The state of whistleblowing programmes in India
Seven years since the launch of the Companies Act 2013, Indian corporates have stepped up their governance for curbing corporate malpractice, fraud, misconduct and non-compliance, according to a new Deloitte report. One mechanism that is seeing growing uptake is the use of whistleblowing programmes, although implementation remains an issue.
Reporting malpractice can be a grueling process, particularly if the perpetrators are peers or superiors within an organisation. Whistleblower programmes are designed to preserve the anonymity of anyone who chooses to come forward and report malpractice, through a systematic and secure mechanism.
Nevertheless, a slight chink in the armor of these programmes can discourage professionals from coming forward, which seems to be the case in India. Deloitte surveyed more than 200 C-suite executives and business professionals in the country, looking to gauge the effectiveness of whistleblower treatment.
The Big Four accounting and advisory firm found that a significant share of businesses in India have whistleblower programmes in place. Half of the survey's respondents are executives, and most of them are in fact in charge of a whistleblower mechanism.
Over 40% of these had either introduced or improved upon their framework since the Companies Act. In fact, less than 15% of surveyed executives reported that they didn’t yet have a structured whistleblower framework in place, indicating the widespread acceptance of such corporate governance checks.
Execution
However, problems emerge in the way these programmes are implemented. Awareness is one major issue. For instance, Deloitte found that nearly a third of businesses do not have a clear policy document that offers guidelines on the whistleblower process. Just over 30% have an annual training programme for whistleblowers, while 40% have campaigns or newsletters in place to inform employees about avenues.
Then there is the lack of infrastructure. Nearly half of all respondents invest less than 5 lakhs per annum on whistleblower mechanisms. As a result, employees are given a single channel to come forward in most cases, with only a third opening up multiple avenues.
Accountability systems are also vulnerable. Less than half of the respondents indicated that an ethics or audit committee was in charge of processing whistleblower reports, while the rest indicated that they power say with a single person in the organisation. The head of human resources, compliance or internal audits are examples of some individual custodians of whistleblower schemes.
Lastly, only a quarter of Deloitte’s respondents had mechanisms in place to record cases when they conduct an investigation, and monitor their progress. Not only does this block effectiveness of programmes within individual organisations, but it also offers little data to analyse the effectiveness of initiatives across India.
“Unless organisations in India are encouraged to share their success stories, whistleblowing programmes will not be taken seriously,” said Nikhil Bedi, Head of Deloitte’s Forensic practice in India, which sits within the Financial Advisory division.
More protection needed
Meanwhile, although corporate governance is increasingly a priority for Indian businesses, Bedi lends the survey results to suggest that the mechanisms in place are more a way of satisfying regulatory conditions than to actually protect whistleblowers.
The lack of investment and consequent lack of clarity in whistleblower programmes is evident, he pinpointed. Nearly half the respondents weren’t aware of reporting channels in their organisation, while roughly the same figure reported that they hadn’t received any formal training.
As a result, most view the mechanisms in place with suspicion. Exactly 50% said that they were uncertain of how complaints would be treated, and if they would even be addressed in the first place. Well over 60% didn’t trust that their reports would remain confidential, while a third had concerns around who the complaint would eventually reach.
According to the report, such a scenario is far from sustainable, and organisations are grappling with how to allay these concerns. As explained by Jayant Saran, also a partner at Deloitte, “Due to these challenges smaller corporations are still debating the basic need to set up a whistleblowing mechanism.”
The firm has three recommendations for businesses looking to improve their whistleblower mechanisms. Clear communication is key, be it about the policy or about action taken with respect to individual complaints. The second pillar is to use employees as a channel to promote ethical behaviour. Thirdly, when examples of ethical behaviour emerge, these should be rewarded publicly.
