Q.

4 Analyse how is whistle blowing effective in strengthening

corporate governance.
Whistleblower protection is integral to fostering transparency, promoting
integrity, and detecting misconduct. Past cases demonstrate that
corruption, fraud, and wrongdoing, as well as health and safety violations,
are much more likely to occur in organizations that are closed and
secretive. In many cases, employees will be aware of the wrongdoing, but
feel unable to say anything for fear of reprisals, concern about acting
against the organizations culture, or lack of confidence that the matter
will be taken seriously. The negative implications of this are far-reaching
for both organizations and society as a whole. Effective whistleblower
protection supports employees in blowing the whistle on corruption,
fraud or wrongdoing.

Whistleblower protection is the ultimate line of defense for safeguarding

the public interest. Protecting whistleblowers promotes a culture of
accountability and integrity in both public and private institutions, and
encourages the reporting of misconduct, fraud and corruption.
Whistleblower protection contributes to an environment of trust and
tolerance and enhances the capacity for countries to respond to
wrongdoing and matters of public concern. However, much remains to be
done to develop a climate of openness and integrity that enables effective
whistleblower protection.

Developing an Effective Whistle Blower Policy:

All business entities often struggle with an appropriate level of
segregation of duties making a whistle blower policy a good mitigating
tool. The Whistle blower policies effective implementations not only
reduce the fraudulent activities but also send a signal to both internal and
external agencies that organizations exercise good corporate governance.
The Whistle Blower Policy may be drafted and implemented by
management but it should be submitted to Audit Committee and Board of
Directors. The foundation of Whistle Blower Policy is a clear and specific
definition of Whistle Blowing. The key aspects are:

1. Clear definition of individuals covered by the Policy

2. Non-retaliation provisions

3. Confidentiality

4. Process
 5. Communication

The Whistle Blower Policy should include the methods to encourage

employees, vendors, customers and shareholders to report evidence of
fraudulent activities. It should properly address the processes that the
employees should follow in filing their claims. Specific Reporting
Mechanisms within the process could include telephone, emails, hotlines,
websites or suggestion boxes. The first steps of creating an environment
where a whistleblower will report problems that exist is the crucial one, to
be fully effective whistle blower policy must be consistently implemented,
claims investigated and evaluated and proper enforcement taken when
necessary.
Some of the instances of unethical practices/improper activities adopted
by certain organizations, which is required to be reported or for which
whistle should be blown are:

Theft, Harassment, Unethical practices, Fraud, Dishonesty,

Discrimination, Lack of Independence of Board/Committees,
Improper Director Remuneration Packages, Lack of Independence of
Auditors, Violation of Regulations and Code of Conduct, Insider
Trading, Corruption, Bribery, Lack of Work Place Safety Hazards,
Financial Statement Misrepresentation, Lack of Proper Internal
Controls.

Conclusion

Today with Scandals like Satyam, Tyco, AIG, Enron, Worldcom, Zerox, need
for more ethical governance has arisen. Whistle blowing has already been
described as one of the basic tenets of Corporate Governance, but in
India, there is no definite Whistle Blower laws. If this tool of Corporate
Governance is used in true letter and spirit, it can be savior for protecting
the stakeholders and the larger public interest. It can be success factor for
survival of corporates, build their brand image, which will support in
raising funds. It can be effective tool in curbing and reporting corporate
frauds, which earlier used to go unreported.

As it is always said, norms of Corporate Governance are not merely to be

complied with but have to be adopted as day-to-day practice of any
organization. Hence, Corporate Governance is a mixture of meeting both
the letter and spirit of law. It is high time India Inc., which is an emerging
economic powerhouse, to strive to raise the standards of Corporate
Governance Practices to Global Benchmark.