Help corporate whistleblowers

India’s corporate governance rules don’t make it compulsory for whistleblowers to be protected
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First Published: Thu, May 16 2013. 07 12 PM IST
Illustration by Jayachandran/Mint
Illustration by Jayachandran/Mint
Dinesh Thakur played a significant role in nailing Ranbaxy Laboratories for its dodgy manufacturing practices, for which the drug maker agreed this week to pay a fine of $500 million to settle charges against it in the US. Thakur, who was a senior executive at Ranbaxy between 2003 and 20005, said in a statement that he had notified the Ranbaxy management about poor manufacturing practices and the falsification of drug data but they did not try to set things right. He then alerted US healthcare authorities.
The Ranbaxy settlement is a timely reminder that corporate whistleblowers such as Thakur have no place in the Indian legal framework. The Public Interest Disclosure and Protection of Persons Making the Disclosure Bill of 2011, which seeks to protect whistleblowers such as Satyendra Dubey, the engineer who was gunned down after he complained about corruption in the national highways programme, covers only government corruption, misuse of public funds and criminal offences by public servants. Corporate transgressions are outside its purview.
Thakur went to US regulators because its False Claims Act has provided protection to whistleblowers since way back in 1863. It encourages insiders to act against corporate wrongdoing, by giving them a percentage of the settlement money, the provision under which Thakur emerged richer by $48.6 million. A 1986 revision to the US law protects employees from sackings, demotion, suspension, threats, harassment or discrimination.
There are two problems with the Indian approach to corporate whistleblowers. First, neither the corporate governance rules framed by the Securities and Exchange Board of India nor the Clause 49 provisions of the listing agreements in India make it compulsory for whistleblowers to be protected. Second, not all companies that have whistleblower rules are paragons of exemplary corporate governance. One extreme case is Satyam Computer Services, which had a whistleblower policy since 2005. It is one thing to say in your annual report that you protect whistleblowers and another thing to create a corporate culture that encourages employees to complain.
Details of a new whistleblower protection framework will still have to be worked out. The first port of call for any employee unhappy with company practices would obviously be senior management, which will often have little incentive to act. It makes more sense to encourage whistleblowers to reach out to regulators, with the law protecting them against a backlash at their workplaces.
Should Indian law cover corporate whistleblowers? Tell us at views@livemint.com
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First Published: Thu, May 16 2013. 07 12 PM IST