Sebi forced to review whistle-blower policy

In October, the government was forced to withdraw the Companies (amendment) Bill, 2003, as corporate honchos objected many of the corporate governance norms suggested by the government. Simultaneously, the Sebi was told to review Clause 49 of the Listing Agreement of Stock Exchanges as many of the provisions were part of the proposed Companies Bill. Sebi asked the Murthy panel to review the corporate governance provisions and take into account the objections raised by the corporate sector. ‘‘The panel is now in the process of finalising the new corporate governance proposals. It’s surprising that representatives from the corporate sector didn’t raise any objections when the committee earlier finalised the report and Sebi made it part of the Listing Agreement. Corporates raised a hue and cry when the Companies Bill was taken to the Cabinet for approval in October this year,’’ said a member of the Narayana Murthy committee.

A Sebi official says, ‘‘Sebi is revisiting changes to Clause 49 (made on August 26, 2003) and implementation of the same is being deferred till further notice. We continue to receive feedback and representation on the amendment.’’ Industry chambers led from the front in challenging the new corporate governance norms. ‘‘With the withdrawal of the Companies (amendment) Bill, 2003, CII is of the view that Sebi should also amend Clause 49 suitably to make it useful for Indian companies and then introduce it in a phased manner,’’ Confederation of Indian Industry (CII) said.

‘‘Ficci is of the view that some of the sub-clauses of the revised Clause 49 are extremely detrimental for the growth of the corporate sector as well as the functioning of board of directors…,’’ Ficci said.

The Sebi had made it mandatory that all listed companies should create a mechanism for employees to report to the management concerns about any unethical behaviour, fraud or violation of the code of conduct. The regulator also asked companies to put in place a suitable mechanism for safeguards against victimisation of whistle-blowers and that they should have direct access to the company’s Audit Committee.

This is what CII chief economist and a member of Murthy panel Omkar Goswami wrote about the whistle-blower policy in Financial Express: ‘‘… the new Clause 49 says that listed companies must have a Whistle Blower Policy.’’