Clause 49

Clause 49of the Listing Agreement to theIndian stock exchangecomes into effect from 31 December 2005. It has been formulated for the improvement ofcorporate governancein all listed companies.

In corporate hierarchy two types of managements are envisaged:i) companies managed byBoard of Directors; andii) those by aManaging Director, whole-time director or manager subject to the control and guidance of the Board of Directors. As per Clause 49, for a company with an ExecutiveChairman, at least 50 per cent of the board should comprise independent directors. In the case of a company with a non-executive Chairman, at least one-third of the board should be independent directors. It would be necessary for chief executives and chief financial officers to establish and maintain internal controls and implement remediation and risk mitigation towards deficiencies in internal controls, among others. Clause VI (ii) of Clause 49 requires all companies to submit a quarterly compliance report tostock exchangein the prescribed form. The clause also requires that there be a separate section on corporate governance in the annual report with a detailed compliance report. A company is also required to obtain a certificate either from auditors or practicing company secretaries regarding compliance of conditions as stipulated, and annex the same to the director's report. The clause mandates composition of anauditcommittee; one of the directors is required to be "financially literate". It is mandatory for all listed companies to comply with the clause by 31 December 2005.

In late 2002,SEBIconstituted theNarayana MurthyCommittee to assess the adequacy of current corporate governance practices and to suggest improvements. Based on the recommendations of this committee, SEBI issued a modified Clause 49 on 29 October 2004 (the revised Clause 49) which came into operation on 1 January 2006.The revised Clause 49 has suitably pushed forward the original intent of protecting the interests of investors through enhanced governance practices and disclosures. Five broad themes predominate. The independence criteria for directors have been clarified. The roles and responsibilities of the board have been enhanced. The quality and quantity of disclosures have improved. The roles and responsibilities of the audit committee in all matters relating to internal controls and financial reporting have been consolidated, and the accountability of top managementspecifically the CEO and CFOhas been enhanced. Within each of these areas, the revised Clause 49 moves further into the realm of global best practices (and sometimes, even beyond).

Awhistleblower(whistle-blowerorwhistle blower)[1]is a person who exposesmisconduct, alleged dishonest or illegal activity occurring in anorganization. The alleged misconduct may be classified in many ways; for example, a violation of alaw, rule, regulation and/or a direct threat topublic interest, such asfraud, health and safety violations, andcorruption. Whistleblowers may make their allegations internally (for example, to other people within the accused organization) or externally (to regulators, law enforcement agencies, to the media or to groups concerned with the issues).Whistleblowers frequently facereprisal, sometimes at the hands of the organization or group which they have accused, sometimes from related organizations, and sometimes under law. Questions about the legitimacy of whistleblowing, themoral responsibilityof whistleblowing, and the appraisal of the institutions of whistleblowing are part of the field ofpolitical ethics.Origin of term[edit]The termwhistle-blowercomes from thewhistlea referee uses to indicate an illegal or foul play.[2][3]US civic activistRalph Nadercoined the phrase in the early 1970s to avoid the negative connotations found in other words such as "informers" and "snitches".[4]Internal[edit]Most whistleblowers areinternal whistleblowers, who report misconduct on a fellow employee or superior within their company. One of the most interesting questions with respect to internal whistleblowers is why and under what circumstances people will either act on the spot to stop illegal and otherwise unacceptable behavior or report it.[5]There are some reason to believe that people are more likely to take action with respect to unacceptable behavior, within an organization, if there arecomplaint systemsthat offer not just options dictated by the planning and control organization, but achoiceof options for absolute confidentiality.[6]External[edit]External whistleblowers, however, report misconduct to outside persons or entities. In these cases, depending on the information's severity and nature, whistleblowers may report the misconduct tolawyers, themedia,law enforcementorwatchdog agencies, or other local, state, or federal agencies. In some cases, external whistleblowing is encouraged by offering monetary reward.Whistleblowers are sometimes seen as selflessmartyrsfor public interest and organizationalaccountability; others view them as "traitors" or "defectors." Some even accuse them of solely pursuing personal glory and fame, or view their behavior as motivated by greed inqui tamcases. Some academics (such asThomas Alured Faunce) feel that whistleblowers should at least be entitled to a rebuttable presumption that they are attempting to apply ethical principles in the face of obstacles and that whistleblowing would be more respected ingovernancesystems if it had a firmer academic basis invirtue ethics.[7][8]

Although whistleblowers are often protected under law from employer retaliation, there have been many cases where punishment for whistleblowing has occurred, such astermination,suspension,demotion,wage garnishment, and/or harshmistreatmentby other employees. For example, in the United States, most whistleblower protection laws provide for limited "make whole" remedies or damages for employment losses if whistleblower retaliation is proven. However, many whistleblowers report there exists a widespread "shoot the messenger" mentality by corporations or government agencies accused of misconduct and in some cases whistleblowers have been subjected to criminal prosecution in reprisal for reporting wrongdoing.

Circumstances of fraud The circumstances in which fraud can exist are enormously diverse. Some of the typesinclude: commercial fraud, fraud against governments, consumer fraud, migration fraud, securities fraud, superannuation fraud, intellectual property fraud, computer and telecommunications fraud, insurance fraud, plastic card fraud, charitable contribution fraud, identity-related fraud, advance fee fraud, art fraud, health care fraud, the list goes on and on, and new opportunities for deceptive conduct arise all the time