The right to expose wrongdoing

But the question before employees is whether whistleblowing is completely safe.

Written by KP Shashidharan | Updated: January 9, 2014 10:40:22 pm

But the question before employees is whether whistleblowing is completely safe.

Whistleblowers play a significant role in any civil society. In their efforts to report misdeeds,whistleblowers often face a risk to life and adverse consequences,such as losing their jobs,getting sued,blacklisted,arrested,threatened and,in extreme circumstances,assaulted or killed. There have been tragic cases in the past where a whistleblower has paid with her life for disclosing corruption in the public interest. A decade after the fatal whistleblowing act of Satyendra Dubey — a project director in the National Highways Authority — by writing to the then prime minister divulging gross contractual irregularities in the Golden Quadrilateral highway project ended in his death in 2003,the Public Interest Disclosure and Protection to Persons Making the Disclosure Bill,2010 is in the final process of enactment. For corporate whistleblowing,the Companies Act,2013 now provides that “Every listed company or such class or classes of companies,as may be prescribed,shall establish a vigil mechanism for directors and employees to report genuine concern in such manner as may be prescribed.”

Such a provision is welcome,coming as it does against the backdrop of an increasing number of corporate scams,rising instances of investors being cheated,corporate defaults on payment of interest on borrowings leading to non-performance assets in banks and public financial institutions.

As per the act,an audit committee should be constituted in a company to act in accordance with the terms of reference specified in writing by the board of directors. The terms of reference should specify wide responsibilities,which should include those responsibilities specified in the act. The audit committee should have the power of recommendation for the appointment of auditors,their remuneration and terms of appointment,of reviewing and monitoring the auditors’ independence,the performance and effectiveness of the audit process and the examination of the financial statement and auditors’ report thereon.

The committee is also duty bound to examine the approval of any subsequent modification of the company’s transactions with related parties. It should scrutinise inter-corporate loans and investments,the valuation of undertakings or assets of the company,the evaluation of internal financial controls and risk management systems. The audit committee is legally responsible for monitoring the end-use of funds raised through public offers and related matters. The committee shall also have the authority to investigate any of the matters specified in the act.

The act makes it mandatory to not only establish a vigil mechanism but also provide “for adequate safeguards against victimisation of persons who use such mechanism and make provision for direct access to the chairperson of the audit committee in appropriate or exceptional cases”. In those companies where the audit committee is not in operation,the board of directors are to nominate a director responsible for the vigil mechanism. Other directors and employees may report their concerns to him. Rules are being framed to provide for adequate safeguards against the victimisation of employees and directors who blow the whistle. Besides,the whistleblower will have access to the chairperson of the audit committee,or to the nominated director.

The question before an employee looking to expose corruption is whether the act of whistleblowing is completely safe. An employee should have legal protection if she thinks what she is reporting is true and is reporting to the right person,following the proper procedure. When an employee breaks the law by reporting something under the Official Secrets Act,she should be conscious of the fact and seek legal advice. There should be an employment tribunal and an industrial tribunal to decide whether the employee has been unfairly treated or dismissed,and whether she should be reinstated or paid adequate compensation.

The whistleblower’s identity should not be disclosed to the accused,as has been clearly ruled by a bench of the Supreme Court. Employees should have the right to refuse to participate in wrongdoing and whistleblower rights should ideally override employee loyalty oaths,as well as confidentiality and non-disclosure agreements. While whistleblowers intentionally making false disclosures should be punished,a good whistleblower protection regulation should safeguard even the whistleblower who makes an inaccurate disclosure,based on reasonable belief of wrongdoing,and safeguard her from disciplinary proceedings and liability under criminal,civil,slander,copyright and data protection laws. Adequate protection measures should be in place legally to safeguard family members of the whistleblower.

The act of whistleblowing helps ensure greater transparency,integrity and accountability in public life. It is therefore important to keep in place a robust whistleblower protection legislation.

The writer is director-general in the office of the CAG. Views are personal.

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