Code of Conduct for Directors and

Senior Management

Submitted By:
Rohit Sanjay Satarke

2022EPGP042

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 1. Introduction

2. Conceptual Discussion (Basic

Table of concepts to be discussed)

Contents 3. State and explain the implementation

of the existing system

4. Alternative systems prevailing in

other countries, if any

5. Data Analysis and Interpretation

6. Conclusion

7. Bibliography

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 ACKNOWLEDGMENT

I express my sincere gratitude to Prof Sridhar, Professor, Legal Aspects Of Business IIM Indore,
who, through his lucid and simplified teachings and references from real-life examples, made
the complicated nuances of legal and corporate governance into a matter of proper
application and decision making in business situations.

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Introduction
Defining Code:
A code is a comprehensive collection of laws, instructions or precepts on a given
subject area.

Defining Code of Conduct:

A code of conduct is a thorough description of the guiding principles of behaviour that
a company expects its directors to follow while performing their duties.
A code like this expresses the ideals for which the company stands and by which it
purports to do business. A code of conduct informs customers, shareholders, rivals,
and any those who come into touch with the company about the standards of
behaviour they may expect from the company.
A code of conduct, also known as a privacy code or code of conduct, is a stated
collection of rules, concepts, values, employee expectations, behaviours, and
relationships that a company deems significant and feels are required for its success.
A code of conduct outlines the values and goals that define a firm, with some being
more lenient than others. A code of conduct represents an organization's culture and
delivers a message that all workers and other stakeholders may refer to.
In reality, a code of conduct might vary from broad ideas to detailed standards. To
avoid conflict or harassment, a code of conduct might highlight ethical attitudes and
staff communication protocols, while also defining the repercussions for improper
behaviour that breaches the code.

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The Need for Code of Conduct
The code of conduct serves as a framework for the company's ethical decision-making.
The following are some of the important elements that motivate the necessity for a
Code of Conduct:

Illustration Of Company’s Values:

It is critical to comprehend how the corporation's senior management implements the
Code of Conduct and establishes a notion of the brand equity that it desires to include
among its customers, suppliers, and other key stakeholders.

Adherence To Law:
A code of conduct is used by an organisation to handle concerns such as workplace
harassment. By referring to the company's policies, employees may learn about
federal and provincial legislation such as health and safety and confidentiality. In the
event of a legal dispute, this is a must-have document for both workers and employers.
The Code requires the Board of Directors and Senior Management to operate within
the scope of their power, as well as to make and keep themselves informed about
developments in the industry in which the Company is engaged, as well as the legal
requirements that must be met.

Other Important Reasons:

The Code is designed to uphold high levels of openness, business ethics, company
culture, and values. The Code also serves as a disincentive to unethical behaviour and
promotes ethical ideals, and it represents the Company's dedication to effective
operation.

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Important Definitions:
It is critical to grasp some of the fundamental terms connected with the application of
the Code and the Code of Conduct. The aim for defining these phrases early in the
firm's paperwork is to prevent any legal complications later on when the company
grows rapidly. Furthermore, legal complications divert attention away from true
progress and serve as a barrier to expansion. Some of the important definitions often
seen in business settings are listed below.
"Board" - the Board of Directors of the Company

"Directors" - directors on the Board

"Company" - the desired organization under consideration

"Senior Management Personnel" - personnel of the Company who are members of its
core management team (excluding Directors) and who occupy the position of chiefs /
heads/ group head of various functions in the Company (i.e., all members of
management one level below the executive directors, including all functional heads)
The following definition may be modified to reflect the company's organisational
architecture and hierarchy.
Corporations often determine and express openly about these Codes. Typically, it is
stated that it applies to the Company's Directors and Senior Management Personnel.

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Types Of Code of Conduct
An employer may choose to include different types of codes of conduct in their
employee handbook. Some of the important code of conduct that can be listed are

• Company's value
• Conflict of interest
• Financial integrity and responsibility
• Confidential information
• Harassment and discrimination
• Dress code
• Leave policy
• Break-time policy
• Social media policy
• Reporting misconduct
• Illegal activity
• Internet usage policy
• Use of technology
• Absenteeism
• Plagiarism
• Environmental concerns

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Conduct Specifications
The following are some of the most essential concerns for conduct requirements. In
the next sections, we will look at the specifics of each characteristic.

• Honesty & Integrity

• Financial reporting and records
• Conflict of Interest
• Compliance with Laws Rules & Regulations
• Company Meetings
• Other Directorships- Disclosures
• Related Party Disclosures
• Related Party Disclosures
• Interaction with media, financial community, employees and shareholders
• Insider Trading
• Human Resources/ Employee Relations

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Honesty And Integrity

a) All Directors and Senior Management Personnel must operate with honesty,
integrity, and fairness, both on behalf of the Company and on their own.
All Directors and Senior Management Personnel must operate in good faith, with due
attention and care, competence and diligence, without allowing their independent
judgement to be subjugated, and in the best interests of the Company and its
shareholders.
b) All Directors and Senior Management Personnel must carry out their responsibilities
in the best interests of the company and uphold their fiduciary commitments.
c) Directors and Senior Management Personnel must not participate in dishonest or
unethical behaviour, including, but not limited to, the following:
I Making false, misleading, deceptive, or fraudulent claims about the Company's goods
and services;
(ii) Theft of proprietary information, possession of trade secret information acquired
without the owner's authorization, or inciting such disclosures by workers of other
firms; (iii) Use of unlawful tactics to increase profit/market share;
(iv) Taking part in bribery; and
(v) Unfair inducement to any government official or Director and Senior Management
Personnel should be able to commit to their obligations successfully.

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Financial reporting and records

The Company must compile and maintain its financial statements in line with relevant
laws and accounting standards.
b) Internal accounting and audit processes must fairly and properly represent all
business transactions and asset dispositions of the Company.
All necessary information must be available to the Company's auditors and other
authorised parties.
c) Any deliberate significant falsification of and/or misstatement on financial accounts
and reports is a violation of the Code.
An audit of financial statements by an external source provides users with a
professional, independent judgement on the accuracy and fairness of the accounts.
Because financial statements are often generated by individuals who are not the
company's owners or stakeholders, having an external audit provides confidence that
the accounts are free of errors and are truthful and properly stated. This kind of audit
is essentially one of the checks and balances necessary to ensure that the company's
financial situation is correct.
Not only do stakeholders and owners want assurance of accuracy, but external
consumers of financial statements depend on the auditor's view as well.

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Potential Conflict of Interest
Conflicts of interest arise most often when needs and interests collide. Conflicts of
interest might arise due to the nature of interactions vs organisational norms or
federal and state legislation.
People may easily become prejudiced (have an unfair preference) due to little factors
such as friendship, food, or flattery, or they may be swayed to make a choice due to
the opportunity for power, status, or money. Conflicts may arise when a person makes
or influences a choice for personal advantage that is unjust, immoral, or even unlawful.
Some of the key stands that may be implemented into the system are listed below. It
is crucial to note that the list below is not complete and may differ from organisation
to organisation. It will be up to the authority holder to decide which element is
appropriate for the firm.
a) Except in exceptional situations where prior consent of the Board is necessary,
Directors and Senior Management Personnel of the Company shall not participate into
any transactions that are or are likely to be in conflict with the interests of the
Company.
b) Directors and Senior Management Personnel shall inform the board if they have a
substantial interest in any transaction or situation directly impacting the Company,
whether directly, indirectly, or on behalf of third parties.
c) Directors and Senior Management Personnel shall not exploit for personal gain
opportunities discovered through the use of corporate property, information, or
position, unless the opportunity is fully disclosed to the Board in writing and the Board
declines to pursue such opportunity for the Company.
d) All transactions involving a conflict of interest should be carried out in compliance
with the law and fully reported to the Board, and the individual involved will be
expected to take the appropriate action as directed to resolve/avoid the conflict if a
decision is made in the case.
e) If the Director or Senior Management Personnel fails to make the required
disclosure, and the Board becomes aware of a conflict of interest that should have
been disclosed by the concerned person, the Board will take the matter seriously and

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consider appropriate disciplinary action against the person concerned. f) The conflicts
stated in this section may occur in a variety of scenarios.
A real or perceived conflict of interest may occur when, directly or indirectly:
The individual participates in a business, connection, or action that interferes with the
Company's performance or obligation, or is otherwise in conflict with or adverse to
the Company's interests.
The individual is in a position to get a personal profit or a benefit for any of his or her
Relatives by making or influencing transactional choices; or
It is not possible to make an unbiased decision in the best interests of the company. g)
The Directors and Senior Management Personnel shall assist the Independent
Directors in carrying out their roles effectively as a Board member and member of a
committee. Conflicts of interest would be judged to exist in the following
circumstances:
Financial interest of the person or his Relatives, including holding a 2% or more
investment in the subscribed share capital of any company or a 2% or more share in
any firm that is an actual or potential competitor, joint venture or other alliance
partner, or a material supplier, customer, distributor, or other person having a
material business relationship with the Company.
The individual who does business on behalf of the Company or is in a position to
influence a decision about the Company's business with a supplier or customer of
whom his or her Relative is a major officer or representative, resulting in a benefit to
him/her or his/her Relative.
Advantages such as a raise in income or other compensation, posting, promotion, or
recruitment of a Relative of the person, if such an individual has the ability to influence
the decision about such benefits. (iv) Acceptance of gifts, contributions, hospitality,
and/or entertainment in excess of the typical level from present or future suppliers,
customers, or other third parties with whom the Company does business. (v)
Acceptance of any directorship/assignment in a firm or organisation that competes
with or is a prospective competitor of the Company by the Director(s)/Senior
Management Personnel. h) If any Director/Senior Management Personnel has any
questions or concerns about a planned transaction or circumstance, such

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Director/Senior Management Personnel should approach the Compliance Officer. I A
director may serve on no more than ten committees or serve as Chairman of no more
than five committees across all firms in which he is a director. Furthermore, every
Director must advise the firm of any committee positions he has in other companies,
as well as any changes that occur. All public limited businesses, whether listed or not,
must be included in the calculation of the number of committees on which a director
may serve, while all other firms, including private limited companies, foreign
companies, and corporations, will be omitted. ii. The Chairmanship / membership of
the Audit Committee and the Stakeholders' Relationship Committee alone shall be
considered in calculating the maximum under this sub-clause.

c) Directors and Senior Management Personnel shall not exploit for their own personal gain,
opportunities that are discovered through use of corporate property, information or position,
unless the opportunity is disclosed fully inwriting to the Board and the Board declines to
pursue such opportunity for the Company.
d) All transactions having conflict of interest should be carried out in accordance with law and
be fully disclosed to the Board and, upon a decision being taken in the matter, the person
concerned will be required to take necessary action as advised to resolve/avoid the conflict.

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e) If the Director or Senior Management Personnel fails to make a disclosure as required
herein, and the Board of its own accord becomes aware of an instance of conflict of interest
that ought to have been disclosed by the concerned person, the Board would take a serious
view of the matter and consider suitable disciplinary action against the person concerned. f)
Conflicts mentioned in this clause can arise in many situations.
A conflict of interest, actual or potential, may, arise where directly or indirectly:
(i) The person engages in a business, relationship or activity that interferes with the
performance or responsibility to the Company or is otherwise in conflict with or
prejudicial to the interests of the Company.
(ii) The person is in a position to derive a personal benefit or a benefit to any of his or
her Relatives by making or influencing decisions relating to any transaction; or
(iii) An independent judgment of the Company's best interest cannot be exercised. g) The
Directors and Senior Management Personnel should facilitate the Independent
Directors to perform their role effectively as a Board member and also a member of
a committee Conflict of interest would be deemed to exist in the following
circumstances:
o Financial interest of the person or his Relatives, including the holding
of an investment to an extent of 2% or more in the subscribed share
capital of any company or share to an extent of 2% or more in any firm
which is an actual or potential competitor, joint venture or other
alliance partner, or a material supplier, customer, distributor or other
person having a material business relationship with the Company.
o The person conducting business on behalf of the Company, or being in
a position to influence a decision with regard to the Company's
business with a supplier or customer of which his or her Relative is a
principal officer or representative, resulting in a benefit to him/her or
his/her Relative.

(iv) Award of benefits such as increase in salary or other remuneration, posting,

promotion or recruitment of a Relative of the person, where such an individual is in a
position to influence the decision with regard to such benefits. (iv) Acceptance of gifts,
donations, hospitality and/or entertainment beyond the customary level from
existing or potential suppliers, customers or other third parties which have business
dealings with the Company. (v) Acceptance by Director(s)/ Senior Management
Personnel of any directorship/ assignment in a company or organization that
competes with or is a potential competitor of the Company. h) If a proposed
transaction or situation raises any question or doubts to any Director/ Senior

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(v) Management Personnel, such Director/ Senior Management Personnel should
consult the Compliance Officer. i) A Director shall not be a member in more than ten
committees or act as Chairman of more than five committees across all companies in
which he is a director. Furthermore, every Director shall inform the company about
the committee positions he occupies in other companies and notify changes as and
when they take place Explanation: i. For the purpose of considering the limit of the
committees on which a director can serve, all public limited companies, whether
listed or not, shall be included and all other companies including private limited
companies, foreign companies and companies shall be excluded. ii. For the purpose
of reckoning the limit under this sub-clause, Chairmanship / membership of the Audit
Committee and the Stakeholders' Relationship Committee alone shall be considered.

Observance of laws, rules, and regulations

Compliance with the law, rules, and regulations becomes critical for the top management and
directors of a business. In the case of noncompliance, the expense of litigation becomes a
significant liability. As a result, every member of the topmost hierarchy must follow the
established compliance standards. An example of a company-wide policy is shown below.
Directors and Senior Management Personnel must follow all relevant laws, rules, and
regulations, both in text and spirit. Directors and Senior Management Personnel shall report
any probable breach of law, rules, or regulations of this Code to the Compliance Officer in
order to help the Company in encouraging legal and ethical behaviour. The independent
Directors must comply with Schedule IV of the Companies Act of 2013, including the following
duties:
(1) undergo adequate indoctrination and update and renew their skills, knowledge, and
familiarity with the organisation on a regular basis
(2) Seek suitable clarification or amplification of material, and, if required, accept and follow
relevant professional advice and opinion of outside experts at the company's cost.
(3) Make every effort to attend all Board of Directors and Board committee meetings of which
he is a member.
(4) Participate constructively and actively in the Board of Directors committees of which they
are chairpersons or members.
(5) Make an effort to attend business general meetings.

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6) Where they have concerns about the company's operations or a planned action, ensure
that they are addressed by the Board and, if not resolved, require that their complaints be
documented in the Board meeting minutes.
7) Maintain current knowledge of the firm and the external environment in which it functions.
(8) Not to unreasonably inhibit the operation of a properly functioning Board or Board
committee.
(9) Pay close attention and guarantee proper thought before authorising related party
transactions, and ensure that they are in the best interests of the firm.
10) Determine and guarantee that the firm has an appropriate and working vigil mechanism,
and that the interests of a person who utilises such a mechanism are not jeopardised as a
result of such usage.
(11) Complaints regarding unethical behaviour, real or suspected fraud, or violations of the
company's code of conduct or ethics policy should be reported.
(12) act within his capacity to aid in the protection of the company's, shareholders', and
workers' lawful interests
(13) not divulge proprietary information, such as business secrets, technology, advertising
and sales promotion strategies, and unpublished price sensitive information, unless
specifically authorised by the Board or required by law.

Company Meetings
Directors should attend Board/general meetings with an understanding of the agenda that
has been presented to them. They must make a deliberate effort to attend all Board meetings
planned throughout the year.
The directors must engage actively and productively in the Board's deliberations and must
adhere to the Board's standards for how it will govern and conduct itself.

Insider Trading
Directors and Senior Management Personnel should not derive benefit or assist others
to derive benefit by giving investment advice from the access to and possession of
information about the Company, not in public domain and therefore constitutes
insider information.
All Directors and Senior Management Personnel should comply with 'Code of Conduct
for Prevention of Insider Trading in Shares of the Company' circulated by the Company
and all insider-trading guidelines issued by the Securities Exchange Board of India.

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Respect for the Individual
In addition to following the law, it is essential to examine the human aspect to
guarantee that there is no disrespect at any level of the organisation.
(a)The Company's goal is built on motivating and developing exceptional employees.
This will only be achievable if everyone respects the rights of those around us.
(a) Executive Directors and Senior Management Personnel are responsible for
ensuring that:
I Individuals in all aspects of employment are not discriminated against on the basis of
race, religion, colour, age, disability, gender, sexual orientation, or marital status,
subject to compliance with applicable laws regarding positive discrimination, and the
sole criterion for recognition within the Company is work performance.
(ii) Racial, sexual, or other forms of harassment are not permitted in the workplace.
(iii) Individuals' personal views are respected, and the Company expressly
disassociates itself from any behaviour that contradicts our commitment to cultural
diversity and equal chances.

Health, safety and environment

(a) Executive Directors and Senior Management Personnel should cause the
Company to endeavour to offer a safe and healthy working environment and to
comply with all rules pertaining to the preservation of the environment of the
territory in which it works. In compliance with existing regulations, the
Company should be dedicated to preventing wasteful use of natural resources
and minimising any harmful effect of the creation, production, use, and disposal
of any of its goods and services on the ecological environment.
(a) Executive Directors and Senior Management Personnel should ensure that the
Company implements the most efficient energy management system, avoids energy
waste, and maximises natural resource use in all plants.

Quality of products and services

Executive Directors and Senior Management Personnel should ensure that the
Company is committed to providing products and services of the highest quality
standards, backed up by efficient after-sales service that is consistent with the needs
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of the customers, in order to ensure total customer satisfaction. Executive Directors
and Senior Management Personnel should encourage the Company to work toward
the correct implementation and acceptance of product safety standards as well as
automotive industry standards related to the tyre business.

Shareholders
Directors and Senior Management Personnel must be dedicated to increasing
shareholder value and ensuring that the Company complies with all rules and laws
governing shareholder rights. Directors and Senior Management Personnel shall
ensure that the Board informs its shareholders about all important elements of the
Company's operations in a timely and fair manner, and that such information is
disclosed in compliance with applicable legislation and agreements.

The SEBI Regulation

Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements)
Regulation, 2015 requires the creation of a code of conduct for the Board of Directors
of the Company, and the Code of Conduct must include the obligations of Independent
Directors as outlined in the Companies Act, 2013.

Internal Control System

Directors and Senior Management Personnel are responsible for maintaining and
causing the Company to maintain a sufficient and appropriate system of internal
controls for financial reporting.

Corporate Governance
Directors and Senior Management Personnel should sincerely adhere to and cause the
Company to adhere to the philosophy of good corporate governance by possessing
strong business fundamentals and delivering high performance through a relentless
focus on transparency, accountability, professionalisation, and corporate social
responsibility in order to increase shareholder value and contribute to society at large.

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Human Resources/ Employee Relations
(a) Directors and Senior Management Personnel shall endeavour to keep the
Company's employee relations friendly.
(b) Executive Directors and Senior Management Personnel should lead the Company
in developing competency-based human resource systems and maintaining human
resource policies aimed at effectively managing the organization's development.
(c) Executive Directors and Senior Management Personnel should help the Company
in further aligning its human resource policies, procedures, and initiatives to suit the
demands of the company.

Bibliography
https://ca.indeed.com/career-advice/career-development/code-of-conduct-examples

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