The Wirecard and Infosys Scandals are a Lesson on How NOT to Treat Whistleblowers

What is the Wirecard Scandal all about and Why it is a Wakeup Call for Whistleblowers

Anyone who has been following financial and business news over the last couple of years would have heard about Wirecard, the embattled German payments firm that had to file for bankruptcy after serious and humungous frauds were uncovered leading to many arrests and the subsequent insolvency of the firm.

Indeed, the Wirecard scandal shook the German financial, business, and political establishment to the core so much so that it is being likened to the Enron debacle, which happened in the United States in the beginning of the 2000s.

The Wirecard scandal is a classic case of hubris and connivance at the highest levels of the firm in dubious business dealings and that too, with the full knowledge of the higher ups.

In this context, it is worth noting that the Wirecard scandal is also a lesson for both regulators and the Whistleblowers who often take great personal risks to expose and report the frauds in their workplaces.

Moreover, the way in which Wirecard treated its whistleblowers by first denying the allegations, then attacking the integrity of the latter, and worse, intimidating them is something that is unacceptable.

How the Whistleblower at Wirecard and the Financial Times Uncovered the Fraud

Whistleblowers are individuals who are courageous enough to report frauds at their workplaces and hence, must be treated with respect and due care.

It is simply not done for corporates to shout them down or otherwise ignore them and their complaints and in the process, undermine their courage and confidence.

This is what exactly happened in the case of the Wirecard, which ultimately forced the whistleblower to go to the premium business publication, Financial Times or FT, with his findings on the fraud being perpetrated at Wirecard. FT, took it upon itself to assign reporters and experts on the case and it was only after sustained investigation by them that the German regulators took cognizance of the fraud at Wirecard leading to its demise.

While Wirecard’s treatment of the whistleblower was reprehensible enough, it also exceeded all boundaries of restraint by attacking the Financial Times and its staff who were engaged in the case.

It is a matter of pride for the whistleblower and the publication that Wirecard ultimately was found guilty of serious malpractices and heads began to roll among its senior executives, as well as it being declared insolvent. However, it is a fact that whistleblowers take risks.

Why Whistleblowers are Critical to Society and How We Need to Protect Them

If one browses through textbooks on business and management, whistleblowers and their role in the modern corporate world is often treated as an afterthought and given a few pages of discussion in such texts.

However, it is our argument that it is high time for the corporate world and the regulators as well as the broader public to demand changes in the way whistleblowers are treated.

For instance, it is clear from the many corporate scandals over the last few decades that serious frauds often are invisible to the external world and many leading Blue Chip firms often present a rosy picture of their business, whereas in reality, they would be in Neck Deep trouble owing to malpractices.

This is where insiders and their knowledge and suspicions of frauds are valuable as they have access to information that is often hidden purposefully from the outside world.

Therefore, whistleblowers play an important and critical role in the contemporary corporate ecosystem and so, firms and regulators have to have codes of conduct on dealing with such individuals.

It also goes without saying that whistleblowers need to be offered legal and other forms of assistance, support and protection to ensure their personal safety.

The Way in which Infosys Handled Whistleblower Complaints Leaves a Lot to be Desired

In times when many corporates have been found to be deficient in aspects of corporate governance and in some of these cases, the boards themselves have acted improperly; it is more the reason for regulators and legislators to draft legislation to address how corporates must deal with whistleblowers.

For instance, in the case of the Indian Software giant, Infosys, the whistleblowers were first dismissed and then laughed at, and it was only after they went to the press as well as to the stock exchanges in addition to anonymous placement of the facts on select websites that Infosys and the regulators began to act.

This is again an example on how NOT to handle whistleblower complaints. Moreover, it is a sad fact that unlike in Wirecard’s case, there was no significant damage to Infosys or its senior leadership from the episode.

It speaks volumes about the India Inc. that whistleblowers are regarded as irritants and nuisance, instead of as courageous individuals who risk everything to report frauds.

More so when so many of the whistleblowers often feel torn between their sense of loyalty to their employers and the moral desire to uncover and complain about frauds and malpractices in workplaces.

Going Against the Status Quo

Last, what the Wirecard and Infosys cases reveal is a deep distrust of anyone who dares to go against the status quo in corporates and this is something that business leaders and other visionaries should address.

More so when such allegations are made against the very top leadership as such leaders are expected to lead by example.

In addition, whistleblowers often prevent the entire firms being dissolved as regulators who act in time often salvage the situation and avert collapse of the firms.

To conclude, we need a new approach on dealing with whistleblowers by corporates and the regulators.

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