Posted on 8 May, 2023 by Taha khan

JURISPRUDENTIAL ANALYSIS OF CORPORATE WHISTLEBLOWING

1.

One of the most important changes in corporate governance over the past fifty years has been the institution of the whistle-blower.[1]Whistle-blowers have been widely acknowledged to perform a crucial and necessary role in society.[2]According to conventional jurisprudential literature on corporate law concerning Whistle blowers, there have mainly been two conflicting schools of thoughts regarding whistle-blowers:

1. Firstly, they have been considered snitches.
2. Secondly, being heroes without capes.

Although conventional literature will paint this black and white picture but as will be argued in much detail in the proceeding sections this is not at all true. In addition to this, another aspect which needs consideration in the law-making process concerning whistle-blowers is that of retaliation. It cannot be overlooked that whistle blowers are just regular employees who feel forced to act because of the actions of their superiors. Their employers unfortunately frequently tend to react to such behaviour by terminating their employment.[3]Employees who are terminated for reporting misconduct often lack legal recourse against their employer for this retaliatory action.[4]Moreover, the value of the whistle-blower in society has been a major topic of discussion in the legal and academic communities.[5]This value has been debated a lot, but much like other legal issues even this suffers from toxic Eurocentricity wherein third world socio-cultural norms have largely been ignored in the law-making process.

Section 2 of this research paper begins by narrating the evolution of the role of whistle blowers over the years and discusses the jurisprudential issues arising from the same as well. Throughout the section personal opinions and arguments have also been given.  In the next section (i.e. 3) of this research paper, third world and other east Asian socio-cultural norms and their effects on evolving law on corporate whistleblowing will be discussed and argued for in much detail.  Thereafter, in section 4 it would analyse the jurisprudential problems surrounding the current legislations governing whistle blowers. Finally, it would conclude in section 5.

2.

Evolving role of Whistle blowers

Over the past half century cases of corporate whistleblowing have increased drastically.  In the past, in western corporate houses, many decision-makers had an unfavourable opinion of whistle blowers and considered them "snitches." This unfavourable opinion considering whistle blowers discouraged many potential whistle blowers to disclose. However, over the years number of whistleblowing case rose. In my opinion, this rise in whistleblowing cases could have been the result of two reasons rather than simply a change in how people perceive whistle blowers, the reasons have been enumerated as follows:

1. A greater willingness to challenge corporate misbehaviour by employees
2. Result of an increase in corporate corruption as a whole.

As whistle blowing cases increased, the jurisprudential problems regarding how to respond to the same also did. There are numerous ways to respond to disclosure by a whistle blower. Although radicalistic in thought, condemning whistle-blowers as treason is one way to respond to it.[6]Another option is to accuse the whistle-blower of making baseless claims. Interestingly, in this context, the Indian Supreme Court in one case took into consideration the fact that the appellant who wanted the status of a whistle blower was a mere 12^thstandard pass out, and thus was not well versed in the technicalities, thereby he must have had some ulterior motive.[7]Therefore based on this the apex court refused to grant the status of a “bonafide whistle blower” to the appellant. [8]

The Watergate break in that forced Richard Nixon to resign, raised awareness of the need for whistle blower laws and helped to fuel the push for whistleblowing protection.[9]The Watergate scandal transformed the image of whistle blowers throughout the 1970s-80s first in the United States of America and then the world over including India, from perceiving them as snitches to corporate heroes. Companies and governments in the US and overseas soon realised that in order to empower and encourage workers to take on the role of whistle blowers, substantial legal protection must be offered to shield them from employer reprisal. This triggered a lot of governments to make laws granting protection to corporate whistle blowers.

As mentioned in the preceding sections, the goal is to strike a balance between the employer's desire to keep employees loyal and society's interest in employing whistleblowing employees to uncover misconduct that could otherwise go undetected. A lot of jurisprudential issues arise on striking this balance. Moreover, there is a conflict between the duties of loyalty and care when it comes to whistleblowing. Ideally speaking, The top executive must express its opposition to any conduct that they think are unlawful. But in reality the top executive tries its best to supress any dissenting voices as has been observed in numerous cases. In the Indian context such as those of “Indian Oil Corporation official and later whistleblower Manjunath Shanmugam”[10]. He was brutally murdered for his brave act of whistleblowing. Cases like these really bring into question the stringency of the current both in India and abroad.

Media portrayal and law making

Contemporaneously, the whistle blower is given a heroic portrayal in the mainstream media.[11]Therefore, whistleblowing is now more accepted than it had previously been.  External whistleblowing refers to reporting a wrongdoing to a group outside of the organisation, like the press or journalists.[12]Whistle blowers who disclose to the media directly are treated particularly harshly, for instance; Legislators and courts in particular frequently decline to defend whistle blowers who provide information to the media.[13]Therefore, when the target organisation lacks any established formal reporting processes, external whistleblowing is more common. In this scenario individuals tend to approach the media, but this causes them to face much retaliation.

USA on whistleblowing: Sarbanes-Oxley Act

In the United States of America the rights for private business whistle blowers varied based on state law prior to the Sarbanes-Oxley Act. Prior to SOX, whistle blowers were covered under federal, state, and common law statutes. After the enactment of the Sarbanes-Oxley Act uniform protections were granted to whistle blowers.[14]Senior officers and managers have to be concerned about holding their jobs at will in some states due to these various protections. In general in the United states there have been cases wherein the anti-retaliation exception to partnerships at-will status has been rejected by the court[15]. Employees who have reported safety concerns or who are obligated to report safety infractions appear to be protected in the majority of states. The least protected personnel were those who were only reporting violations of corporate policy. Additionally, a few of states refuse to provide protection to whistleblowers who make “false accusations” or who do not “thoroughly research their concerns.”[16]
The SOX has sparked much debate as rather than simply incentivising whistle blowers to disclose it mandates them to do so. In my opinionthis is a rather uncalled for approach. Moreover  refusal to grant whistleblowers protection on account of them making false accusations and not thoroughly researching their concerns is arbitrary and is liable to be easily misused usually by powerful multinationals.

Irs Whistleblower program and United Nations Ethics office

Since more than a century, the Internal Revenue Service of the USA has had the legal right to reward people who report people who do not pay their taxes.[17]A lot of debate among legal circles has emerged surrounding this including senators in the senate voicing against rewarding the perceived rats. In one senate hearing, a senator made the argument that the Whistleblower Program should be scrapped since it rewards people for reporting their coworkers, relatives, and other parties.[18]It has also been referred to as the “award for rats program”. Thereby viewing the whistle blowers in negative light.

In numerous cases concerning prima facie acts of what conventional literature would term as whistleblowing, the United nations has held them to be acts of “retaliation. For instance in one case the UNAT said that whistle-blowers, who it described as those who report an act of misconduct by a departmental colleague to higher authorities, are not specifically included in the Ethics Policy.” Although in this case it was claimed that he was a "whistle-blower," the UNAT found that he was truly a victim of retaliation.[19]

On the contrary in one rare occasion the same UN had held that the petitioner should have been granted whistle blower protection, which had accepted a staff member's status as a "whistle blower."[20]

In my opinionthe stand of International organisation on the topic of whistle blowing is rather arbitrary and inconsistent.

3.

Cultural beliefs and their effects on whistleblowing

Due to the influence and pervasiveness of modern multinational organisations as well as the interdependence of whistle-blowing practises across countries, it is crucial to understand the relationships among whistle blowing, subjective norms, attitudes, and intentions across cultures.[21]When Time Magazine named the three whistle blowers "people of the year" in 2004  public perception regarding whistle blowers changed significantly for the better.[22]Moreover, attitudes regarding whistle-blowing also depend on whether the society concerned is more collectivist or individualistic. For instance, in the more collectivist Thai society than in the more individualistic American culture, it is more crucial to shape subjective standards and attitudes to encourage whistle-blowing. In addition to this it has been observed that in cultures such as those of south America(in particular brazil), brazilians value euphemisms, strategies to avoid the unpleasant, and ways to lessen inconveniences. They avoid fights at all costs.[23]These persistent indications allow for the description of a culture in Brazil that, on the whole, is not supportive of whistleblowing conduct.[24]

Coming to east Asian cultures such as those of South Korea, Confucian ethics and collectivism, are prevalent in East Asian society that have had a significant impact on whistle blower motives.[25]Confucianism had a very prominent spiritual influence on East Asian cultures during the Middle Ages as Christianity did on Western culture. Before the arrival of the Europeans, the bulk of legislation in countries such as Japan and Korea were founded on Confucian principles[26]. A law that offered legal assistance to whistle blowers was opposed by Korean academics and activists who said that the bill violated collectivist principles and Confucian ethics, which are fundamental to South Korean society.[27]Thereby, in the case of Korea Religious beliefs and other traditons once seemed to challenge coporate law making concerning whistle blowing.

Collectivism vs Individualism

Firstly, I would like to admit that there has not been enough research to support the arguments on whether collectivism has a detrimental relationship to whistleblowing. As has been discussed in the preceding section, one of the cultural characteristics of Asian civilization is collectivism. It is possible that whistleblowing is more consistent with the individualistic cultural traits of Western society than the collectivistic culture of Asian society, as indicated by the quick proliferation of whistleblowing legislation in Western nations.[28]Positive impacts of collectivism on the two types of whistleblowing suggest that those with a more collectivistic outlook are more inclined to not whistleblow.

4.

Jurisprudential Problems with Laws regulatING corporate whistle blowing

Whistle blower laws typically only come into effect after revelations have been made and retaliation has started, which is a fundamental problem.[29]Another issue is that there are various covert ways for businesses to undercut workers without offering concrete proof of retaliation. Whistle blowers frequently experience rumours and ostracism, yet both of these reactions are nearly impossible to record.   Protective or supportive measures for whistleblowers are required and should focus on mental health issues in addition to sources of stress like job loss and income loss.[30]In addition to this there is a severe disinclination towards protecting perceivably less important disclosures concerning the environment, thereby there need to be laws more specific to environmental whistle blowers.[31]

Blowing the whistle is linked to numerous stressors or resource loss. Mental health issues among corporate whistle blowers are increasingly becoming common.[32]These can be lowered by removing sources of stress like financial issues brought on by job loss, fees associated with legal aid. In addition to this actions like providing social support, counselling, or treatment could be provided for.

Severe retaliation can disparage whistle blowers from disclosures. For instance on numerous studies done on whistleblowing in Police departments, it has been found that retaliation against police whistle blowers is extremely expansive. Police agencies themselves pay a lot of money to bring down whistle blowers. Whistle blowers are discouraged as a result. Thereby, when any corruption or hedious activity is revealed, it is by a third party such as an investigative commission, a grand jury inquiry, or another entity Due to these third party involvements police institutions publicly humiliate departments, so those departments have power over the investigation. [33]

As has been discussed in much detail in the previous sections there are mainly 3 statutes which govern whistleblowing in India, namely, the Companies act, 2013, whistleblower act, 2014 and the SEBI(LODR). As has been argued throughout the paper these legislations aren’t enough and are still incomplete. After a brief analysis of some cases concerning whistle blowing in India it becomes clear that large multinationals and government organisations try their best to supress dissenting crusading voices. In this context it becomes obligatory to introduce more stringent laws to protect these voices. Moreover, As has been discussed in the preceding sections in much detail, whistle blowers are just regular employees who feel forced to act because of the malicious actions of usually their superiors. In doing so they face a lot of resistance, including hostility from their own governments and powerful corporates. Fear of retaliation, losing one's job, is a common occurrence among those who blow the whistle. In my opinion more focus by lawmakers should be placed on acknowledging that whistle blowers should be protected because many of them benefit society. A value driven approach should be adopted by lawmakers while framing laws concerning whistle blowers. Moreover, whistle blowers should be seen in a more positive light rather than as snitches in media portrayal. Also, in the Indian context most legislations are incomplete. As has been discussed in the preceeding chapters there is an urgent need to expand the whisleblower protection act, 2014 to cover private companies as well. In addition to this care should be taken to inculcate evolving jurisprudence from other countries such as the United States of America and the United Kingdom albeit in tandem with third world approaches to corporate whistleblowing law.