Why the whistleblower is still vulnerable

Why the whistleblower is still vulnerable

The act of “blowing the whistle" isn’t entirely new to the country. The police have been relying on it to crack cases for decades before Ellsberg blew the lid off the Pentagon Papers. In more recent times, we’ve seen it work, for the right reasons or wrong, even outside the realm of criminology. Remember former cricketer Manoj Prabhakar who exposed the match-rigging scam? /Content/Videos/2007-09-27/03.wb.flv2fee8ec6-6cd8-11dc-aff9-000b5dabf636.flv

Why it has become a hot topic

And yet, the term is beginning to take up a large part of state and central administrative agendas and boardroom discussions, besides stirring the mindset of a restless generation.

While the general attention whistle blowing is getting in this country today was largely triggered by the murder of a shining example of responsible citizenry, Satyendra Dubey.

At the corporate level, scandals in global companies such as Enron and Worldcom have got both, regulators and corporates world thinking of ways to ensure businesses in which the public has substantial stake adhere to a predefined set of rules to protect their stakeholders. Ergo, the strong emphasis on corporate governance, of which an adequate whistle-blowing policy is an integral part.

Whistle-blower policy in India

While the government still has to bring out a comprehensive whistle-blower policy, the Securities and Exchange Board of India (Sebi), the market regulator, included guidelines for companies in an amendment to Clause 49 of the listing agreement in August 2003. Under the guidelines:

• An employee wanting to report a fraud or malpractice in his organization has direct access to his company’s audit committee and can approach it without seeking the consent of his superiors

• The company will send a circular or other correspondence to all its employees informing them that they enjoy this right; it will also protect them from harassment such as termination of services or otherwise discriminate against them

• The company will confirm that it has adhered to the above practice in its annual report, in the Board report on Corporate Governance

Why it lacks teeth

These guidelines were implemented on the recommendations of the Sebi Committee on Corporate Governance chaired by N.R. Narayana Murthy.

So today, you have a Clause 49 that simply calls on companies to merely “establish a mechanism" to enable employees to report misconduct.

However, there are a number of companies have indeed evolved a whistle blower policy. In some cases, the reporter of misconduct even includes other stakeholders, such as vendors and customers.

The scene in the US

In the US, the $591 million Enron fraud and the $3.8 billion WorldCom case spurred the administration to pass the Sarbanes-Oxley Act, 2002, which provided legal protection to whistleblowers in public companies. Under the Act, retaliation against a corporate whistleblower can invite a jail term of up to 10 years, and a fired employee can be reinstated and receive arrears of salary along with interest and damages.

Section 806 of Sarbox, intended to protect employees of public companies from retaliation for reporting financial misdeeds, is administered by the Department of Labor’s (DOL) Occupational Safety and Health Administration, which handles similar provisions for 13 other laws.

Despite the laws and the good intentions behind their enactment, however, the whistleblower isn’t all that well off in the US, according to a report by attorneys at the law firm of Orrick, Herrington, & Sutcliffe LLP.

Of the 947 employees who have claimed Sarbox whistle-blower protection ever since the law was enacted, more than two thirds have seen their cases dismissed, and some have settled or withdrawn. But not one whistleblower has ultimately made it past company appeals and won his case, the report says.


• Whistleblower policy be made mandatory, with clear cut guidelines for prosecuting intimidation of or retaliation against the complainant

• Inclusion of other stakeholders, such as vendors, shareholders and customers, in the list of eligible complainants

• Imposition of fines/ penalties for frivolous or mischievous complaints

• Fast-track disposal of cases along the lines of the Sarbanes-Oxley Act, under which rulings are given by the DOL within 180 days

— Acknowledgements: Nirvana Advisory Group Pvt. Ltd, New Delhi