This week, co-founder and group CEO of Flipkart, abruptly quit the firm. A statement issued by Flipkart and Walmart said that "His decision follows an independent investigation done on behalf of the Flipkart and Walmart into an allegation of serious personal misconduct. He strongly denies the allegation. Nevertheless, we had a responsibility to ensure the investigation was deliberate and thorough. While the investigation did not find evidence to corroborate the complainant’s assertions, it did reveal other lapses in judgement, particularly a lack of transparency, related to how he responded to the situation. Because of this, we have accepted his decision to resign."
This is the latest example of swift action taken by firms, especially international and large Indian firms on complaints filed by whistle-blowers pointing to a growing challenge for brand and reputation managers to look at the fallout of such issues.
Sanjay Choudhry, veteran corporate affairs and communication professional says, "The culture of Indian firms has been evolving since the 1990's when the Indian economy opened up. At that time the professionals that entered the market were trained and educated in a certain way and structures within companies tended to be quite rigid, making it tough for whistle-blowers to get a platform. Now, with the advent of start-ups professionals are not necessarily trained to follow processes and structures, the openness of social media also makes it easier for people to voice their challenges.
Choudhry adds that this directly impacts reputation. He says, "If employees are your best brand ambassador a bad word from them can affect your product, your brand and the quality of people who join. Having said that change is not a pendulum and you are unlikely to see a quick change in how firms approach whistle-blowers. The entire culture of corporate India is evolving and the appropriate cultural change will take a lot of time."
The Ranbaxy whistle-blower story
In 2013, drug maker Ranbaxy, later sold to Sun Pharma in 2014 after Daicchi Sankyo acquired the firm pleaded guilty to multiple criminal felonies in the US. The firm agreed to pay $500 million to resolve criminal and civil allegations of falsified drug data and systemic manufacturing violations resulting in substandard and unapproved drugs. The groundbreaking settlement is the largest of its kind against a generic drug manufacturer. The person who led to this was whistle-blower Dinesh Thakur, a former Ranbaxy executive who worked with the US FDA for eight years to expose the data fraud after reporting the matter internally as well.
This is probably the most prominent and well-known case of a whistle-blower in India. Few such cases would ever see light, tough as they can be to prove. And the whistle-blower is at considerable risk for being targetted in the follow up to a complaint. But, what the #MeToo movement has done is open the doors to a certain comfort in making public issues against a firm. In addition, the revised Companies Act 2013 has broadened the ambit of whistleblowers substantially where listed firms are concerned.
Section 177(9) of the Companies Act, 2013 and Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 requires every listed company, companies which accept deposits from the public and companies which have borrowed money from banks and public financial institutions in excess of fifty crore rupees to establish a vigil mechanism for Directors and Employees to report their genuine concerns about on unethical behavior/misconduct / actual or suspended frauds / violation of code conduct.
Legal experts say in effect the vigil mechanism and whistle-blower policy emerging from that as outlined in the Companies Act 2013, means that virtually any stakeholder can file a complaint rising to considerable reputational challenges.
Mukund Trivedy, founder Straight Drive and corporate communication veteran says, "The organization which believes in treating employees with respect and dignity need not worry at all. The employees of such entities are their real brand ambassadors who will voluntarily come out and defend the company’s brand and reputation in the event of any one-off incident. However, the companies which have chinks in their armour should definitely worry about the backlash and public outrage. Such toxic companies should remember that like #MeToo movement all aggrieved stakeholders also feel encouraged to share their own stories during such public outbursts."
Legal implications for whistle-blower complaints
This is one area of reputation management where walking the talk requires concrete and often legal steps.
Shivli Katyayan, general counsel, Policybazaar.com group of companies explains that "The basic challenge faced in ensuring that the spirit of the law is complied with is the recognition and subsequent definitive action on the whistle-blower complaint. An action which establishes that – a genuine complaint will be seriously examined and actioned and if the complaint is found to be false – the complainant will also be subject to appropriate measures against him/her."
In addition, communicators strongly believe that ensuring correct follow-up action requires a certain culture that flows from the very top.
Trivedy, a whistle -blower himself advises that " The companies may begin by asking themselves whether their employees feel empowered to ask tough ethical questions in meetings or not. People go out and share the company’s misdemeanour on social media only when they are rebuffed and denied an opportunity to speak inside the company."
He adds that "A robust internal mechanism built on the trust and confidence of employees is critical to averting any public fury. The leaders at the top must demonstrate their commitment to open communication through their actions and behaviours. For instance, how many companies would reward their whistleblowers for speaking up and showing genuine concerns?"
Katyayan agrees that being publicly seen as supporting action on "Affirmative action on the matter including a statement to the public would show definitive intent on the company’s part to follow the law and prevent dilution of the company’s reputation. It also helps to have a liability cover against such fallouts."
At the end of the day, Trivedy says India has very good corporate communication professionals who are equal to the task of handling complex issues that emerge after a complaint. He adds that "They need to take cognizance of such probable crisis and prepare well to take control of the messaging. The key to success lies in making employees the company’s brand ambassadors. We have the talent, technique and tools. The question is whether corporates have the intent to make it happen or not?"