Corporate Governance And Whistleblowing

Akshay Yadwendra, Jindal Global Law School

ABSTRACT

Often neglected in corporate governance scholarly narratives and in those players that complement governance institutions, whistleblowers are no longer evident within formal governance frameworks. Whistleblowers may within a company be lower-ranking employees, not directors or officers; expose perceptions of misconduct to others within the company or report them to governmental or other actors outside the company. However, it is notable how frequently corporate scandal retrospective stories incorporate internal whistleblowing events of governance and conformity failings. This research work suggests that adding whistleblowers into formal governance mechanisms could encourage director involvement in monitoring compliance.

Whistleblowing is important for internal compliance because it provides private information that suggests misconduct, typically provided by players not subject to whistleblowing requirements. Faithful whistleblowers are valuable because they create friction which makes publicly sanctioned narratives plausible. Whistleblowers' reports can also provide documentation on misconduct following the factual inquiry. The role of the Board of Directors to develop and monitor the compliance policies with whistleblowing components, as one State legislature has done, emphasises the significance of a proactive participation by directors. It also enhances the chance of involvement of lawyers who advise the board and the likelihood of more efficient use of reporting by whistleblowers.