The increasing role of Whistle-Blowing

Whistleblowing is when an individual reports wrongdoing in an organisation, for example financial misconduct or discrimination. This person is often an employee but can also be a third-party such as a supplier or customer.

Internal whistleblowing is when someone makes a report within an organisation. Often companies implement whistleblowing channels for this purpose so that employees and other stakeholders can speak up if they become aware of misconduct. Employees can also report to their line manager.

External whistleblowing is when a person blows the whistle publicly, either to the media, police or via social media channels.  People often opt to blow the whistle publicly if they have little faith in their organisation’s investigation or reporting procedure, have tried speaking up internally with no result or if there is no whistleblowing system in place.

Whistleblowing complaints focus on conduct prohibited by a specific law such as a criminal offence, discrimination or evidence of a cover up. Speak up policies may however cover a broader range of issues related to compliance and ethics.

In response to this decline in trust, we have seen legislative reform, mandating increased corporate transparency: the Commonwealth Parliament introduced legislation that will fundamentally change whistleblower protections. The Treasury Laws Amendment (Whistleblowers) Bill 2017 (the Bill) is expected to be passed later this year and aims to:

• Increase protection for whistleblowers and their family members;
• Extend protection for reports to media or to politicians (see the full list of regulatory changes here); and
• Underline a commitment to trust by requiring large corporations to implement a whistleblower policy addressing mandatory criteria.

Business should start with the things they can control. In particular:

• Building internal capabilities for transparent and consistent communication which align to the mandatory requirements in the Bill, and
• Implementing policies, processes and training which support a sustainable, “speak-up” organisational culture that commits to addressing risks and preventing workplace retaliation.

Whistleblowing means when an employee makes fraud, corruption, and wrongdoing in an organization known to the public. A whistleblower in India is a current or ex-employee who exposes information regarding what is believed to be fraud, corruption or deviation from the company rules and company law India. The employee discloses what they believe to be the unethical or illegal behavior of higher management.

The whistleblower policy in India is aimed to safeguard the interest of the general public. Employees who reveal fraud, corruption or mismanagement to the senior management are called internal whistleblowers. Employees who report fraud or corruption to the media, public or law authorities are external whistleblowers. Indian whistleblowers are protected under the Whistleblower Protection Act India.

Law dealing with whistleblowing in India

Laws relating to whistleblowing and protection of whistleblowers are inadequate in India. However, the Companies Act, 2013 lays down provisions for whistleblowing and corporate governance in India and the elimination of fraud by establishing adequate vigil mechanism. Sections 206 to 229 of the Companies Act, 2013 lay down laws relating to Inspection, Inquiry, and Investigation incorporate.

Section 208 of the Act empowers an Inspector to inspect company records and furnish any recommendations to conduct investigations. Section 210 states that the Central Government may order an investigation into the affairs of the company in the following cases:

• On receipt of a report by Registrar or Inspector of the company.
• On intimation of a Special Resolution passed by a company that the affairs of the company must be investigated.
• To uphold the public interest.

Additionally, the Securities and Exchange Board of India (SEBI) amended the Principles of Corporate Governance in 2003. Clause 49 of the Listing Agreement now includes the formulation of a Whistleblower policy in Indian companies. A company may establish a mechanism for employees to report concerns regarding unethical behavior, actual or suspected fraud or violation of the company’s code of conduct or ethics policy. However, it is currently not mandatory for companies to have a whistleblowing policy in place.

The Whistleblower Protection Bill, 2011 which replaced the Government Resolution, 2004 has not come into force yet. The bill aims to balance the need to protect honest officials from undue harassment with protecting persons making a public interest disclosure.

Shortcomings or wrongdoings in a company may lead to a loss of the company’s goodwill and capital. It is important for every company to have a whistleblowing policy in place for both the organization and employees. To encourage employees in raising their voices against wrongdoing and reach the appropriate authority, a company must get a tailored whistleblowing policy through an experienced corporate lawyer.

The whistleblowing policy must include stipulations that will ensure confidentiality and anonymity of the informant. The policy must also include provisions for the establishment of an internal committee of members from each level of management to deal with potential whistleblowers.