CII Policy Watch on Corporate Integrity & Good Citizenship

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An industry segment that ful lls its obligations to society at large, connects with the surrounding community, and closely follows the rules and regulations of the country in which it operates, is able to emerge as a credible partner in development and a competitive leader in the world. corporate integrity and good citizenship is not a matter of choice for an aspirational company, but a non-negotiable imperative. Early on in its history, cii internalized this belief and sought to disseminate it widely among industry Members.
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  • 1. 1policy watch this IssueInside Message From the Director General............ 1 Chandrajit Banerjee, Director General, CII Policy Barometer.......... 5 Industry Voices............. 7 CEO Speak............................................................................................2 August 2016, Volume 5, Issue 2 Policy I    ndustry is an integral component of the society and community of a nation and bears huge responsibility in the matter of ethics and integrity. An industry segment that fulfills its obligations to society at large, connects with the surrounding community, and closely follows the rules and regulations of the country in which it operates, is able to emerge as a credible partner in development and a competitive leader in the world. Corporate integrity and good citizenship is not a matter of choice for an aspirational company, but a non-negotiable imperative. Early on in its history, CII internalized this belief and sought to disseminate it widely among Industry Members. In 1996, CII constituted the National Committee on Corporate Governance to formulate a Code of Corporate Governance and encourage Industry to adopt it on a voluntary basis.The final Code was brought out in 1998, and it is a matter of pride to state that CII was the first organization in India to establish these guidelines, which went on to gain universal acclaim. CII has defined a Model Code of Conduct as a set of ‘principles, values, standards, or rules of behaviour that guide the decisions, procedures, and systems of an organization in a way that a) contributes to the welfare of its key stakeholders, and b) respects the rights of all constituents affected by its operations. According to international data, companies that have internalized compliance as part of their usual business activities enjoyed 17% higher revenues, 14% higher profits, 18% higher customer satisfaction, 17% higher customer retention and 50% less spend on compliance. Today, corporate governance is increasingly recognized as a core differentiator of leadership, even as the business climate is in the process of radical change. Regulatory changes make compliances mandatory, while Government and investor expectations are becoming more stringent. Corporate sustainability depends on a company’s agility in meeting applicable norms and standards, particularly for companies that aspire to global operations.The coverage of such norms is becoming wider, extending to industrial relations, accounting practices, credit and finance, environmental and sustainability regulations, and Corporate Social Responsibility (CSR), among others. In addition, a company must be alive to the needs of society and attempt to foster inclusive growth by associating itself with the underprivileged sections of society, including women, and the differently abled. Over the years, CII has brought out several Codes that act as guides for companies across critical areas, including the CII Model Code of Conduct, Charter of Good Practices for Industrial Relations, Code of Conduct for Affirmative Action, Code of Conduct for Gender Equality, Code of Conduct for Disability and Code of Conduct for HIV/ AIDS. CII is the Secretariat for the National Foundation for Corporate Governance (NFCG) founded under the aegis of the Ministry of Corporate Affairs with the partnership of stakeholder institutions such as the Institute of Company Secretaries of India, among others. The CII National Committee on Integrity and Transparency in Governance was established to focus on promoting the agenda of ethical business practices. It aims to ensure wider compliance, raise awareness on corporate governance and disseminate information on internationally accepted norms and standards to enable firms to become globally competitive. One outcome of the deliberations of the Committee was to establish a certification course for compliance officers, in collaboration with the Indian School of Business and GE. This course, held in July and August 2016 would help professionals to deploy ethical practices and be compliant within their companies. Beyond compliances, CII is working towards developing guidelines for good corporate citizenship. This would imply action by the corporate in areas such as environment and industrial relations, beyond what is required by the law. A large proportion of companies are honest and contribute greatly to development. It is a small number of willful defaulters which can adversely impact the positive image of the Industry. By taking corporate integrity and good citizenship to Industry at large, CII aspires to strengthen the role of corporates as excellent partners in national development. n Chandrajit Banerjee Director General Confederation of Indian Industry Sumit Mazumder, Immediate Past President, CII and Chairman, CII National Committee on Integrity and Transparency in Governance and CMD, TIL Ltd Pradeep Bhargava, Co-Chairman, CII National Committee on Integrity & Transparency in Governance and Industrial Relations and Director, Cummins India Ltd Focus: Corporate Integrity and Good Citizenship
  • 2. 2 policy watch CEOSpeak Corruption affects growth and economic development, distorts the level playing field and seriously impacts international trade and investments. Governments around the world are concerned about corruption in their countries and are taking several measures to contain it. In India, the Government, which took office two years ago has clearly articulated the view that they would follow a zero tolerance policy on corruption. While many measures have been taken to reduce corruption, it needs the participation and support of all in this effort. According to the Transparency International Corruption Perceptions Index, which ranks a total of 168 nations, India’s current ratings has improved from 84th in 2014 to 76th in 2015. There are many causes for corruption which include money needed for election funding, seeking favors to win orders and – very importantly – greed which leads to wrong doings. Since India is a signatory to the United Nations Convention Against Corruption (UNCAC) and ratified it in 2011, several laws are on the anvil to conform to the requirements of this international law. Other countries have strong anti-corruption laws such as the Foreign Corrupt Practices Act (FCPA) in USA and the Anti-Bribery Act of the UK. Other initiatives includes the OECD Anti-Bribery Convention and the World Economic Forum Partnering Against Corruption Initiative (PACI). Indian laws include the Right to Information Act 2005, Prevention of Corruption Act 1988, the Indian Penal Code, Prevention of Money Laundering Act 2002, and the Whistle Blower Act 2013. CII initiatives in the area of Anti- Corruption About six years ago, CII set up a National Committee on Integrity and Transparency in Governance with the aim to bring about transparency in Governance and get the message across to Industry that doing business ethically makes good sense. To start with, CII brought out a Code of Business Ethics which it recommended to Members to follow on a voluntary basis. Beyond the Code, it was felt that there was need for more awareness sessions, sharing of company experiences and these were organized across the country. CII appeared before the Parliament Standing Committee on Law and Justice to put forward its views on impending legislation on anti-corruption. It also came out with a publication on Best Practices and Ethics in 25 Member companies. Workshops and meetings were organized in partnership with and in close cooperation with the OECD and the World Economic Forum. Policy issues were discussed with the Government with a view to simplify processes and CII is engaged in a regular dialogue with the Government on ease of doing business. One of the reasons for corruption has been the absence of clear and transparent policies. In the area of National Resource Management, we now have clear policies in mining, as an example. Last year, the Committee decided that with a large membership from the SME sector, CII should come out with a simpler code which could be recommended to Members for implementation. Based on the Codes of some well-known companies, the Committee drafted a Code which contained six basic Industry Urged to be Ethical Sumit Mazumder Immediate Past President, CII and Chairman, CII National Committee on Integrity and Transparency in Governance and Chairman & Managing Director, TIL Limited Source: garagestockshutterstock.com
  • 3. 3policy watch CEOSpeak principles to be followed for doing business ethically. The Model Code of Conduct was recommended to Members to follow and it was mentioned that those who would adopt the Code, would have their names included in the CII website. Over 100 companies have already confirmed that they would follow the Code; more and more names are coming in. While the Model Code is the first step to being ethical, a Working Group under Mr Pradeep Bhargava, Co-Chairman of the National Committee is working towards developing guidelines for Good Corporate Citizenship. Because of the complexities of doing business in India, the Committee felt that we need to develop a band of trained professional Compliance Officers who would play a critical role in the operations of the company. CII, GE and the Indian School of Business partnered to develop a course for Compliance Officers, a 10-day residential programme held at the premises of the Indian School of Business. The course was inaugurated by DR TM Bhasin, Vigilance Commissioner on 9th July 2016 at the ISB campus, Mohali. The second phase of the course was held in ISB, Hyderabad in August. A total of 39 participants from diverse industries and service sectors participated in the Course.Twenty five per cent participants were women and 45% were from senior and top management levels. Depending on the success of the course, CII is planning to organize such programmes on a regular basis. The Advantages of being Ethical We normally refer to surveys done internationally but to make the point to Indian Industry, it was agreed that we will do a study to obtain the perceptions of Indian Industry on how they have benefitted by being transparent and open in their business operations. The Committee has also decided to study two sectors this year, sectors which affect the common man and where transparency is needed. Additionally, to share the experience and knowledge between the public sector CVOs and their counterparts in the private sector, meetings have been organized between them in the presence of the Chief Vigilance Commissioner. Specific subjects have been discussed and in the last interaction, Forensic Accounting and Whistle Blower Act were the themes. The CII National Committee has several other initiatives planned to address the issue of corruption but let me say that we believe that Industry must play its part to curb wrong doings in business. Our dialogue with Government on ease of doing business will continue but we must show the way and take measures including ensuring that business between private sector companies are transparent and ethical.We are confident that through concerted efforts we should be able to spread the message that business must be ethical and in the process help in the growth and development of the country. n Good Corporate Citizenship Should Be Non-negotiable CII believes that apart from being ethical in conducting business, corporate India should  make their impact on society as caring  and responsible corporate citizens as well. What does that mean - there is a distinction between Governance and Citizenship - Governance focuses on compliance and integrity while Citizenship goes beyond to ‘Socially Responsible Business’. The Code of Governance is basic and should be non-negotiable for every enterprise but that itself is a challenge and journey in our socio/ economic/ political framework. The Model Code of Conduct is the ‘minimum’ first level target.This will create the platform for compliance as well as display of integrity and transparency in the conduct. Good Corporate Citizenship – Basic Premise It will be helpful to define the parameters under which the Good Corporate Citizenship journey takes off. Ambitious for sure, but certainly doable. Not being invented, but being ‘formalised’. A worthwhile journey already embarked by some caring corporates in India. Some ground rules are as follows: • Compliance to the prevailing laws is assumed as given.  Both in letter and spirit. This is the starting point • This is a proactive and voluntary journey. There cannot be any pre-conditions. Incentives/change in laws/something in Pradeep Bhargava Co-Chairman, CII National Committee on Integrity & Transparency in Governance and Industrial Relations and Director, Cummins India Limited
  • 4. 4 policy watch CEOSpeak return from Government etc are not on the agenda  • The real benefits are joy/ pride on one hand and sustainability/respect on the other. Scope and Content Like the Governance module, the initial scope is kept finite and more elements can be added as the organization advances in the journey. Given below is an illustrative – not comprehensive or in any order of priority – listing of the scope and content: • Corporate Social Responsibility – Governance / Compliance – Abiding by the law and spending 2% of net profit on CSR, for the right beneficiaries etc. Genuine interest to do good for society – Corporate Citizenship – Will encompass activities like: i. Encouraging employees’ (even families if possible)  engagement in CSR activities which will  make them more sensitive  and caring individuals/citizens ii. Developing capability and capacity of selected NGOs to make them more productive and efficient. This is a big gap and corporates can help them rather than just being critical iii. Taking interest in/ownership of improvement of communities around your premises/facilities iv. Carry out audit on the work done on CSR to ascertain impact • Environment – Governance / Compliance – Strict adherence to the limits prescribed by the law. No violation and complete disclosure. Don’t abuse nature – Corporate Citizenship – This can include activities like: i. Making your product /services green in every aspect ii. Green Manufacturing/Delivery Process. Priority and Preference for Green Supply Chain (vendors) iii. Sensitizing Employees/ Stakeholders on virtues of Green. Use nature iv. Lower carbon footprint • Industrial Relations – Governance / Compliance – Paying minimum wages, if possible higher wages bearing in mind wages paid to regular employees for same job done, fair Industrial Resolution Mechanism in place, Compliance to various Acts like the Factories Act, Labour Act etc – Corporate Citizenship - Will include the following activities: i. Ensuring complete hygiene /safety / support for all staff including Contract Labour and other non- permanent employees ii. Ensuring Social Security for all category of employees engaged with the organization iii. Providing dignity, respect and equitable treatment to all employees Other possible areas The organization can embrace Good Corporate Citizenship with proactive initiatives like: • Skilling – Helping / Adopting skill providers  like ITI / Polytechnic / Professional Institutions and even becoming Vocational Training Providers • Recruitment – Being a fair employer by adopting non-discriminatory policies and embracing diversity • Women Employment – Induct and empower women, ensure their safety and security and above all create an inclusive environment through sender sensitization Possible next steps The important point of inflexion is acknowledging that (some) corporates can and should go beyond compliance. We don’t put  a limit in activities like quality/ cost reduction/ efficiency improvement and take them as ‘continuous improvement’ agenda. The same can be the endeavour for these activities which make us more socially responsible. As the first step, perhaps a finite number of (caring and willing) corporates from different sectors can converge and agree on the first phase of this journey.  This group in the Pilot phase, while implementing some of these, will evolve yet another Code of Conduct which will become the guidelines for others to follow.  The logical extension of this journey would be by these very organizations influencing their stakeholders (suppliers/ channel partners etc.) to join. nSource: donskarposhutterstock.com
  • 5. 5policy watch Policy Barometer CII Model Code of Conduct – Ethical Business Practices Accurate Books and Records: The company will maintain accurate accounts and records which reflect the true and fair picture of the company’s affairs in compliance with accepted accounting principles and standards for financial reporting. Bribery and Corruption: The company will prohibit bribery in any form in all its business dealings and will maintain strong controls to prevent and detect improper payments. The company shall comply with anti-money laundering and terrorist financing laws and report unaccounted cash or suspicious transactions. Fair and Equitable Treatment: The company shall not unfairly discriminate on the basis of race, caste, religion, color, ancestry, marital status, gender, sexual orientation, age, nationality, ethnic origin or disability. The company shall not tolerate harassment, whether sexual, verbal, physical or psychological against any employee. Health and Safety: The company shall provide a safe, clean and healthy work environment. Quality of Goods and Services: The company shall strive to ensure that its products and services meet the legally required safety and quality standards. Environment and Society: The company shall strive to be a good corporate citizen by promoting social welfare activities, promoting sustainability and minimizing the adverse impact of company operations on the environment. Business Courtesies - Industry Guidelines The guidelines herein can be adopted by companies as follows: • Companies which currently do not have any specific guidelines on business courtesies may adopt these guidelines and/or modify certain industry specific practices for their operations • Companies with similar existing policies related to business courtesies, these guidelines can act as reference document. Such organizations may ensure that they have also implemented appropriate monitoring and tracking mechanisms of such courtesies as per guidance set forth in the document Guidelines Need for an industry wide guidance Corruption, bribery and improper payments continue to be high compliance risks in the country. Trends have emerged which show that bribery and improper payments have taken various forms other than a simple exchange of cash. In India, the Prevention of Corruption Act (POCA), 1988 expressly prohibits Government officials to accept remuneration, financial or non-financial advantage of any kind other than the legal remuneration for the services rendered by them. Further, the Prevention of Corruption Amendment Bill, 2013, makes giving a bribe a specific offence. In the private sector also, companies want to ensure that business decisions are made in an objective, unbiased manner, without any apparent or perceived conflict of interest or with a view to obtain improper business advantage. However, interactions in the usual course of business are inevitable and may require basic courtesies to be provided. These are relevant also in the cultural context in India, where basic courtesies and giving of gifts to business partners is seen as a sign of respect and maybe customary. Various Government, public and private sector enterprises have their own codes of conduct for their employees. In the absence of common guidance on what business courtesies can be provided during business interactions, CII seeks to provide industry guidelines that CII Member companies can consider to assist them t
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