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History of whistle-blowing in ancient India
21 Nov 2022
In ancient India, blueprints of whistleblowing were already in existence. In the 4th century, Kautilya proposed that any suchaka (i.e. informant) who provides information about fraudulent activities under perpetration, will receive one-sixth of the amount in question as a reward if he is successful in proving it; if he is a bhritaka which means government servant, he will receive one-twelfth of the amount for the same act. Whistleblowing was also discussed by the Ancient Greeks decades ago.
Who is a whistle-blower?
In most straightforward words, a whistle-blower can be termed as a person who makes a disclosure. Here, disclosure doesn't refer to trade secrets; instead, disclosure means disclosing unethical or improper activity based on facts concerning the company.
Importance of whistleblowing
Whistleblowing turns out to be a savior of the economy when billions of dollars are lost every year due to occupational fraud. The need for a well-functioning whistleblowing mechanism has never been more evident before. The whistleblowing mechanism is a valuable part of the organization's Anti-Fraud Regime.
According to the Association of Certified Fraud Examiners (ACFE), which publishes a report every two years in relation to occupational fraud, it has consistently mentioned in its reports of 2012, 2014, and 2016 that "Tips" are the most common method to detect fraud. Another significant finding from the 2016 ACFE was that 51% of occupational fraud was detected with tips from employees. Also, another 14% of the tips received from anonymous sources are likely also to be the employees who chose to remain anonymous.
Finally, in the 2016 ACFE report, it was also found that the companies having formal whistle-blower mechanisms, tips were the source of fraud detection in 47% percent of the cases while organizations without any whistle-blower mechanism, tips were the source of fraud detection for only 28% instances.
These statistics highlight the need to have an established whistleblowing mechanism in every organization for detecting fraud.
Rise of whistle-blowing practice in modern era
After multiple scams such as – 2G Spectrum Scam, Satyam scam, Harshad Scam and many more, there is a steep rise in the whistle-blower complaints which brings our attention to the urgent need for a robust legal regime to protect whistle-blowers. Let's examine whether the existing legal regime is sufficient enough to provide adequate clarity and support to companies along with whistle-blowers.
Legal regime in India
With rise in the whistle-blower practice, The Whistle-blowers Protection Act was enacted in India in 2014. Its applicability is limited only to the public servants. It was enacted to build a mechanism to receive information about the wrongdoings such as corruption, misuse of power, etc. Under the Companies Act, 2013, a vigil mechanism needs to be established for reporting the real concerns. The mechanism also needs to provide adequate safeguard to the employees utilizing the mechanism against retaliation. The details of the mechanism also need to be published on the company's website. Recently, in 2020, the Companies Auditor's Report Order (CARO) was issued by the Ministry of Corporate Affairs. It was issued for solidifying the corporate governance structure under the Companies Act, 2013. The order applies to all companies, including international companies, as specified by the Companies Act, 2013.
For a complete overview of the Legal Regime of Whistleblowing in India, click here. - Legal Regime in India
Protection of whistle-blowers
The employees play a vital role in the effective working of whistle-blower mechanisms. However, the whole procedure will be ineffective if the employees have no trust in the company's administration. Previously, employees have already faced retaliatory actions such as - murder of Satyendra Dubey an engineer worked with National Highway Authority of India and the case of Manjunath Shanmugham induces the necessity of a stringent law which can protect the whistle-blowers. To come forward, whistle-blowers need confidentiality from the retaliatory measures and have faith in the integrity of the organization on the protection provided.
For the protection of the whistle-blowers in India, Whistle-blowers Protection Act was enacted in 2014. This act protects the whistle-blowers of their identity, and also strict measures are there to prevent their victimization. Under this law, an organization cannot initiate proceedings against a whistle-blower who has a probe pending. The same sections have been introduced in the Companies Act applicable to the listed companies and are a part of the norms prescribed by SEBI. All the listed companies and public sector organizations must have a whistle-blower policy that specifies the procedures resources available to the whistle-blowers.
Conclusion
Over the years, several large corporate scams have rattled the global economy. Every time we look back at the possibility of preventing these scams, corporate governance issues are highlighted. Looking at the scams indicates the urgent need for a proper whistleblowing mechanism in every workplace. It will help employees to disclose the corruptness and malpractices, which can probably prevent these scams. The lack of adequate protection to the whistle-blowers against retaliatory actions is causing a hindrance in the smooth functioning of whistle-blower policy. The companies should frame a mature whistle-blower policy that can expose the malpractices and other issues faced by the employees.
Developing a mature whistle-blower policy will take some time. However, with the expertise of WhistleFirst, a mature whistle-blower policy along with a whistle-blower protection policy is just a few clicks away. WhistleFirst creates a practical whistleblowing framework through six ways-
- Whistle-blower policy - WhistleFirst carefully drafted a set of rules & regulations along with the implementation of best work principles intended to protect and safeguard the whistleblowers' rights and interests.
- Communication poster - A poster is created which summarises the company's whistleblowing policy.
- Training - A set of customized training videos are provided to both the employers and employees to share equal partnership and responsibilities through effective dialogue and communication.
- Whistle-blower reporting - WhistleFirst always promotes to "speak without fear" with the help of a personalized online platform, 24*7 available ethics hotlines, grievance email address, and local post.
- Customized webpage - It acts as an online assistant to a responsive whistleblowing system that integrates case management, reporting, ethics policy, hotlines, and communication & training modules.
- Case management - The expertise and professional services of WhistleFirst makes case management an easy task by handling complaint filing, complaint assignment, complaint processing, and report generation.
