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Mechanism for whistle blowing
This document discusses corporate governance and the importance of whistleblowing mechanisms. It provides context around corporate governance, outlines stakeholders' expectations, and examines the value chain between a company and its investors, customers, employees, and other stakeholders. It then focuses on whistleblowing as a key aspect of ensuring good corporate governance and internal regulation. It defines whistleblowing and the concerns around reporting improper practices. It also discusses legal provisions in India regarding whistleblowing and initiatives to protect whistleblowers both in India and internationally.
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Mechanism for whistle blowing
- 1. A tool togood corporate governance 1 Mechanism for Whistle Blowing Safeguards & Reach
- 2. “Corporate governance is… …theapplication 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 2
- 3. Corporate Governance - Thebasic Framework 3 Output – Input = Wealth Created ? Sustainability Happiness and Prosperity 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 Enhanced Capabilities Best Management Practices are Vital Here Law and Ethics are Vital Here
- 4. Corporate Governance ValueChain 4 Investors Lenders Customers Suppliers Employees Government Regulator “Corporate Governance is not related to investors only, though they are most important Beneficiary.” The Stakeholders
- 5. The Stakeholders’ ValueChain 5 SUPPLIERS CUSTOMERS HUMAN 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
- 6. An indispensible ingredientof ensuring Good Corporate Governance in Spirits Whistle Blowing The Internal Regulator 6
- 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. 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. Area of WhistleBlowing 9 • 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
- 10. Area of WhistleBlowing The Board & Senior Management The Executor Staff The Subjects of Concern
- 11. Focal Areas fora 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. Legal Provisions governingWhistle 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. 12
- 13. Initiatives towards WhistleBlowing IN INDIA INTERNATIONALLY
- 14. Reference of WhistleBlower in Indian Statues Committee Reports Listing Agreement Voluntary Guidelines to Corporate Governance
- 15. Committees recommending WhistleBlowing as an element of Corporate Governance 15 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
- 16. What does theListing 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. RECOMMENDATIONS ON WHISTLEBLOWER 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. Do other countrieshave 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. Instrument of effectingWhistle Blowing An effective Whistle Blower Policy 19
- 20. The Aims ofthe 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. Whistle Blowing inIndia Inc. 21
- 22. Components of aneffective 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
- 23. Procedural Aspects of Whistle Blowing 23 Providing confidenceto 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
- 24. How to encourageWhistle 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. Risks involved inthe process 25 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
- 26. BENEFITS May avoid public disclosureby 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
- 27. Some of theBiggest Corporate Collapse 27 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…
- 28. Whistle Blower… The ActualReward!!! 28
- 29. The Satyendra DubeyFate … (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. 29
- 30. History Repeated inthe 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
- 31. Other Setbacks toWhistle Blowing The Jayaraman, Incident… (2008) The mark sheet forgery racket in Pondicherry University was found murdered on May 20, 2008. 31 The Bombay Stock Exchange Scandal… (2001)
- 32. Whistle Blowing - Themissing 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
- 33. Recommendations • Whistleblower policybe 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
- 34.