Cos HUL, Ranbaxy, SKS, Wipro and others appointing independent ombudsperson to settle grievances
More and more companies are appointing independent ombudsperson to settle grievances - with consumers, employees, suppliers, sellers, clients.
In late-2011 , after 10 years of wrangling, it wasn't a judgment , but an HUL initiative that brought closure. In September 2011, HUL appointed four retired high court judges as ombudsperson to settle the company's disputes with its channel partners. Soon after, following a hearing by V Panshiker, one of the judges, HUL paid Gandhi Rs 2.56 lakh, and the matter was closed."The court would have taken years," says Gandhi. HUL is one of the early Indian companies that is taking the concept of ombudspersony-independent arbitrators-beyond the traditional domains of consumers and investors , and using it to settle grievances of other stakeholders also: namely, vendors, distributors , retailers and employees.
In the past six months, Ranbaxy, SKS Microfinance and Wipro have all instituted the office of the ombudsperson aimed at one or more of those constituencies. And more are looking to follow suit (See graphic). Their reasons vary. If HUL is looking to empty its disputes basket, SKS wants to regain lost credibility, and Wipro and Bharti as a good practice.
"We had a customer grievance cell," says MR Rao, MD & CEO, SKS. "But after the Andhra Pradesh crisis, no matter how much we did all this, people refused to believe we were doing enough. So, we thought having an independent ombudsperson will help." Adds Dev Bajpai, executive director-legal , HUL: "We resolved 88 disputes with our business associates last year."
Whatever their reason, a steadily increasing number of companies are beginning to see such an independent arbitration platform that covers all stakeholders as a best practice.
"It's not just about spelling out a whistleblower policy, but also about having a system that enables all stakeholders to raise concerns about wrongdoings fearlessly and have the confidence that issues, if any, will be resolved," says Alexis Samuel, chief risk officer & corporate ombudsperson, Wipro.
In HUL's case, disputes primarily relate to claims by former distributors and suppliers who allegedly delivered goods that fell short of quality standards. Bajpai of HUL says decisions taken by its ombudsperson are binding on the company, but the counter-party has the option to still go to court.
According to the India Fraud Survey 2010, released by consultant KPMG, procurement, sales and distribution are the most vulnerable to wrongdoings. "It is appropriate an internal ombudsperson office covers suppliers, vendors and customers, along with employees ," says Rohit Mahajan, partner & co-head , forensic services, KPMG India. Officials from Bharti and Wipro say 65% of complaints are from employees.
According to Vijaya Sampath, ombudsperson for Bharti, dissatisfaction with appraisal and inappropriate conduct of superiors are the common issues, and cases of sexual harassment have been rare. Since companies hire ombudsperson, it raises questions about their independence. Companies say they ensure this by keeping them out of payrolls or by having a reporting structure with firewalls.
For example, Sampath, a retired professional, is not a Bharti employee and she reports to the chairman of the audit committee of the board. Although having ombudsperson is a matter of choice for companies, the smart ones will opt for it, says Ashvin Parekh, partner & national leader–financial services, Ernst & Young.
Adds Soundar Rajan, a former ombudsperson at Dell India and now an independent advisor on corporate ethics and compliance: "It not only saves costs in unnecessary and cumbersome disputes, but also enhances a company's reputation."
For example, Gandhi, the ex-HUL distributor quoted above, says he may have spent "twice the settlement amount" in his 10-year litigation with the company. Rajan adds that for companies with any kind of global connect , it's inevitable as an ombudsperson's office is the norm globally. Indian companies, too, have made a start towards that end.