Summary: A whistleblowing mechanism enables individuals to report wrongdoing within a company without fear of retaliation. In India, it is mandatory for companies to establish such a system and provide access to stakeholders for reporting misconduct. An effective whistleblowing policy should be board-approved, publicly available, and comprehensive. It must allow employees, directors, and stakeholders to report concerns while clarifying the types of issues that should be raised. The reporting process should specify designated contacts and discourage anonymous complaints. Legal provisions ensure whistleblowers can escalate concerns to the Audit Committee Chair in exceptional cases, maintaining independence and transparency. Confidentiality is critical, as fear of identity exposure or retaliation can deter reporting. Companies should create a culture of trust and implement training programs to raise awareness of whistleblower protections. A well-defined investigation process should be outlined, ensuring due process is followed. Regular oversight by the Audit Committee, including reviews of complaints and outcomes, helps maintain the integrity of the mechanism and strengthens corporate governance.
Introduction
Whistleblowing mechanism relates to reporting of a suspected wrongful act or misdoing within a company. In India, it is mandatory for companies to have such a mechanism, and to give access to its stakeholders to report a wrongdoing, without the fear of victimisation. It plays a critical role in corporate governance, by promoting accountability of persons in power, and ensuring ethical conduct.
For this mechanism to be effective, the following are essential:
1. Policy – Having a Board approved policy, which is hosted on the website of the company. This policy should be upto date, and complete in all respects. Some companies host the policy on intranet, thereby preventing persons from outside the company from having access to this mechanism.
2. Who can report – The policy should provide access to employees, Directors and all stakeholders to report any wrongdoing. Often, the policy is restricted only to employees and Directors, leaving out stakeholders, who too could have instances to report.
3. What is to be reported – The policy should give an indicative list of the kind of wrongdoings that should be reported. This would help the person reporting, and prevent concerns, such as HR related concerns, from being reported using this forum. The policy should clearly state that it is not a grievance redressal mechanism for employees.
4. Reporting – The policy should clearly state to who should be reported to. This would include the name of the individual/ committee, and the contact details (email id and address) of the person. If the company encourages oral complaints, then the number of the person should also be clearly given. It should also mention that anonymous complaints would be discouraged.
5. Access to Audit Committee Chair – Law provides for access to the Audit Committee Chair in exceptional situations. This is to ensure that the mechanism has the independence required, and the whistleblower has the confidence that genuine complaints would be dealt with.
6. Confidentiality of identity – A number of companies often do not receive any complaints under this mechanism because the whistleblower may feel that his/her identity may be revealed, or that he/she would be unfairly treated post the complaint. For this mechanism to be successful, it is vital that a culture of trust is created, and persons are assured that there will be no victimisation of the person making a complaint.
7. Training/ awareness generation – Another reason why companies often do not receive complaints is because there is inadequate awareness of the mechanism. The compliance department should ensure that at regular intervals there is enough awareness generation, emphasising the fact that there will be no victimisation for persons, including termination, demotion, abuse, discrimination or adverse impact on their appraisal, if they use this mechanism.
8. Process for investigation – The policy must mention the standard process that would be followed in case of receipt of complaint. This is only so that the stakeholders are made aware that due process will be followed once a complaint is received.
9. Oversight of Audit Committee – Ordinarily, summary of complaints received, along with conclusions from investigations, and actions taken, if any, are presented to the Audit Committee in its quarterly meetings. This ensures that there is a process for such complaints to be reported to a committee of the Board, and the independence required for this mechanism to work efficiently, and effectively, is ensured.
Source: https://excellenceenablers.com/role-of-whistleblowing-mechanisms-in-fostering-ethical-governance/
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