While working with Fortune 500 companies in recent years, I realised just how pathetically they all exhibit reluctance to adopt robust policies for whistleblowing (the act of reporting misconduct or unethical behaviour within an organisation). They seem to think that having a whistleblowing policy might lead to suggesting there are ethical or governance issues within. They fear that even unsubstantiated whistleblower claims could tarnish their reputation.
Interestingly, many employees, including senior executives, resist whistleblowing policies out of fear that it could lead to internal strife, expose misconduct within the organisation, or result in personal consequences for those involved.
It is even worse in most Indian companies, more so in the small and medium enterprise (SME) sector. There is a culture of speaking out against authority figures or senior management, as it may be seen as disrespectful or insubordinate. Remember the number of sexual harassment cases that are reported in India? There were a mere 28,000 cases between 2018-2021 whereas one in 15 employees experienced some form of it (ILO report).
Employees are sceptical about the confidentiality and protection provided by employers, and they fear retaliation or the leakage of their identities. Without the trust factor, reporting incidents will not happen. In India, concerns about potential legal implications and regulatory scrutiny deter companies from embracing good policies. Incidents in the past, from ICICI Bank to Sun Pharma, show the complexities of navigating the legal landscape.
In many cases, implementing and maintaining a whistleblowing programme requires financial resources, including investment in secure reporting mechanisms, investigations, and legal support. Some companies view this as an unnecessary cost.
It isn’t as if all Indian companies are resistant to whistleblowing policies, and there has certainly been growing recognition of their importance in recent years. Regulatory authorities have also taken steps to encourage whistleblowing and protect whistleblowers. However, cultural and historical factors, coupled with concerns about reputation and trust, lead to resistance within many organisations.
Overcoming these challenges requires a cultural shift within the organisation, a strong leadership commitment to ethics and transparency, and education about the benefits and legal protections associated with whistleblowing policies. Companies that successfully embrace whistleblowing as a means of improving corporate governance and ethics can reap the long-term benefits of a more accountable organisational culture.
Impact of whistleblowers
Whistleblowing should evolve from being viewed as a mere act of defiance to becoming a cornerstone of corporate governance. A healthy whistleblowing policy benefits employees and employers, promoting transparency, accountability, and ethical conduct.
In 2018, an anonymous whistleblower exposed the Nirav Modi-PNB fraud, resulting in the prevention of further financial losses (but not quite the arrest of the fraudsters). This shows how employees can be powerful allies in preventing corporate misconduct. In the US, the Enron scandal was exposed by whistleblowers who revealed accounting irregularities and fraudulent practices. The subsequent bankruptcy of Enron serves as a stark reminder of the financial devastation that could have been averted through whistleblowing.
The Infosys whistleblower raised concerns about irregularities in accounts. While the allegations were not substantiated, the incident put a spotlight on the company's commitment to transparency and corporate governance, safeguarding its reputation. In contrast, the Volkswagen emissions scandal, which rocked the automotive industry globally and was exposed by whistleblowers, resulted in a fallout that resulted in hefty fines and a loss of reputation because of its denial.
From fraud to “Me-Too”, there are many cases that demonstrate the benefits of a healthy policy. There is no point in not implementing a good policy in current times. Here are some best practices to follow:
- Ensure that employees have easy access to confidential and anonymous reporting mechanisms, such as hotlines or web portals.
- Establish strong anti-retaliation measures to shield whistleblowers from adverse consequences, ensuring that they are not victimised as it happens today.
Commit to conducting unbiased and comprehensive investigations into complaints to instil confidence in the process.
- Safeguard the identity of whistleblowers to protect them from potential harm while still allowing for effective investigations.
- Educate employees about the whistleblower policy, its importance, and the process for reporting misconduct. Regular training can reinforce the commitment to ethics.
Encourage employees to champion the policy by setting an example of ethical behaviour and transparency.
- Provide feedback to whistleblowers about the outcomes of the investigation, even if the allegations are not substantiated.
Regularly review and update the policy to align with changing regulations and best practices.
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