Money & Banking

Whistleblower policy being used by someto raise personal grievances: HDFC CEO

Our Bureau Mumbai | Updated on January 09, 2020 Published on January 08, 2020

Keki Mistry says malicious whistleblowing can impact stock prices, shareholder perception

 

Genuine whistleblowing, motivated by a sense of moral conscience and for the greater good of the organisation is important, but there are also people acting out of greed and revenge for advancing personal growth, according to Keki Mistry, CEO and Vice-Chairman, HDFC.

Addressing an event organised by the Confederation of Indian Industry, Mistry said malicious and irresponsible whistleblowing can impact stock prices, shareholder perception, and tarnish the image of the organisation.

“Whistleblower policy is an important measure of internal control, but it should also have checks and balances in place to curb frivolous complaints,” he said.

Recently, the Securities Exchange Board of India (SEBI) said that it would entertain complaints against market participants only if the whistleblower is reachable to substantiate allegations and provide supporting documents. It has also said that complaints made to it must be from an identified source.

Speaking about corporate governance, Mitsry said it is often looked at as a means to measure how well companies are run. In Mistry’s opinion, organisational culture is a key differentiator. Long-term company value can be created through a strong and unique culture.

“In India, over the last decade, we have seen some of the best and, unfortunately, some of the worst companies in terms of governance, with scandals ranging from collusion and misappropriation of funds to fudging accounts and fund diversion,” said Mistry. Governance laws are intensifying globally, with each country having different levels of corporate governance.

Board reshaping

The requirements of organisations have changed with time, society, technology and changing market forces. Mistry said that board composition changes have become important for management bodies in order to pace with technological disruptions. Directors should be digital-savvy and be aware of cybersecurity risks. Board composition should also focus on race, gender, and skill diversity.

“Independent directors are believed to be gatekeepers of compliance and governance in an organisation; boards should encourage them,” said Mistry. However, according to him, unreasonable expectations and displaced accountability have deterred well-qualified independent directors from joining company boards.

Investors are increasingly starting to look at non-financial factors to evaluate companies. Studies by global rating agencies have linked ESG to long-term value.

Mistry said that it is not just developed economies but emerging economies like India are also making an earnest effort to increase their standards of governance and the bar continues to rise. However, the administration and officials must ensure that corporate norms don’t become extremely stringent.

Companies should be allowed to flourish without overbearing regulation. “One of the reasons for the slowdown has been the averseness of companies towards risk-taking. This will hamper the animal spirit of our corporates,” said Mistry.

Published on January 08, 2020
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