MBE Implementation Framework

Leadership: The role of a leader is of critical importance in ensuring that every employee in the company follows the ethical way of doing business. A leader must know how to involve and engage with the employees and other stakeholders and ensure periodic evaluation of employee and of self in the ethical conduct of business.

Implementation/ Compliance Structure: Companies must have a detailed plan that outlines the processes involved and addresses the administrative issues of embarking upon such a journey.They would also need to draw out a roadmap and develop a concern resolution and review mechanism to ensure that the MBE plan does not falter at the implementation stage

Communication and Training: The communication and training framework must be robust enough to detect discrepancies and flexible enough to ensureeasy adaptability to company specific situations.The tenets of communication on ethical misconduct / violations are as follows:

- Understand the basic principles underlying the Code.

- Apply the basic principles in likely scenarios (correlation with TCoC clauses).

- Understand what constitutes a concern / violation.

- Understand what happens when an integrity concern is raised.

- Build clarity on how a concern is addressed.

- Emphasise the importance of confidentiality of informationon cases detected / reported

Measurement of Effectiveness: The programme needs to be closely monitored and regularly reviewed for effective implementation. The CEO’s annual declaration to group chairman and chairperson of the board covers the efforts and results under the four pillars by reporting the key actions undertaken for the previous year and planned for the succeeding year.

Roles and Responsibilities:

Employee is the key. Every employee is responsible for making business decisions that are consistent with the Group's commitment to compliance and ethics.

Board of Directors:

Some of the key aspects that boards must get involved in are:

• Setting the tone for the company as a whole
• Holding the CEO and other senior leaders liable for their decisions and actions
• Overseeing the design of the ethics programme, particularly in terms of:
  • The form and content of information required from the principal ethics officer
  • The focus of the ethics effort; to determine whether it is compliance-based, more broadly values-based or goes beyond corporate boundaries and addresses social issues
  • The role, organisational position and selection of ethics counselors
• Establishing the objectives of ethical conduct for the CEO and the senior leadership team, as well as ensuring that ethical values are duly reflected in their selection criteria, performance evaluation and compensation system
• Adopting systems that minimise conflict of interest for the members of the board
• Instituting an independent review of the board's overseeing of the executive management

Principal Ethics Officer (PEO):

The role of the PEO has been detailed in the role delineation for the senior leadership team (which includes company CEOs and those who report directly to them). But there are some requirements that should fall exclusively in the ambit of the PEO. These include:

• Assuring, on behalf of the company, compliance with the code not just in letter but also in spirit
• Assuring the integrity of the ethics reporting and monitoring system
• Setting the tone of organisational integrity at the top
• Leading by serving as a role model
• Encouraging ethical behaviour by facilitating and legitimising ethical dialogue
• Appropriately selecting and placing ethics counselors
• Allocating adequate resources & sufficient flexibility to the ethics counsellors, to enable them to effectively undertake their functions
• Ensuring that the ethics counsellors have access to the PEO, the chief financial officer and the board of directors
• Presenting the compliance report to the board of directors

Senior Leadership Team:

The principal responsibility for embedding ethics and integrating them into business processes lies with the ethics counsellor. But the role of the senior leadership team is critical in enabling the ethics counsellor's initiatives. While the ethics counsellor uses the code to review business processes and identify potential barriers to its effective integration, solutions to overcome identified barriers have to be collectively developed and deployed by the senior leadership team through engagement of employees.

Leadership:

The role of the senior leadership team, including the ethics counsellor, in embedding the TCoC includes:

• Setting the tone by articulation of clear organisational values
• Developing an ethics strategy, goal and objectives
• Developing ethics policies and procedures
• It must be ensured that ethics policies and procedures consistent with ethics goals aredeveloped and communicated, and that employee adherence to these policies andprocedures is monitored
• Periodic assessment of the ethical climate within the organisation
• Building support for ethical practices
• The organisation's ethical positions need frequent reinforcing. Senior leadership team members must act as role models to demonstrate conformance to ethical values, and ensure that employees adhere to ethical values in every aspect of their jobs. Employees must be involved in the development and deployment of ethical practices.
• Demonstration of ethical leadership practices
• Supporting ethics education and training
• Addressing those outside the Tata Group

An important leadership task is identifying and sensitising people and companies outside the Tata Group, whose activities on behalf of the company may involve issues covered by the code. This includes requiring them to agree to comply with the relevant aspects of the code.

Ethics Counsellor:

The ethics counsellor should support the senior leadership team in discharging its responsibilities. In addition, the specific roles and responsibilities of the ethics counsellor are (but not restricted to):

• Identification, monitoring and control of measures of ethical system effectiveness: Periodic compliance reviews must be conducted with the assistance of the internal audit staff to assess the effectiveness of compliance measures and to identify ways of improving them. Measures and indicators for assessment of the effectiveness of ethics policies and procedures have to be developed and monitored. It is also necessary to develop ways to integrate ethics monitoring outcomes in personnel evaluations and over all organisational performance assessments.
• Development of guidelines for ethical decision making: The ethics counsellor along with the senior leadership team must develop guidelines to resolve ethical issues, apart from ensuring the presence of trained ethics personnel to support and interpret the guidelines where necessary. It must communicate the availability of these guidelines and the ethics support personnel, and hold employees accountable for inadequate use of the guidelines and resources made available.
• Impact evaluation of initiatives: The ethics counsellor along with the senior leadership team must develop procedures to assess the impact of ethical behaviour on employee morale and organisational effectiveness, as well as track stakeholder attitudes on the ethical conduct of the organization
• Identifying potential barriers to deployment of the code, developing and deploying policies, procedures and guidelines to overcome these barriers
• Developing measures and indicators to monitor and track the effectiveness of ethics management systems
• Developing and deploying an ethics management strategy and action plans
• Receiving reports of possible violations.
• Providing help on questions related to the code
• Referring possible violations to the appropriate resource personnel
• Ensuring confidentiality
• Facilitating an objective investigation process
• Ensuring closure and feedback to the reporting person
• Ensuring timely submission of relevant declarations (CEO's declaration, manager's declaration, conflict of interest statement, etc)

Employees:

Effective deployment of the code ultimately depends on the participation of employees. Theresponsibility of each employee includes:

• Understanding the company's fundamental ethical values as well as learning the details of the clauses and their relevance to their work
• Supporting the shaping and development of ethical practices for enterprise-wide deployment, with the code in letter and spirit. In short, ethical issues must be considered in day-to-day operations, in every aspect of the job
• Seeking guidance on ethical issues from their managers, company legal counsel, ethics counsellors or other company resource personnel
• Communicating (could be written or oral, and anonymous) any concern about possible violations and requests to violate the codes must be promptly reported
• Cooperating in investigations regarding concerns about the code and ensuring that no retribution is visited on anyone for reporting or supplying information about a concern

The Compliance Mechanism

The ethics counsellor at headquarters is responsible for compliance across all units of the company and reports to the CEO (or principal ethics officer) and audit committee or ethics committee of the board

Local ethics counsellors at various locations are responsible for unit-level compliance and report to the ethics counsellor

Company managers are responsible for personal and organisational compliance in their areas of operations

The compliance process

The compliance process flows in the following steps:

• In a decision situation the employee must ascertain if any clause of the code is applicable to the situation
• If the issue is not clear the employee may seek guidance from the ethics counsellor or one of the other resource personnel on the ethics team
• The employee may then ascertain, in cases where a provision of the code is applicable, whether a situation for a potential concern exists or not
• If a situation for a potential concern exists, the employee must report it to the ethics counselor, ethics helpline or to the chairperson, audit committee of the board as per whistle-blower policy
• Ethics counsellors are required to log and document the concern in the appropriate format
• They must then ascertain if the concern pertains to a member of the senior leadership team. If so, they may pass on the concern to the chairperson of the ethics committee of the board or, if there is no ethics committee, to the chairperson of the audit committee
• The ethics counsellor may undertake a categorisation of the concern into types 1, 2 and 3 or 4

Types of concerns

A type 1 concern is about the company violating the code.

A type 2 concern is about an employee violating the code.

A type 3 concern is about a violation by another Group company. Such cases may be reported to the ethics counsellor of the Tata company involved and taken through formal investigations if required.

An additional type 4 concern is one, where the company or an employee seeks clarification on the clauses of the code, with respect to their understanding and the implementation process. These are concerns where proactive issues based on the present and future challenges of growth and aspirations are raised. The ethics counsellor may encourage such concerns since they lead to better understanding and the clarifications that are provided, lower the risks to reputation.

Concern resolution flow chart