Although whistleblowing is essential to promote good governance and ethical practices, there is a need to unveil and unmask whistle-blowers with vested interests.
For the first time, the Companies Act, 2013 recognized the whistle-blower concept by providing protection to individuals who expose wrongdoings by companies, particularly those involving frauds, corruption, etc. It is a salutary provision and aims to curb malpractices being indulged into by unscrupulous managements.
Of late there have been instances of whistleblowing by disgruntled persons, once a part of the management or after they fell apart from the managing group. The whistleblowing causes immediate individual harm or public trust damage resulting in massive erosion in shareholders’ value even before the accused gets an opportunity to put forward the correct perspective.
Although whistleblowing is essential to promote good governance and ethical practices, there is a need to unveil and unmask whistle-blowers with vested interests, who, under the garb of a “whistle blower”, choose to wash dirty linen in public to settle their personal scores. With regard to Governance practices, whistleblowing is a world renowned concept, but it becomes a far greater challenge when it gets raised by the Promoters’ family members themselves wherein the personal differences or interests are maliciously converted into Public Interest.
In such situations, there is a dire need to evaluate every action and the circumstances for such an action/s on at least the following parameters:
Firstly, one has to see with a fine toothcomb the motivation at an individual level of the person taking up the issue - whether he/she is taking it up to serve his/her own personal agenda or the reason behind such an action is indeed some genuine Public good. Secondly, the circumstances/background under which issues get raised are also an important factor that need to be evaluated minutely. In other words, the timing of raising the particular issue is of huge significance.
One case we can look at right now is that of Omaxe, wherein Promoter’s younger brother is the whistle blower. Omaxe, that was founded in 1987 by Rohtas Goel, who later inducted his younger brother, Sunil Goel on the Board. Over the time, the company grew and this big real estate development company set up footprints in 8 states and 27 cities. In the present case, the younger brother has questioned certain steps by the management alleging mismanagement after he was not reappointed on the Board.
Whether his allegations will hold true in the long run is a different story all together, but as of now it’s the general shareholders who are on the losing side. Scanning the allegations on the above mentioned parameters, it’s important to address this issue in the backdrop when questions get raised to settle personal scores rather than for the larger public interest. Furthermore, it will be interesting to know, if the same person had ever got his dissent noted, during his tenure as a director, or he has raised the issue after he has not been reappointed on the Board.
It’s a well-known fact that the real estate sector has been in difficult shape in the last several years and even the best of companies are facing the heat and are defaulting. Another blaring example of whistle blowing under the garb of public good was that of GHCL. In the said matter, during 2008, low level of promoter stake led to few large investors coming together trying to present the whole situation as a failure of the promoters to run the business well and raising governance issues. The public discourse that got built up was of lack governance practices at GHCL but finally it ended with the ulterior motive being much different.
In Manpasand Beverages case again, Governance was the key issue raised by certain set of investors post the auditor’s sudden exit, which led to its share price fall from around Rs 300 to less than 100 level and still struggling – for no fault of its own. The promoters of the company have alleged that this was part of a larger conspiracy by some big players of the industry. The moot question that arises is for whose benefit the whistle blowing concept has been introduced- – personal or shareholders? Fact is whatever the outcome of such cases may be, it is always the shareholders who bear the brunt - value destruction, business squeeze, job losses for employees, challenges for vendor partners, and loss of business opportunities.
Also the management bandwidth gets challenged and instead of putting up all efforts for the company’s growth and betterment of shareholders’ value, a lot of energy goes in fire-fighting and troubleshooting the negative fallouts. So overall the guiding light for all general public and shareholders is always to consider, decode and evaluate behind any news arising out of any motivated campaigns against any company or its promoters, more so when the allegations are from a co-promoter or a family insider. Doing so will in a very short span of time bring out the truth.
While the basic philosophy of whistleblowing is to provide a mechanism for reporting genuine concerns and accordingly law provides for adequate safeguards against victimization of persons who use this mechanism, should there be not a law to hold the whistle-blower accountable for his actions based on unsubstantiated/false allegations and to require him to make good the value destruction created by his motivated actions. Let the larger good and larger interest prevail!!!
[The author is the Founder of Corporate Professionals. The views and opinions expressed in this article are those of the author and do not necessarily reflect that of Business Television India (BTVI)]
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