Module-1 Ethics Programme: Ethics Audit - Part 2/3
Ethics Audit Mechanisms
The following mechanisms viz.., Whistle Blowing, Ombudsman, Lokpal & Lokayuktha, Listing agreement with Stock Exchanges by companies and Provisions of the Companies act 2013 are available in the Indian context, to supplement the corporate ethics in business and government.
1. Whistle
Blowing
The
term “whistle-blowing” originates from the practice of British policemen who
blew their whistles whenever they observed commission of a crime.
Whistle
blowing means calling the attention of the top management to some wrongdoing
occurring within an organization.
Whistleblowing
is the act of revealing inappropriate activities, often anonymously, to parties
within or outside the organization with the purpose of alerting individuals who
can take corrective action.
Whistle-blowing
is the first line of defence for organisations to uncover and mitigate
activities of fraud and other malpractices. It plays a vital role in supporting
ethics and compliance programmes for organisations.
Whistle-blowing is also an alternate mode for
communication between employees and management when other formal channels may
present a barrier and are not supportive enough in revealing serious act of
misconducts.
Many
organisations face challenges in establishing a robust whistle-blowing
mechanism and subsequently have less convincing reporting channels that
encourage employees to report suspicious incidents.
The
objective of whistle blowing are to
• Encourage employees to bring
ethical and legal violations they are aware of to an internal authority so that
action can be taken immediately to resolve the problem
• Minimize the organization’s
exposure to the damage that can occur when employees circumvent internal
mechanisms
• Let employees know the organization is serious about adherence to codes of conduct
Also written as whistle-blower or whistle blower is a person, usually an employee, who exposes information or activity within a private, public, or government organization that is deemed illegal, illicit, unsafe, or a waste, fraud, or abuse of taxpayer funds
The
committees constituted at various points in time for improving corporate
Governance in India has strongly recommended whistle blowing as an important
element
Confederation of Indian IndustryCode on Corporate governance 1998
Kumara Mangalam Birla Committee 1999
2. Ombudsman
An
ombudsman is an official who is appointed by the Government to investigate
individual’s complaints against a company, financial institutions, businesses,
organization, specially a government department or public entities and attempts
to resolve the raised concerns either by process of mediation or giving
recommendations.
An ombudsman is an independent body to which consumers cantake their complaints. It has the powers to mediate settlements between
consumers and their service providers and can act as a one-stop solution to
their woes as its recommendations are binding on all players. If the
complainant subscriber is not satisfied, he has the option to approach another
forum.
An ombudsman is an
official appointed to investigate complaints against a service or an
administrative authority. Though they are usually appointed by governments,
private companies can also have them. In India, the government has appointed
ombudsmen to resolve grievances related to banking, insurance and income tax. Acrucial consumer-friendly aspect of the scheme is that the verdicts are binding
on banks, insurance companies and the tax department, but not on the
complainant. If an individual is not satisfied with the verdict handed out by
the ombudsman, he is free to approach other redressal forums.
ELIGIBILITY
You can’t approach an ombudsman directly. Your case will be considered only if
you complained to the relevant authority and failed to get a response.
TIME BAR
The complaint should be made within a year of receiving a reply from the
concerned authority. If there is no reply, it should be within 13 months of
filing the first complaint.
FORMAT
Though there is a form to file a complaint, it can also be done on plain paper.
One must state the relevant details of the case and send it to the ombudsman’s
office.
E-COMPLAINTS
Grie vances can also be e-mailed to the ombudsman. However, the complainant
will still have to visit the ombudsman’s office to sign a copy of the
complaint.
PROCEEDINGS
Ombudsmen are not bound by legal rules of evidence and may follow procedures
that they feel are fair and proper. Proceedings are summary in nature.
AWARDS
An ombudsman is required to pass a verdict within three months of receiving a
complaint. Awards are binding on banks, insurance firms and the tax department.
Ombudsman
is available for Banking , Insurance, Income Tax among other sectors in India.
i.
Banking Ombudsman
Banking
Ombudsman is a body created by the RBI to take care of the banking complaints
of the general public in India. RBI appoints a senior official or Ombudsman who
addresses and resolves all the complaints and grievances of the customers.
TheBanking Ombudsman is basically that has been created by RBI to look after
banking related complaints that general public may need assistance with. The
Ombudsman is a senior official, who has been appointed by the Reserve Bank of
India to address grievances and complaints from customers, pertaining
deficiencies in banking services. It covers all kinds of banks including public
sector banks, Private banks, Rural banks as well as co-operative banks. It was
originally established in 1995, it went through some major revisions in 2006
which covered transactions pertaining to complaints of ATM cards, debit cards and
credit cards, deduction of service charges by banks without prior intimation,
unfair practices of banks and non-compliance by direct sales agents (DSA) of
banks for the services that were promised while opening the bank account and
more. It was last amended in February, 2009 as of December, 2015 to meet the
deficiencies that arise from online banking as well.
There
are currently (08 Feb 2021) three separate ombudsman for banks, NBFCs and non-bank prepaid payment issuers
(PPIs), including wallets.
At
present, the RBI has a Banking Ombudsman (BO) at 22 offices. In the larger
offices, a second BO looks into complaints of digital banking, i.e. complaints
against authorized payment system operators, in addition to his or her normal
work. Plus, there is an RBI ombudsman for NBFCs at four offices
The
RBI plans to integrate them under one centralized scheme to make the grievance
redressal mechanism more efficient and simpler. Under the new scheme, you will have one ombudsmen for all
your complaints related to a bank, NBFC or a digital wallet. Integration has
its advantages of streamlining of systems, optimal utilization of manpower and
quicker decision-making, leading to earlier resolution of complaints in a more
standardized format
ii.
Insurance Ombudsman
The ombudsman mechanism
was administered by the Executive Council of Insurers, which
has been renamed as the
Council for Insurance Ombudsmen.
The government on March 2 , 2021
notified comprehensive amendments to the Insurance Ombudsman Rules, 2017, with
a view to improve the working of the insurance ombudsman mechanism to
facilitate resolution of complaints regarding deficiencies in insurance
services in a timely, cost-effective and impartial manner.
Under the amended rules, thetimeliness and cost-effectiveness of the mechanism has been substantially
strengthened. Policyholders will now be enabled for making complaints
electronically to the ombudsman and a complaints management system will be
created to enable policyholders to track the status of their complaints online.
Further, the ombudsman may use videoconferencing for hearings.
Further, insurance brokers have been
brought within the ambit of the Ombudsman mechanism, by empowering the
Ombudsmen to pass awards against insurance brokers as well; A number of
amendments have been made for securing the independence and integrity of the
ombudsman selection process, while also building in safeguards to secure the
independence and impartiality of the appointed persons while serving as
Ombudsmen. Further, the selection committee will now include an individual with
a track record of promoting consumer rights or advancing the cause of consumer
protection in the insurance sector.
iii.
Telecom Sector Ombudsman
The Cellular Operators Association
of Indian (COAI) and the Association of Unified Service Providers of India
(AUSPI), the industry bodies representing GSM and CDMA operators made a good
beginning for the introduction of an independent, cost effective and effective
dispute settlement body on March 13, 2007
The initiative to address consumergrievances, all telecom service providers jointly announced the setting up of
an ombudsman. The first office for the Telecom Sector Ombudsman (TSO) will be
set up in New Delhi and will look into consumer grievances across the country.
3. Lokpal
& Lokayuktha
The
Lokpal in India is synonymous with the concept of Ombudsman prevailing in other
countries such as Sweden, Finland, Denmark, etc. The concept of Ombudsman
initially originated in Sweden in the year 1809 and now adapted in many other
nations in the world. It played a significant role in curbing maladministration
and corruption. Ombudsman is a government official who investigates the
consumer’s complaints relating to the administration and judicial function.
Thus, it helps to protect the rights and interest of the people and checks on
abuse of power and over the exercise of jurisdiction of the superior
The Lokpal and Lokayukta Act, 2013 was
enacted to establish Lokpal for the Union and Lokayukta for States to perform
the functions of Ombudsman in India.
These
institutions are statutory bodies without any constitutional
status.
They
perform the function of an "ombudsman” and inquire into allegations of
corruption against certain public functionaries and for related matters.
In the Central
Government, the President is empowered to appoint the Lokpal after
consultations with Chief Justice of India and the Leader of Opposition in Lok
Sabha. The Lokayuktas are appointed by the Governors in consultation with
Lokpal. In a case the Supreme Court held that opinion of Chief Justice of High
Court has primacy in appointments of Lokayuktas. The Lokpal or Lok Ayuktas hold
office for a term of 5 years. They cannot be easily removed from political and
judicial interferences. They can be removed from the office on the ground of
misbehaviour, incapacity etc, by the President after following the procedure
laid down in this respect.
4. Clause
49 of Listing Agreement with Stock Exchanges
It
is a non-mandatory requirement under clause 49 of the listing agreement
by companies
The
company may establish a mechanism for employees to report to the management
concerns about unethical behaviour, actual or suspected fraud or violation of
the company’s code of conduct or ethics policy.
It
provide for adequate safeguards against victimization of employees who avail of
the mechanism and also provide for direct access to the Chairman of the Audit
committee in exceptional cases.
Once
established, the existence of the mechanism may be appropriately communicated
within the organization.
5. Provisions
of Companies Act 2013
It
is mandatory for
• All
the listed companies and
• Companies
which accept deposits from the public
• Companies
which have borrowed money from Banks and PFI in excess of Rs.50
crores under section 177(9) read with Companies (Meetings of
Board and its Powers) Rules, 2014.
Companies
which are required to constitute an audit committee shall operate the vigil
mechanism through the audit committee and if any of the members of the
committee have a conflict of interest in a given case, they should recuse
themselves and the others on the committee would deal with the matter on hand.
For
other companies, the Board of directors shall nominate a director to play the
role of audit committee for the purpose of vigil mechanism to whom other
directors and employees may report their concerns.
It
provide adequate safeguards against victimization of employees and
directors who avail of the Vigil mechanism and also provide for direct
access to the chairperson of the Audit committee or the director
nominated to play the role of audit committee, as the case may be, in
exceptional cases.
Once
established, the existence of the mechanism may be appropriately communicated
within the organization.
The
details of establishment of Vigil mechanism shall be disclosed by the company
in the website, if any, and in the Board’s Report.
In
case of repeated frivolous complaints being filed by a director or an employee,
the audit committee or the director nominated to play the role of audit
committee may take suitable action against the concerned director or employee
including reprimand.
Comments
Post a Comment