Has India Inc. woken up to whistle-blowing?

WbReal life or virtual – everyone loves a ‘superhero’! The definition may vary – one doesn’t have to be a clichéd masked vigilante battling criminals after dark. All it takes is intent, an ethical mind-set, willingness and action toward a cause for the benefit of the company, or the larger society. But can one person actually make a difference? Does he/ she have the company’s or society’s support? Is he/ she victimized for voicing the truth? Over the last few years, corporate India has seen the rise of a new kind of crusader – the whistle-blower. This brigade of champions has tried to unmask issues related to corruption and bribery, which currently plague India.

With the regulatory scenario in India undergoing a significant evolution, there has been an uptick in whistle-blowing complaints. Recent news reports have stated that the Central Vigilance Commission (CVC) has already received close to 450 complaints around whistle-blowing in the first half of 2014. The number stood at 698 complaints in 2013. There is a significant Government push too. For instance, the Whistle-blowers Protection Act which received the President’s assent in May this year is directed at protecting whistle-blowers in India. The Companies Act 2013, already notified, mandates establishing a ‘vigil mechanism’ for directors and employees to report ‘genuine concerns’.

With the legal framework in place, it was anticipated to be smooth sailing ahead. Companies are already taking the first few steps to implement and manage a whistle-blowing framework, but will it be sufficient? According to EY’s recently released survey, The Whistle-Blowing Quandary: India Inc.’s journey from oblivious to obvious, the industry still has a long way to make the vigil mechanism more than just a ‘tick in the box’. According to the findings, 22% of the respondents had implemented a framework because they had a ‘pressing need’ for it. Only 13% stated that the framework was fully compliant with the Companies Act 2013.

The survey also highlighted that most organizations were not inclined toward outsourcing the whistle-blowing mechanism to third party service providers – only 32% of the respondents had done it. It is imperative for them to realize that contracting a third party vendor augments the efficacy of the mechanism as it offers the benefits of impartiality, objectivity and confidentiality. Many organizations assented to having a policy in place but half of the respondents offered only one channel for reporting of complaints. Hotlines, which are a globally preferred channel of reporting, scored low in India. Only 57% of the respondents surveyed had set it up in their respective organizations. In many cases, training was unsatisfactory. Around 56% of the survey respondents indicated that less than 25% of complaints reported the need for further investigations. This indicated that the majority of the complaints received by them were not within the scope of whistle-blowing. Compared to global leading practices, this is relatively inadequate to build a robust whistle-blowing framework and mechanism.

Today, corporate India is moving toward enhanced transparency, with the right ‘tone at the top’ and laws driving enforceability for certain classes of companies. Whistle-blowing may still be at a relatively nascent stage, but its impact over time will be instrumental in strengthening internal controls, encouraging sound governance and driving compliance. Requisite laws and safeguard against victimization will also empower whistle-blowers (employees, third parties etc.) to raise red flags and continue their crusade against fraud and corruption.

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