High level understanding of ethics, compliance and governance

1. ICSI-GSCM-Oct 16
Ethics, Governance & Compliance
21st October 2016

2. Ethics- “Is it right even if legal”
Ethics is a set of
principles of right
conduct or a system
of moral principles
Business ethics : the
principles, norms and
standards for
conduct of ORG.
activities,
relationship with
stakeholders
Professional Ethics:
Group of people who
adhere to a set of
ethical standards.
Professional virtues
independence,
integrity and
objectivity etc.

3. Why-Ethical Corporate behavior
Strengthening
relationships
Value creation
Brand- image
Standardization

4. Influencers
Legal, Political & Judicial Economic
Changes in legal environment Recession
Introduction of CSR Consumer behavior- PSU banking vs. Private banking
Introduction of various cess/taxes Cost benefit & outsourcing
Strict anti-corruption laws Ease of dealing/doing business
Introduction of women directors Economic policies
POSH at workplace – Vishaka Vs State of Rajsthan
Public Liability Act- MC Mehta case
Social Technological
Changing social trends –corporate upbringing Standardization
Up gradation of skills Systemic controls & less human interactions
Changing employee-management relationships Virtual meetings- resulting decline in relationship
between management and employees
Environmental IT security
Environmental factors- pollution Privacy
More video/ tele-conferencing –reduction of
pollution by vehicular movements

5. Code of ethics- Indicatives
Code of Ethics- Corporate Conduct Employee Conduct
1. National interest
a. Participation in overall economic
development of the country
b. Alignment with public policy
1. Ethical conduct- professionalism, honesty & integrity
2. Legal & Regulatory compliance
2. Financial reporting and records
a. True and fair financials
b. No willful/material misrepresentation
c. Appropriate records
3. Concurrent employment
a. For profit
b. Not for profit
3. Health safety & Environment 4. Conflict of interest
4. Public representation 5. Insider trading
5. Third party representation 6. Protecting company’s assets
6. Shareholders value 7. Non discrimination & non harassment
7. Political non alignment 8. Substance abuse
9. Anti-corruption- Gifts & entertainment
10. Political activities
11. Communicating with regulators
12. Appropriate use of computer assets
13. Privacy
14. Record retention
15. Confidentiality, trade secrets & business practices

6. What do you do?
At a function organized by your company in your company premises, shortly before the end of the function, you
notice that your manager is busying putting cartons of drinks into the boot of his car. In that split of a second; he
glances at you, smiles and says; ‘what the company doesn’t know wouldn’t hurt the company; erase this from
your memory’. Then your supervisor says his goodbyes to everyone including you, and he drives out of the
premises.
A supplier overhears a conversation amongst your colleagues that today is your birthday; she quickly goes out to
the shopping mall next to your office building to buy you a card and a box of chocolate. She comes back to your
office, meets you at the reception, and wishes you ‘a happy birthday’ and gives you the birthday card and the box
of chocolate.
A supplier overhears a conversation amongst your colleagues that today is your birthday; she quickly goes out to
the shopping mall next to your office building to buy you a card and a box of chocolate. She comes back to your
office, meets you at the reception, and wishes you ‘a happy birthday’ and gives you the birthday card and the box
of chocolate. The supplier is one of the three bidders your department is considering for a current tender.
One of the accountants in your department has resigned and needs to be replaced. Your manager tells you that
he wants to appoint Tyler, an accountant with one of your suppliers. He tells you to nevertheless go through the
motions of following procedure by advertising the post internally. You agree that Tyler has the requisite
qualification for the post. Once the applications have all been received, you realize that several more competent
candidates from your subsidiary companies have applied. Your manager is however adamant that Tyler should be
appointed.

7. Ethical decision making
What alternatives
are available for my
consideration? If Yes
Are they legal? If No
, Stop!
Do they meet with
professional/
organizational
ethical standards? If
No, Stop!
Will I be able to
disclose my actions?
If No, Stop!
Ethical Decision

8. Implementation
Communication Recruitment
Speaking up Induction & Training
Disciplinary
Procedures
Ethical Corporate
Culture
Performance
Management

9. Board/ Directors – Focal Point & Custodian of CG
Ethical Leadership & Corporate Citizenship
Effective & Independent Audit Committee
Governance of Risk
Compliance with Laws, Rules, Codes & Standards
Effective Risk Based Internal Audit
Governing Stakeholder Relationships
Integrated Reporting & Disclosure
Corporate
Governance
Corporate Governance is a system by which a company is directed and
controlled

10. Legislative framework- General
The Companies Act, 2013 SEBI Regulations
 Board composition – introduction of IDS
 Resident Director
 Nominee directors are no longer IDs
 Women Director
 Duties of Directors
 Code and letter of appointment to Independent
Directors
 Performance evaluation of directors
 Mandatory committees
a. Audit committee
b. Nomination and remuneration committee
c. Stakeholders relationship committee
d. Corporate social responsibility committee
Board of Directors- 1/3 or 1/2 to be ID
Women director
Code of conduct
Audit Committee- 2/3 to be ID
NRC- 1/2 to be IDs
Stakeholder relationship Committee
RMC
Vigil Mechanism
Related party transactions
Compliances for subsidiary company
IDs & Sr. Mgmt. obligations
Quarterly reporting
Other disclosures

11. Internal corporate governance controls
Monitoring by
the board of
directors
Internal control
procedures and
internal
auditors
Balance of
power
Monitoring by
large
shareholders
Monitoring by
banks and
other large
creditors

12. Competition
Debt covenants
Demand for
and
assessment of
performance
Government
regulations
Managerial
/labor market
Media pressure
Takeovers
External corporate governance controls

13. Compliance
Compliance is a comprehensive program that helps institutions and their employees
conduct operations and activities ethically; with the highest level of integrity, and in
compliance with legal and regulatory requirements.
Why Compliance Programs
– Legal and Regulatory requirements and organizational policies
– Fiduciary Responsibility
– Disclosure and Internal Control Standards
– Foster a culture of ethics and compliance
– Understand the nature of risks and potential exposures
– Identify and manage risks that impact the institution’s reputation
– Integrate the compliance program into ERM Framework

14. Influencers- General
Board and Audit Committee
o Independent and engaged?
Management’s Philosophy and Operating Style
o Communicates by word and action there is support for compliance and
commitment to ethics
o Code of Conduct
o HR Practices and Policies: Recruitment and hiring; orientation; evaluation,
promotion and compensation; disciplinary actions
Organizational Structure
o Centralized vs. Decentralized
o Assignment of Authority and Responsibility
Risk Culture (Appetite and Tolerance)

15. Key drivers of effective compliance program
CCO reporting to
Board level
committee
Written policies
and procedures;
Training and
education
Lines of
communication
Well-publicized
disciplinary
guidelines
Internal
compliance
monitoring
Periodic Risk
Assessments

16. Compliance toolkit
Chief Compliance Officer Job
Description
Office of Compliance Mission
Statement
Compliance Officers Working
Group Charter
Audit and Compliance
Committee Charter;
Audit and Compliance
Committee Calendar

17. Compliance risks analysis
Organization’s objectives, structure and operations?
Compliance Risk Identification
Risk Assessment- Likelihood and impact
Risk Evaluation- Appetite & Action planning
Risk Mitigation
Monitoring, Review and Corrective Action,
Communication

18. Thank you
????
Vimal Kishor
9987719880
ICSI-GSCM-Oct 16