Business Ethics 01

Business  Ethics  Tathagat  Varma  

Session  1/12:  17-­‐Jul-­‐09  

Learning  Rules  •  There  are  NO  wrong  quesAons  or  wrong  answers    in  the  class      –  I  expect  you  to  interact,  quesAon  and  disagree    – Don’t  assume  anything  blindly!  

•  Pedagogy:    –  25%  teaching  (slides  and  references  will  be  shared)  –  25%  classroom  &  online  discussion  (no  slides  for  this  !)  –  25%  self-­‐study  (your  individual  effort  !)  –  25%  seminar  (working  as  a  team)  

•  I  may  not  know  everything.  Let’s  learn  together  

Course  EvaluaAon  Marks   Due   Ac2vity   Remarks  

Class  ParAcipaAon  

10%   Throughout   Individual   This  is  not  just  about  class  aXendance,  but  acAvely  contribuAng  to  the  class  by  sharing  ideas,  quesAoning,  answering,  etc.  

Quiz   20%   Session  4-­‐5   Individual   MulAple-­‐choice  quesAons  on  basic  concepts  and  simple  applicaAons.  Expect  quesAons  from  outside  what  will  be  covered  

Seminar   20%   Session  10-­‐11   Group   Case  Study  analysis,  prepare  report  and  make  presentaAon.  50%  for  report  (group),  50%  for  presentaAon  (individual  performance)  

End-­‐term   50%   Aaer  session  12   Individual   ApplicaAon  of  concepts  in  real-­‐life  situaAons.  Expect  quesAons  from  outside  what  will  be  covered  

Greatest  Business  Scandals  •  Ponzi  Scheme  •  Ivar  Kreuger  •  Savings  and  Loan  Debacle  •  Ivan  Boesky  •  Worldcom  •  Tyoe  •  HealthSouth  Corp  •  Martha  Stewart  •  Enron  •  Madoff  

Ponzi  Scheme  •  In  the  1920s,  Charles  Ponzi  tricked  thousands  of  New  Englanders  into  invesAng  in  his  postage  stamp  business.  In  a  pyramid  scheme,  Ponzi  used  new  investors'  money  to  pay  off  earlier  investors.  Eventually  his  scheme  collapsed,  but  his  name  sAll  lives  on,  infamously.    

Ivar  Kreuger  •  As  the  "Swedish  Match  King,"  Ivar  Kreuger  was  once  one  of  the  richest  men  in  the  world.  From  1913  to  1932,  he  built  a  small  match  business  into  a  $600  million  global  empire.  Kreuger  controlled  40  percent  of  the  world's  match  producAon.  However,  aaer  his  suicide  in  1932,  forensic  auditors  found  that  Kreuger  had  operated  a  giant  pyramid  scheme.  His  debts  exceeded  Sweden's  naAonal  deficit.  

Savings  and  Loan  Debacle  •  During  the  1980s,  a  string  of  bad  business  decisions  triggered  more  than  1,000  U.S.  savings  and  loans  insAtuAons  to  fail.  Total  S  &  L  income  was  $781  million  in  1980;  the  next  year  it  fell  to  -­‐$4.6  billion.  Charles  KeaAng,  lea,  a  major  player  in  the  scandal,  took  advantage  of  small  investors  in  the  company,  Lincoln  Savings  and  Loan,  and  made  risky  investments  under  the  protecAon  of  the  KeaAng  Five  -­‐  involving  five  senators  who  had  received  $300,000  from  KeaAng  during  that  Ame.    

Ivan  Boesky  •  Arbitrageur  and  investment  banker  Ivan  Boesky  was  charged  in  1986  with  manipulaAng  the  stock  market  through  insider  trading.  On  November  14,  1986,  also  known  as  "Boesky  Day,"  he  paid  $100  million  to  make  up  for  insider  trading  profits.  He  later  spent  Ame  in  jail  following  his  plea-­‐bargain,agreeing  not  to  parAcipate  in  the  markets.  His  acAviAes  were  the  inspiraAon  for  the  Gordon  Gekko  character  in  the  film  "Wall  Street."  

Worldcom  •  In  2002,  telecommunicaAons  giant  Worldcom  commiXed  the  largest  accounAng  fraud  in  history.  Bernard  Ebbers,  former  Worldcom  chairman,  was  later  sentenced  to  25  years  in  prison  for  orchestraAng  an  $11  billion  scheme  that  drove  his  company  into  bankruptcy.  

Tyco  •  That  same  year,  former  CEO  L.  Dennis  Kozlowski  and  two  other  former  employers  used  $600  million  in  bonuses  and  company  loans  to  buy  extensive  personal  luxuries  like  vacaAon  homes,  upscale  apartments,  jewlery  and  clothing.  

HealthSouth  Corp  •  Fiaeen  employees  at  HealthSouth,  once  the  largest  U.S.  operator  of  rehabilitaAon  hospitals,  pleaded  guilty  in  2004  to  overstaAng  earnings  by  $2.5  billion.  CEO  Richard  Scrushy  was  acquiXed,  but  was  convicted  this  year  for  arranging  $500,000  in  donaAons  to  former  Alabama  Governor  Don  Siegelman  in  exchange  for  a  seat  on  a  state  hospital  regulatory  board.  

Martha  Stewart  •  ImClone  Systems  founder  Sam  Waksal  Apped  domesAc  diva  Martha  Stewart  that  the  FDA  would  not  approve  their  new  cancer  drug.  Stewart  sold  about  $228,000  in  stocks  right  before  ImClone  dropped  18  percent.  Although  she  first  claimed  she  was  innocent,  Stewart  took  a  plea  bargain  deal  and  served  several  months  in  prison  aaer  she  was  convicted  of  four  counts  of  obstrucAng  jusAce  and  lying  to  invesAgators.  

Enron  •  InflaAng  profits,  hiding  a  billion  dollars  in  debt  and  manipulaAng  the  energy  market  are  only  a  few  crimes  Enron  has  on  its  list.  In  2001,  Enron  declared  bankrupcy,  along  with  many  of  the  company's  investors.  This  month,  aaer  being  convicted,  former  CEO  Ken  Lay  died  of  a  heart  aXack.  Jeff  Skilling,  former  CEO,  was  found  guilty  of  fraud  and  conspiracy;  his  trial  is  scheduled  for  Oct.  23.  

Nick  Leeson  •  Year  made  public:  1995  EsAmated  Losses:  $1.4  billion  

In  the  early  1990s,  Leeson,  a  trader  who  worked  for  BriAsh  investment  bank  Barings,  made  numerous  risky  moves  on  the  Singapore  InternaAonal  Money  Exchange  (SIMEX),  hiding  his  losses  from  the  firm  in  a  secret  account.  By  the  Ame  Barings  discovered  the  ruse,  it  was  too  late:  The  bank  was  $1.3  billion  in  debt  and  had  to  shut  its  doors.  Leeson,  who  served  more  than  six  years  in  prison,  publicly  owned  up  to  his  wrongdoing  in  two  books  about  the  scandal  and  its  fallout.  

Michael  W.  Berger  •  Year  made  public:  2000  EsAmated  Losses:  $393  million  

ManhaXan  Capital  Management,  started  in  1996  by  Michael  W.  Berger,  lost  $400  million.  But  according  to  SEC  documents,  Berger  failed  to  report  the  losses  to  investors.  Instead  he  masked  them  by  doctoring  financial  data  in  clients'  accounts.  Berger  pleaded  guilty  to  securiAes  fraud  in  federal  court  but  fled  before  his  sentencing  in  2002.  He  was  caught  in  Austria  in  2007.  

Madoff  •  Year  made  public:  2008  EsAmated  Losses:  $65  billion  

•  Madoff  was  sentenced  on  June  29  to  150  years  in  prison,  aaer  pleading  guilty  on  March  12  to  federal  charges  that  include  fraud  and  money  laundering.  He  lured  many  high-­‐profile  investors  by  promising  to  beat  the  market  through  a  slow  and  steady  investment  strategy.  But  Madoff  actually  engaged  in  an  elaborate  Ponzi  scheme.  As  the  markets  tumbled  late  last  year,  alarmed  investors  asked  to  pull  their  money  out.  Madoff  couldn't  come  close  to  providing  the  $7  billion  requested  and  was  turned  in  by  his  sons  

Allen  Stanford  •  Year  made  public:  2009  EsAmated  Losses:  $8  billion  

•  Stanford,  founder  of  Stanford  Financial  Group  and  the  AnAgua-­‐based  Stanford  InternaAonal  Bank,  was  a  trusted  figure  among  elite  investors.  The  SEC,  FBI,  and  IRS  had  inquired  for  years  about  his  company,  which  promised  high-­‐yielding  returns  on  cerAficates  of  deposit.  In  mid-­‐February,  the  SEC  filed  a  civil  case  against  Stanford  and  two  associates,  accusing  the  Houston-­‐based  company  of  "orchestraAng"  a  massive  fraud.  

Jerome  Kerviel  •  Year  made  public:  2008  EsAmated  Losses:  $8  billion  

•  Société  Générale  trader  Kerviel  is  said  to  have  made  tens  of  millions  worth  of  futures  trades  without  the  knowledge  of  his  superiors.  Once  the  French  bank  discovered  his  acAons,  it  realized  that  his  trades  had  already  generated  tremendous  losses.  Kerviel  is  awaiAng  trial  and  if  convicted,  faces  up  to  three  years  in  prison.  

Ralph  Cioffi  and  MaXhew  Tannin  •  Year  made  public:  2008  EsAmated  Losses:  $1.6  billion  

•  Bear  Stearns  hedge  fund  managers  Cioffi  and  Tannin  allegedly  lied  to  investors  about  the  health  of  their  funds,  which  were  heavily  backed  by  subprime  mortgages.  The  funds  were  struggling,  but  their  alleged  falsehoods  lured  further  investment,  according  to  the  federal  indictment.  The  funds  buckled  in  June  2008,  cosAng  investors  $1.6  billion.  Cioffi  and  Tannin  were  both  charged  with  conspiracy  and  fraud;  both  pleaded  not  guilty  and  are  awaiAng  trial.  

Edward  Strafaci  •  Year  made  public:  2002  EsAmated  Losses:  $350  million  

According  to  court  documents,  Strafaci,  execuAve  vice-­‐president  of  New  York-­‐based  Lipper  Holdings,  told  investors  in  reports  that  their  investments  into  two  Lipper  hedge  funds  were  growing  at  up  to  15%  annually.  In  reality  the  funds  were  losing  money.  In  2004,  Strafaci  pleaded  guilty  in  federal  court  to  securiAes  fraud  and  was  sentenced  to  six  years  in  prison.  

Tom  PeXers  •  Year  made  public:  2008  EsAmated  Losses:  At  least  $1  billion  

PeXers,  a  money  manager  who  ran  PeXers  Group  Worldwide  in  Minnesota,  was  indicted  in  December  by  a  federal  grand  jury  on  20  counts  of  money  laundering,  conspiracy,  and  wire  and  mail  fraud.  He  is  alleged  to  have  duped  investors  from  1995  to  2008.  According  to  court  documents,  PeXers  allegedly  received  over  $1  billion  from  investors  and  subsequently  provided  them  with  false  reports  claiming  that  his  firm  was  using  their  money  to  buy  and  resell  wholesale  consumer  goods  for  profit.  The  complaint  alleges  that  these  transacAons  never  took  place.  PeXers,  who  pleaded  not  guilty,  is  awaiAng  trial.  

Kazutsugi  Nami  •  Year  made  public:  2009  EsAmated  Losses:  $1.4  billion  

According  to  authoriAes  in  Japan,  Nami,  chairman  of  Japanese  bedding  linen  company  L&G,  claimed  he  could  get  a  36%  annual  return  on  investments  in  a  ficAonal  currency  he  created  and  dubbed  Enten,  meaning  "divine  yen."  Nami  allegedly  took  $1.4  billion  from  roughly  37,000  investors  by  convincing  them  that  aaer  the  world's  economies  collapsed,  his  digital  Enten  currency  would  make  them  wealthy.  Investors  grew  frustrated  when  Nami  allegedly  began  repaying  them  in  Enten.  In  February  he  and  21  former  execuAves  of  the  company  were  arrested  and  charged  with  fraud  in  Tokyo.  

Paul  Greenwood  and  Stephen  Walsh  •  Year  made  public:  2009  EsAmated  Losses:  $554  million  

According  to  SEC  documents,  New  Yorkers  Greenwood  and  Walsh  ran  a  fraudulent  commodiAes  trading  company,  WG  Trading  Investors.  Instead  of  pursuing  a  "stock  index  arbitrage  strategy,"  Greenwood  and  Walsh  allegedly  used  the  funds  as  their  own  "piggy  bank,"  starAng  in  1996.  The  firm's  assets  have  been  frozen  and  the  SEC  has  filed  a  civil  complaint  in  federal  court  in  ManhaXan  charging  the  men  with  fraud.  They  also  face  criminal  charges.  

Closer  home…  •  Harshad  Mehta    •  Ketan  Parekh  •  Fodder  Scam  

•  Telgi  •  Satyam  

•  …  •  (hXp://ismb-­‐india.blogspot.com/2009/01/indias-­‐biggest-­‐scams.html)  

Sample  Code  of  Ethics  •  IEEE:  Among  oldest  (125  ys  old)  technical  professional  body  

•  PMI:  Larget  professional  body  in  the  field  of  Project  Management  

•  Wal-­‐Mart:  largest  company  in  the  world  

•  Tata:  Oldest  business  house  in  India,  immaculate  reputaAon  of  business  ethics  

•  Infosys:  the  posterchild  of  new  India;  unblemished  reputaAon  

IEEE  Code  of  Ethics  We,  the  members  of  the  IEEE,  in  recogniAon  of  the  importance  of  our  technologies  in  affecAng  the  quality  of  life  throughout  the  world,  and  in  accepAng  a  personal  obligaAon  to  our  profession,  its  members  and  the  communiAes  we  serve,  do  hereby  commit  ourselves  to  the  highest  ethical  and  professional  conduct  and  agree:    

1.  to  accept  responsibility  in  making  decisions  consistent  with  the  safety,  health  and  welfare  of  the  public,  and  to  disclose  promptly  factors  that  might  endanger  the  public  or  the  environment;    

2.  to  avoid  real  or  perceived  conflicts  of  interest  whenever  possible,  and  to  disclose  them  to  affected  parAes  when  they  do  exist;      

3.  to  be  honest  and  realisAc  in  staAng  claims  or  esAmates  based  on  available  data;      

4.  to  reject  bribery  in  all  its  forms;      5.  to  improve  the  understanding  of  technology,  its  appropriate  applicaAon,  and  potenAal  consequences;      6.  to  maintain  and  improve  our  technical  competence  and  to  undertake  technological  tasks  for  others  only  if  

qualified  by  training  or  experience,  or  aaer  full  disclosure  of  perAnent  limitaAons;      

7.  to  seek,  accept,  and  offer  honest  criAcism  of  technical  work,  to  acknowledge  and  correct  errors,  and  to  credit  properly  the  contribuAons  of  others;      

8.  to  treat  fairly  all  persons  regardless  of  such  factors  as  race,  religion,  gender,  disability,  age,  or  naAonal  origin;      

9.  to  avoid  injuring  others,  their  property,  reputaAon,  or  employment  by  false  or  malicious  acAon;      10.  to  assist  colleagues  and  co-­‐workers  in  their  professional  development  and  to  support  them  in  following  this  

code  of  ethics.    

PMI  Code  of  Ethics  

Wal-­‐Mart  Statement  of  Ethics  

Tata  Group  Code  of  Conduct  This  comprehensive  document  serves  as  the  ethical  road  map  for  Tata  employees  and  companies,  and  provides  the  guidelines  by  which  the  group  conducts  its  businesses.  •  Clause:1  -­‐  Na2onal  interest  

The  Tata  group  is  commiXed  to  benefit  the  economic  development  of  the  countries  in  which  it  operates.  No  Tata  company  shall  undertake  any  project  or  acAvity  to  the  detriment  of  the  wider  interests  of  the  communiAes  in  which  it  operates.  

•  A  Tata  company’s  management  pracAces  and  business  conduct  shall  benefit  the  country,  localiAes  and  communiAes  in  which  it  operates,  to  the  extent  possible  and  affordable,  and  shall  be  in  accordance  with  the  laws  of  the  land.  

•  A  Tata  company,  in  the  course  of  its  business  acAviAes,  shall  respect  the  culture,  customs  and  tradiAons  of  each  country  and  region  in  which  it  operates.  It  shall  conform  to  trade  procedures,  including  licensing,  documentaAon  and  other  necessary  formaliAes,  as  applicable.  

Clause:2  -­‐  Financial  reporAng  &records  •  A  Tata  company  shall  prepare  and  maintain  its  accounts  fairly  and  

accurately  and  in  accordance  with  the  accounAng  and  financial  reporAng  standards  which  represent  the  generally  accepted  guidelines,  principles,  standards,  laws  and  regulaAons  of  the  country  in  which  the  company  conducts  its  business  affairs.  

•  Internal  accounAng  and  audit  procedures  shall  reflect,  fairly  and  accurately,  all  of  the  company’s  business  transacAons  and  disposiAon  of  assets,  and  shall  have  internal  controls  to  provide  assurance  to  the  company’s  board  and  shareholders  that  the  transacAons  are  accurate  and  legiAmate.  All  required  informaAon  shall  be  accessible  to  company  auditors  and  other  authorised  parAes  and  government  agencies.There  shall  be  no  willful  omissions  of  any  company  transacAons  from  the  books  and  records,  no  advance-­‐income  recogniAon  and  no  hidden  bank  account  and  funds.  

•  Any  willful,  material  misrepresentaAon  of  and  /  or  misinformaAon  on  the  financial  accounts  and  reports  shall  be  regarded  as  a  violaAon  of  the  Code,  apart  from  inviAng  appropriate  civil  or  criminal  acAon  under  the  relevant  laws.  No  employee  shall  make,  authorise,  abet  or  collude  in  an  improper  payment,  unlawful  commission  or  bribing.  

Clause:3  -­‐  CompeAAon  •  A  Tata  company  shall  fully  support  the  development  and  operaAon  of  compeAAve  open  markets  and  shall  promote  the  liberalisaAon  of  trade  and  investment  in  each  country  and  market  in  which  it  operates.  Specifically,  no  Tata  company  or  employee  shall  engage  in  restricAve  trade  pracAces,  abuse  of  market  dominance  or  similar  unfair  trade  acAviAes.  

•  A  Tata  company  or  employee  shall  market  the  company’s  products  and  services  on  their  own  merits  and  shall  not  make  unfair  and  misleading  statements  about  compeAtors’  products  and  services.  Any  collecAon  of  compeAAve  informaAon  shall  be  made  only  in  the  normal  course  of  business  and  shall  be  obtained  only  through  legally  permiXed  sources  and  means.  

Clause:4  -­‐  Equal  opportuniAes  employer  

•  A  Tata  company  shall  provide  equal  opportuniAes  to  all  its  employees  and  all  qualified  applicants  for  employment  without  regard  to  their  race,  caste,  religion,  colour,  ancestry,  marital  status,  gender,  sexual  orientaAon,  age,  naAonality,  ethnic  origin  or  disability.  

•  Human  resource  policies  shall  promote  diversity  and  equality  in  the  workplace,  as  well  as  compliance  with  all  local  labour  laws,  while  encouraging  the  adopAon  of  internaAonal  best  pracAces.  

•  Employees  of  a  Tata  company  shall  be  treated  with  dignity  and  in  accordance  with  the  Tata  policy  of  maintaining  a  work  environment  free  of  all  forms  of  harassment,  whether  physical,  verbal  or  psychological.  Employee  policies  and  pracAces  shall  be  administered  in  a  manner  consistent  with  applicable  laws  and  other  provisions  of  this  Code,  respect  for  the  right  to  privacy  and  the  right  to  be  heard,  and  that  in  all  maXers  equal  opportunity  is  provided  to  those  eligible  and  decisions  are  based  on  merit.  

Clause:5  -­‐  Gias  and  donaAons  •  A  Tata  company  and  its  employees  shall  neither  receive  nor  offer  or  make,  directly  or  indirectly,  any  illegal  payments,  remuneraAon,  gias,  donaAons  or  comparable  benefits  that  are  intended,  or  perceived,  to  obtain  uncompeAAve  favours  for  the  conduct  of  its  business.  The  company  shall  cooperate  with  governmental  authoriAes  in  efforts  to  eliminate  all  forms  of  bribery,  fraud  and  corrupAon.  

•  However,  a  Tata  company  and  its  employees  may,  with  full  disclosure,  accept  and  offer  nominal  gias,  provided  such  gias  are  customarily  given  and  /  or  are  of  a  commemoraAve  nature.  Each  company  shall  have  a  policy  to  clarify  its  rules  and  regulaAons  on  gias  and  entertainment,  to  be  used  for  the  guidance  of  its  employees.  

Clause:6  -­‐  Government  agencies  •  A  Tata  company  and  its  employees  shall  not,  unless  mandated  under  applicable  laws,  offer  or  give  any  company  funds  or  property  as  donaAon  to  any  government  agency  or  its  representaAve,  directly  or  through  intermediaries,  in  order  to  obtain  any  favourable  performance  of  official  duAes.  A  Tata  company  shall  comply  with  government  procurement  regulaAons  and  shall  be  transparent  in  all  its  dealings  with  government  agencies.  

Clause:7  -­‐  PoliAcal  non-­‐alignment  •  A  Tata  company  shall  be  commiXed  to  and  support  the  consAtuAon  and  governance  systems  of  the  country  in  which  it  operates.  

•  A  Tata  company  shall  not  support  any  specific  poliAcal  party  or  candidate  for  poliAcal  office.  The  company’s  conduct  shall  preclude  any  acAvity  that  could  be  interpreted  as  mutual  dependence  /  favour  with  any  poliAcal  body  or  person,  and  shall  not  offer  or  give  any  company  funds  or  property  as  donaAons  to  any  poliAcal  party,  candidate  or  campaign.  

Clause:8  -­‐  Health,  safety  and  environment  

•  A  Tata  company  shall  strive  to  provide  a  safe,  healthy,  clean  and  ergonomic  working  environment  for  its  people.  It  shall  prevent  the  wasteful  use  of  natural  resources  and  be  commiXed  to  improving  the  environment,  parAcularly  with  regard  to  the  emission  of  greenhouse  gases,  and  shall  endeavour  to  offset  the  effect  of  climate  change  in  all  spheres  of  its  acAviAes.  

•  A  Tata  company,  in  the  process  of  producAon  and  sale  of  its  products  and  services,  shall  strive  for  economic,  social  and  environmental  sustainability.  

Clause:9  -­‐  Quality  of  products  and  services  

•  A  Tata  company  shall  be  commiXed  to  supply  goods  and  services  of  world  class  quality  standards,  backed  by  aaer-­‐sales  services  consistent  with  the  requirements  of  its  customers,  while  striving  for  their  total  saAsfacAon.  The  quality  standards  of  the  company’s  goods  and  services  shall  meet  applicable  naAonal  and  internaAonal  standards.  

•  A  Tata  company  shall  display  adequate  health  and  safety  labels,  caveats  and  other  necessary  informaAon  on  its  product  packaging.        

Clause:10  -­‐  Corporate  ciAzenship  •  A  Tata  company  shall  be  commiXed  to  good  corporate  ciAzenship,  not  only  in  the  compliance  of  all  relevant  laws  and  regulaAons  but  also  by  acAvely  assisAng  in  the  improvement  of  quality  of  life  of  the  people  in  the  communiAes  in  which  it  operates.  The  company  shall  encourage  volunteering  by  its  employees  and  collaboraAon  with  community  groups.  

•  Tata  companies  are  also  encouraged  to  develop  systemaAc  processes  and  conduct  management  reviews,  as  stated  in  the  Tata  ‘corporate  sustainability  protocol’,  from  Ame  to  Ame  so  as  to  set  strategic  direcAon  for  social  development  acAvity.  

•  The  company  shall  not  treat  these  acAviAes  as  opAonal,  but  should  strive  to  incorporate  them  as  an  integral  part  of  its  business  plan.  

Clause:11  -­‐  CooperaAon  of  Tata  companies  

•  A  Tata  company  shall  cooperate  with  other  Tata  companies  including  applicable  joint  ventures,  by  sharing  knowledge  and  physical,  human  and  management  resources,  and  by  making  efforts  to  resolve  disputes  amicably,  as  long  as  this  does  not  adversely  affect  its  business  interests  and  shareholder  value.  

•  In  the  procurement  of  products  and  services,  a  Tata  company  shall  give  preference  to  other  Tata  companies,  as  long  as  they  can  provide  these  on  compeAAve  terms  relaAve  to  third  parAes.  

Clause:12  -­‐  Public  representaAon  of  the  company  and  the  group  

•  The  Tata  group  honours  the  informaAon  requirements  of  the  public  and  its  stakeholders.  In  all  its  public  appearances,  with  respect  to  disclosing  company  and  business  informaAon  to  public  consAtuencies  such  as  the  media,  the  financial  community,  employees,  shareholders,  agents,  franchisees,  dealers,  distributors  and  importers,  a  Tata  company  or  the  Tata  group  shall  be  represented  only  by  specifically  authorised  directors  and  employees.  It  shall  be  the  sole  responsibility  of  these  authorised  representaAves  to  disclose  informaAon  about  the  company  or  the  group.  

Clause:13  -­‐  Third  party  representaAon  •  ParAes  which  have  business  dealings  with  the  Tata  group  but  are  not  members  of  the  group,  such  as  consultants,  agents,  sales  representaAves,  distributors,  channel  partners,  contractors  and  suppliers,  shall  not  be  authorised  to  represent  a  Tata  company  without  the  wriXen  permission  of  the  Tata  company,  and  /  or  if  their  business  conduct  and  ethics  are  known  to  be  inconsistent  with  the  Code.  

•  Third  parAes  and  their  employees  are  expected  to  abide  by  the  Code  in  their  interacAon  with,  and  on  behalf  of,  a  Tata  company.  Tata  companies  are  encouraged  to  sign  a  non-­‐disclosure  agreement  with  third  parAes  to  support  confidenAality  of  informaAon.  

Clause:14  -­‐  Use  of  the  Tata  brand  •  The  use  of  the  Tata  name  and  trademark  shall  be  governed  by  manuals,  codes  and  agreements  to  be  issued  by  Tata  Sons.  The  use  of  the  Tata  brand  is  defined  in  and  regulated  by  the  Tata  Brand  Equity  and  Business  PromoAon  agreement.  No  third  party  or  joint  venture  shall  use  the  Tata  brand  to  further  its  interests  without  specific  authorisaAon.  

Clause:15  -­‐  Group  policies  •  A  Tata  company  shall  recommend  to  its  board  of  directors  the  adopAon  of  policies  and  guidelines  periodically  formulated  by  Tata  Sons.  

Clause:16  -­‐  Shareholders  •  A  Tata  company  shall  be  commiXed  to  enhancing  shareholder  value  and  complying  with  all  regulaAons  and  laws  that  govern  shareholder  rights.The  board  of  directors  of  a  Tata  company  shall  duly  and  fairly  inform  its  shareholders  about  all  relevant  aspects  of  the  company’s  business,  and  disclose  such  informaAon  in  accordance  with  relevant  regulaAons  and  agreements.  

Clause:17  -­‐  Ethical  conduct  •  Every  employee  of  a  Tata  company,  including  full-­‐Ame  

directors  and  the  chief  execuAve,  shall  exhibit  culturally  appropriate  deportment  in  the  countries  they  operate  in,  and  deal  on  behalf  of  the  company  with  professionalism,  honesty  and  integrity,  while  conforming  to  high  moral  and  ethical  standards.  Such  conduct  shall  be  fair  and  transparent  and  be  perceived  to  be  so  by  third  parAes.  

•  Every  employee  of  a  Tata  company  shall  preserve  the  human  rights  of  every  individual  and  the  community,  and  shall  strive  to  honour  commitments.  

•  Every  employee  shall  be  responsible  for  the  implementaAon  of  and  compliance  with  the  Code  in  his  /  her  environment.  Failure  to  adhere  to  the  Code  could  aXract  severe  consequences,  including  terminaAon  of  employment.  

Clause:18  -­‐  Regulatory  compliance  •  Employees  of  a  Tata  company,  in  their  business  conduct,  shall  comply  with  all  applicable  laws  and  regulaAons,  in  leXer  and  spirit,  in  all  the  territories  in  which  they  operate.  If  the  ethical  and  professional  standards  of  applicable  laws  and  regulaAons  are  below  that  of  the  Code,  then  the  standards  of  the  Code  shall  prevail.  

•  Directors  of  a  Tata  company  shall  comply  with  applicable  laws  and  regulaAons  of  all  the  relevant  regulatory  and  other  authoriAes.  As  good  governance  pracAce  they  shall  safeguard  the  confidenAality  of  all  informaAon  received  by  them  by  virtue  of  their  posiAon.  

Clause:19  -­‐  Concurrent  employment  •  Consistent  with  applicable  laws,  an  employee  of  a  Tata  company  shall  not,  without  the  requisite,  officially  wriXen  approval  of  the  company,  accept  employment  or  a  posiAon  of  responsibility  (such  as  a  consultant  or  a  director)  with  any  other  company,  nor  provide  freelance  services  to  anyone,  with  or  without  remuneraAon.  In  the  case  of  a  full-­‐Ame  director  or  the  chief  execuAve,  such  approval  must  be  obtained  from  the  board  of  directors  of  the  company.  

Clause:20  -­‐  Conflict  of  interest  •  An  employee  or  director  of  a  Tata  company  shall  always  act  in  the  interest  of  the  company,  and  ensure  that  any  business  or  personal  

associaAon  which  he  /  she  may  have  does  not  involve  a  conflict  of  interest  with  the  operaAons  of  the  company  and  his  /  her  role  therein.  An  employee,  including  the  execuAve  director  (other  than  independent  director)  of  a  Tata  company,  shall  not  accept  a  posiAon  of  responsibility  in  any  other  non-­‐Tata  company  or  not-­‐for-­‐profit  organisaAon  without  specific  sancAon.  

•  The  above  shall  not  apply  to  (whether  for  remuneraAon  or  otherwise):  –  NominaAons  to  the  boards  of  Tata  companies,  joint  ventures  or  associate  companies.  –  Memberships  /  posiAons  of  responsibility  in  educaAonal  /  professional  bodies,  wherein  such  associaAon  will  benefit  the  employee  /  Tata  company.  –  NominaAons  /  memberships  in  government  commiXees  /  bodies  or  organisaAons.  –  ExcepAonal  circumstances,  as  determined  by  the  competent  authority.  

•  Competent  authority,  in  the  case  of  all  employees,  shall  be  the  chief  execuAve,  who  in  turn  shall  report  such  excepAonal  cases  to  the  board  of  directors  on  a  quarterly  basis.  In  case  of  the  chief  execuAve  and  execuAve  directors,  the  Group  Corporate  Centre  shall  be  the  competent  authority.  

•  An  employee  or  a  director  of  a  Tata  company  shall  not  engage  in  any  business,  relaAonship  or  acAvity  which  might  conflict  with  the  interest  of  his  /  her  company  or  the  Tata  group.  A  conflict  of  interest,  actual  or  potenAal,  may  arise  where,  directly  or  indirectly…  –  An  employee  of  a  Tata  company  engages  in  a  business,  relaAonship  or  acAvity  with  anyone  who  is  party  to  a  transacAon  with  his  /  her  company.  –  An  employee  is  in  a  posiAon  to  derive  an  improper  benefit,  personally  or  to  any  of  his  /  her  relaAves,  by  making  or  influencing  decisions  relaAng  to  any  transacAon.  –  An  independent  judgement  of  the  company’s  or  group’s  best  interest  cannot  be  exercised.  

•  The  main  areas  of  such  actual  or  potenAal  conflicts  of  interest  shall  include  the  following:  –  An  employee  or  a  full-­‐Ame  director  of  a  Tata  company  conducAng  business  on  behalf  of  his  /  her  company  or  being  in  a  posiAon  to  influence  a  decision  with  regard  to  his  /  her  company’s  business  with  a  

supplier  or  customer  where  his  /  her  relaAve  is  a  principal  officer  or  representaAve,  resulAng  in  a  benefit  to  him  /  her  or  his  /  her  relaAve.  

–  Award  of  benefits  such  as  increase  in  salary  or  other  remuneraAon,  posAng,  promoAon  or  recruitment  of  a  relaAve  of  an  employee  of  a  Tata  company,  where  such  an  individual  is  in  a  posiAon  to  influence  decisions  with  regard  to  such  benefits.  

–  The  interest  of  the  company  or  the  group  can  be  compromised  or  defeated.  

•  Notwithstanding  such  or  any  other  instance  of  conflict  of  interest  that  exist  due  to  historical  reasons,  adequate  and  full  disclosure  by  interested  employees  shall  be  made  to  the  company’s  management.  It  is  also  incumbent  upon  every  employee  to  make  a  full  disclosure  of  any  interest  which  the  employee  or  the  employee’s  immediate  family,  including  parents,  spouse  and  children,  may  have  in  a  family  business  or  a  company  or  firm  that  is  a  compeAtor,  supplier,  customer  or  distributor  of  or  has  other  business  dealings  with  his  /  her  company.  

•  Upon  a  decision  being  taken  in  the  maXer,  the  employee  concerned  shall  be  required  to  take  necessary  acAon,  as  advised,  to  resolve  /  avoid  the  conflict.  

•  If  an  employee  fails  to  make  the  required  disclosure  and  the  management  of  its  own  accord  becomes  aware  of  an  instance  of  conflict  of  interest  that  ought  to  have  been  disclosed  by  the  employee,  the  management  shall  take  a  serious  view  of  the  maXer  and  consider  suitable  disciplinary  acAon  against  the  employee.  

Clause:21  -­‐  SecuriAes  transacAons  and  confidenAal  informaAon  

•  An  employee  of  a  Tata  company  and  his  /  her  immediate  family  shall  not  derive  any  benefit  or  counsel,  or  assist  others  to  derive  any  benefit,  from  access  to  and  possession  of  informaAon  about  the  company  or  group  or  its  clients  or  suppliers  that  is  not  in  the  public  domain  and,  thus,  consAtutes  unpublished,  price-­‐sensiAve  insider  informaAon.  

•  An  employee  of  a  Tata  company  shall  not  use  or  proliferate  informaAon  that  is  not  available  to  the  invesAng  public,  and  which  therefore  consAtutes  insider  informaAon,  for  making  or  giving  advice  on  investment  decisions  about  the  securiAes  of  the  respecAve  Tata  company,  group,  client  or  supplier  on  which  such  insider  informaAon  has  been  obtained.  

•  Such  insider  informaAon  might  include  (without  limitaAon)  the  following:  –  AcquisiAon  and  divesAture  of  businesses  or  business  units.    

–  Financial  informaAon  such  as  profits,  earnings  and  dividends.    –  Announcement  of  new  product  introducAons  or  developments.    –  Asset  revaluaAons.    

–  Investment  decisions  /  plans.    –  Restructuring  plans.    –  Major  supply  and  delivery  agreements.    –  Raising  of  finances.  

•  An  employee  of  a  Tata  company  shall  also  respect  and  observe  the  confidenAality  of  informaAon  pertaining  to  other  companies,  their  patents,  intellectual  property  rights,  trademarks  and  invenAons;  and  strictly  observe  a  pracAce  of  non-­‐disclosure.  

Clause:22  -­‐  ProtecAng  company  assets  •  The  assets  of  a  Tata  company  shall  not  be  misused;  they  shall  be  employed  primarily  and  judiciously  for  the  purpose  of  conducAng  the  business  for  which  they  are  duly  authorised.  These  include  tangible  assets  such  as  equipment  and  machinery,  systems,  faciliAes,  materials  and  resources,  as  well  as  intangible  assets  such  as  informaAon  technology  and  systems,  proprietary  informaAon,  intellectual  property,  and  relaAonships  with  customers  and  suppliers.  

Clause:23  -­‐  CiAzenship  •  The  involvement  of  a  Tata  employee  in  civic  or  public  affairs  shall  be  with  express  approval  from  the  chief  execuAve  of  his  /  her  company,  subject  to  this  involvement  having  no  adverse  impact  on  the  business  affairs  of  the  company  or  the  Tata  group.  

Clause:24  -­‐  Integrity  of  data  furnished  •  Every  employee  of  a  Tata  company  shall  ensure,  at  all  Ames,  the  integrity  of  data  or  informaAon  furnished  by  him/her  to  the  company.  He/she  shall  be  enArely  responsible  in  ensuring  that  the  confidenAality  of  all  data  is  retained  and  in  no  circumstance  transferred  to  any  outside  person/party  in  the  course  of  normal  operaAons  without  express  guidelines  from  or,  the  approval  of  the  management.  

Clause:25  -­‐  ReporAng  concerns  •  Every  employee  of  a  Tata  company  shall  promptly  report  to  the  

management,  and  /  or  third-­‐party  ethics  helpline,  when  she  /  he  becomes  aware  of  any  actual  or  possible  violaAon  of  the  Code  or  an  event  of  misconduct,  act  of  misdemeanour  or  act  not  in  the  company’s  interest.  Such  reporAng  shall  be  made  available  to  suppliers  and  partners,  too.  

•  Any  Tata  employee  can  choose  to  make  a  protected  disclosure  under  the  whistleblower  policy  of  the  company,  providing  for  reporAng  to  the  chairperson  of  the  audit  commiXee  or  the  board  of  directors  or  specified  authority.  Such  a  protected  disclosure  shall  be  forwarded,  when  there  is  reasonable  evidence  to  conclude  that  a  violaAon  is  possible  or  has  taken  place,  with  a  covering  leXer,  which  shall  bear  the  idenAty  of  the  whistleblower.  

•  The  company  shall  ensure  protecAon  to  the  whistleblower  and  any  aXempts  to  inAmidate  him  /  her  would  be  treated  as  a  violaAon  of  the  Code.  

Note:  The  TCoC  does  not  provide  a  full,  comprehensive  and  complete  explanaAon  of  all  the  rules  that  employees  are  bound  to  follow.  Employees  have  a  conAnuing  obligaAon  to  familiarise  themselves  with  all  applicable  laws,  company  policies,  procedures  and  work  rules.  

Infosys  Code  of  Ethics    

References  •  Advice  from  Aristotle  •  A  History  of  Business  Ethics  •  Business  Ethics  Primer  

•  How  are  Ethics  and  Excellence  related  ?  (my  blog  post)  

•  Business  Ethics  from  Knowledge@Wharton  

•  Modern  Ethics