate Finance Visit us at:•Corporate Taxation 34