Whistleblower Policy – a means to better Corporate Governance
Shweta Shankar, SCMHRD
KEYWORDS Whistle blowing, Corporate Governance, Business Ethics, Organization Culture
ABSTRACT
In today ' s era of globalization and technological advancement, one can easily say without doubt that corruption is one of the biggest evils plaguing our society. Corruption has become a way of life in many societies and particularly so in India. Studies have proved that GDP growth is inversely proportional to growth in corruption. Higher corruption leads to a lower GDP and vice versa. It is imperative to bring back that golden era where people were conscientious and businesses, honest and honorable. Though many systems and processes are in place, legal and otherwise to curb corruption, they have not been able to achieve the required measure of success. However a new method of curbing corruption by way of“ whistle-blowing” has been able to achieve some success in controlling corruption. Whistle blowing can be defined as the act exposing wrongdoing within an organization.
The whistle blower policy has rightly been recognized as one of the basic norms of corporate governance by most countries across the world. This essay deals with how whistle blowing is incorporated into corporate governance, talks about some major whistle blowing incidents and discusses about some initiatives that can be taken to enhance the effectiveness of whistle blowing.
NFCG ARTICLE
1.0 INTRODUCTION
In a developing country like India, we find that new firms and organizations crop up by the minute. The legal procedures make it relatively easy for a person to set up an organization in India. We find that most of the big companies face problems that are more internal rather than external. Corruption and fraud act as malaises and cripple the effective functioning of big companies.
An example in case is the shocking incident at Satyam Computer Services, where Satyam’ s the then Chairman Mr. Ramalinga Raju took responsibility for broad accounting improprieties that overstated the company ' s revenues and profits and reported a cash holding of approximately $ 1.04 billion that simply did not exist.[ 1 ]
Whistle blowing if encouraged could help in bringing to light such malpractices and process frauds at a very nascent stage itself.
2.0 WHISTLE BLOWING Whistle blowing can be defined“ as the act exposing wrongdoing within an organization to internal or external parties.” The wrongdoing can include theft, burglary, violation of safety norms, embezzlement, financial fraud etc. Whistle blowers may disclose the fraud internally, i. e. to someone within that organization or externally, i. e. to someone outside the organization like law enforcement agencies, media, public etc. Sometimes, monetary incentives are given to encourage external whistle blowing.
The term ' whistle blower ' comes from the act of a referee blowing a whistle to indicate foul play. This term was coined by the US activist Ralph Nader in the early 1970s to avoid referees being called negatively as ' snitches ' and ' informers '. Whistle blowing has the potential to transform the culture of an organization positively. Whistle blowing policies can greatly help organizations that firmly believe in honest and fair trade practices.
3.0 WHAT IS CORPORATE GOVERNANCE?
Corporate governance is the system or structure by which organizations are managed or governed. It is the responsibility of the Board of Directors which is appointed by the shareholders of the company to ensure that the company has a sound and transparent governance system. The company and the board of directors are accountable to the shareholders. The decisions and rules of the board are subject to laws, regulations and the shareholders ' opinion in meetings.
The well-being of the company is the well-being of its shareholders, and the directors are accountable for this. This is clearly spelt out in the Companies Act 1956 through its various sections and in many other legal doctrines. [ 2 ]
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