The whistle-blowing mechanism has gradually become a standard feature in the corporate governance practice of Singapore listed companies. Indeed, Guideline 11.7 of the Singapore Code of Corporate Governance 2005 has expressly imposed upon the Audit Committee a duty to ensure that adequate whistle-blowing arrangements are in place. The Enron incident, in which Ms Sherron Watkins, an employee of Enron, reported on the misconduct of Enron's management, illustrated the effectiveness of whistle-blowing as an effective tool in checking the possible improprieties of management. Generally, employees of a company would be the first to spot any malpractice or misconduct on the part of the management.
To ensure the effectiveness of the whistle blowing mechanism, an appropriate policy (outlining the procedure and communication channel for employees to ventilate the improprieties of the management) should be put in place for its implementation, and adequate publicity of the policy must be given to the employees in general.
An Audit Committee ought to receive complaints of improprieties on the part of the management from the relevant employees in strict confidence. Upon a careful evaluation of the complaints, the Audit Committee, if it deems fit, should cause an independent investigation of the complaints to be carried out, with appropriate follow-up actions.
Whether a whistle-blowing mechanism is effective in practice would depend on whether the employees in the relevant company are convinced that their complaints would be carefully and fairly considered by the Audit Committee in strict confidence. All reasonable steps should be taken to ensure that no whistleblower would suffer any detriments when making any complaints in good faith.
In its evaluation of the complaints, the Audit Committee should exercise due care in sifting out any possible malicious allegations and in ensuring that the whistle-blowing mechanism is not used (or abused) as a ground to launch any unmeritorious and personal attacks against the management by disgruntled employee.
Written by Tea Han Guat and Kho Kim Suan
Ms Tea Han Guat
Senior Foreign Legal Counsel Loo & Partners
Ph: (65) 6322-2224
Fax: (65) 6534-0833
Ms Kho Kim Suan
Corporate Compliance and Secretarial Services Senior Executive
Loo & Partners
88 Amoy Street, Level Three
Ph: (65) 6322-2215
Fax: (65) 6534-0833