May 15, 2013

Whistle-blowers back in spotlight

Share on
The idea of whistle-blowers has captured the imagination of many over the last several years. The latest case of Ranbaxy Laboratories, where revelations by one of its former employees, Dinesh Thakur, have prompted the company not only to plead guilty of lying to US drug regulators but also to pay a hefty penalty of $500 million (Rs 2,740 crore today) to settle the dispute, has brought them back into the spotlight.

Whistle-blowers are, simply put, individuals who have chosen to speak up to expose the rot in companies, government and public life. However, experts point out Thakur was lucky as he filed a case in the US. India is yet to have a robust policy and law to encourage and protect those who chose to red flag irregularities and issues related to corporate governance.

Thakur, who exposed the fraudulent practices taking place in Ranbaxy before 2005 and also filed a lawsuit in US District Court of Maryland, was rewarded with about $48.6 million from the Federal share of the settlement amount paid by Ranbaxy.

About 150 activists have been harassed for demanding answers under the Right to Information Act and around 20 have died in the last couple of years. To recall some: Shehla Mahsood, an activist was shot dead in August 2011 in Madhya Pradesh after she filed applications under RTI on illegal diamond mining. Shanmugam Manjunath was a grade A officer at Indian Oil Corp and was murdered for sealing a corrupt petrol pump in Uttar Pradesh.

Satyendranath Dubey, a Indian Institute of Technology graduate, was another such whistle-blower. Dubey, a project director with the National Highways Authority of India, who highlighted financial and contractual irregularities in construction projects, was shot dead in front of the Gaya Circuit House in November 2003. A current case the global media is worried about is of Naveen Soorinje, a TV reporter jailed in Karnataka for exposing an assault on young couples by a far-right Hindu group.

However, India still does not have a comprehensive whistle-blower law that provides protection to people who speak up against malpractices within companies or government. Some experts believe it is about doing the right thing and no law can enforce such a thing but what companies can do is to institutionalise the practice in a way that encourages people to speak up while protecting their identity.

“Whistle blowing mechanisms are most valuable when they are deeply embedded into the corporate governance apparatus of companies. For example, companies that integrate an effective whistle-blowing mechanism into the audit committee’s review and monitoring framework are in a superior position to ensure the integrity of their financial reports,” says Monish Chatrath, leader for consulting and markets at Mazars India.

“The government is working to put in place some regulations and norms to help such whistle-blowers,” says Pavan Kumar Vijay, managing director, Corporate Professionals. According to Vijay, the new Companies Bill, awaiting Rajya Sabha approval, will mandate most companies to have a whistle-blower policy.

“This would enable such people to directly have an access to the audit committee chairman, where majority is independent directors. Hence, if someone wants to highlight malpractices by a company’s managing director, he or she will be encouraged and protected by this committee,” Vijay said. The policy would also implement adequate safeguards for such people. However, Vijay feels India is still far away from rewarding whistle blowers, instead the first step has to be to give them enough protection.

Request a Call