As part of its efforts to tackle growing number of corporate scams, the Securities & Exchange Board of India (Sebi) has decided to make it obligatory for listed companies to provide their employees and directors with a whistle-blower mechanism.
The capital market regulator will incorporate a provision in this regard in its new Corporate Governance Code for listed companies. The Code has already been approved by the regulator's board. The market regulator said the proposal received nineteen comments in its favour, while just one was against it.
The facility aims at encouraging directors as well as employees to report their genuine concerns and any wrongdoings in the functions of their company.
Sebi said in a statement, "Other external stakeholders are not totally within the powers of the company and have other avenues for redressal of their concerns. Hence, the proposal may be aligned with the Companies Act, 2013 and whistle blowing mechanism may be restricted to directors and employees only."
While the mechanism would stress on the need to protect whistle-blowers from victimization, it also aims to check any misuse of this mechanism.
Currently, a listed company may set up a mechanism for its employees to report to the management their concerns regarding any unethical behaviour, but it not compulsory for companies to have a whistle-blower mechanism.