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

Feb 14, 2017

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Vimal Kishor
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Page 1: Ethics Compliance and Governance

ICSI-GSCM-Oct 16Ethics, Governance & Compliance

21st October 2016

Page 2: Ethics Compliance and Governance

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.

Page 3: Ethics Compliance and Governance

Why-Ethical Corporate behavior

Strengthening relationships

Value creation

Brand- image

Standardization

Page 4: Ethics Compliance and Governance

Influencers

Legal, Political & Judicial EconomicChanges in legal environment Recession Introduction of CSR Consumer behavior- PSU banking vs. Private banking

Introduction of various cess/taxes Cost benefit & outsourcingStrict anti-corruption laws Ease of dealing/doing businessIntroduction of women directors Economic policiesPOSH at workplace – Vishaka Vs State of RajsthanPublic Liability Act- MC Mehta case

Social TechnologicalChanging 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 securityEnvironmental factors- pollution PrivacyMore video/ tele-conferencing –reduction of

pollution by vehicular movements

Page 5: Ethics Compliance and Governance

Code of ethics- IndicativesCode of Ethics- Corporate Conduct Employee Conduct1. 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 recordsa. True and fair financialsb. No willful/material misrepresentationc. Appropriate records

3. Concurrent employmenta. For profitb. Not for profit

3. Health safety & Environment 4. Conflict of interest4. Public representation 5. Insider trading5. Third party representation 6. Protecting company’s assets6. Shareholders value 7. Non discrimination & non harassment7. Political non alignment 8. Substance abuse

9. Anti-corruption- Gifts & entertainment10. Political activities11. Communicating with regulators12. Appropriate use of computer assets13. Privacy14. Record retention15. Confidentiality, trade secrets & business practices

Page 6: Ethics Compliance and Governance

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.

Page 7: Ethics Compliance and Governance

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

Page 8: Ethics Compliance and Governance

Implementation

Communication Recruitment

Speaking up Induction & Training

Disciplinary Procedures

Ethical Corporate Culture

Performance Management

Page 9: Ethics Compliance and Governance

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

Page 10: Ethics Compliance and Governance

Legislative framework- GeneralThe 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 disclosuresAdobe Acrobat

Document

Page 11: Ethics Compliance and Governance

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

Page 12: Ethics Compliance and Governance

Competition

Debt covenants

Demand for and

assessment of performance

Government regulations

Managerial /labor market

Media pressure

Takeovers

External corporate governance controls

Page 13: Ethics Compliance and Governance

ComplianceCompliance 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

Page 14: Ethics Compliance and Governance

Influencers- GeneralBoard and Audit Committeeo 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. Decentralizedo Assignment of Authority and Responsibility

Risk Culture (Appetite and Tolerance)

Page 15: Ethics Compliance and Governance

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

Page 16: Ethics Compliance and Governance

Compliance toolkitChief Compliance Officer Job

Description

Office of Compliance Mission Statement

Compliance Officers Working Group Charter

Audit and Compliance Committee Charter;

Audit and Compliance Committee Calendar

Page 17: Ethics Compliance and Governance

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

Page 18: Ethics Compliance and Governance

Thank you

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Vimal Kishor9987719880

ICSI-GSCM-Oct 16