An Analytical Study on the Effectiveness of Whistleblower Policies in Selected Companies in Madurai Region

Abstract

Whistleblowing activity, a crucial mechanism for promoting transparency, accountability, and ethical behavior within corporate organizations, refers to the practice of reporting unethical, illegal, or fraudulent activities happening in the company to authorities by employees or other insiders of the company. As per the Companies Act of 2013, it is mandatory for the establishment of a vigil mechanism like Whistleblowing for certain companies that accept public deposits and borrow money from banks more than 50 crores. These companies have to establish a Whistleblowing mechanism to report issues like unethical behavior, fraud, or violations of the company's code of conduct. Though the Act recommends the mechanism the practical reality of the utilization of the mechanisms is questionable. The present study aims to investigate the effective implementation of whistleblower policy in companies operating in the Madurai region. The gaps between the design of policies and their practical implementation unveils the employees’ low level of trust in confidentiality and protection. Applying Structural Equation Modeling (SEM) statistical tool, the factors that affect employee trust have been identified. They are ‘safeguards’ and ‘transparent policy communication’. The effectiveness of the policy is determined heavily by employee’s trust. Thus, the research implies that despite the mechanical adherence to the Company Act, to make the whistleblower systems more reliable, easily accessible, and actively utilized to encourage moral behavior in the workplace, the companies have to concentrate on building employee trust through strong safeguards and transparent policy communication.