Code of Ethics

A Study of the Ethics Practiced at ITC Limited

As part of CIA I in Ethics (MBA 632)
To be submitted to: Prof. Hemalatha R.

Submitted by:
Sachin R,
1527619, M1
 Table of Contents
Introduction 3
ITC Limited About the Company 45
The Code of Conduct for ITC Limited Associates 6 11
Scope and Purpose of the Code of Conduct 67
Clauses present in the Code of Conduct 7 11
Clause 1: Compliance with Laws, Rules & Regulations 7
Clause 2: Insider Trading 7 8
Clause 3: Conflicts of Interest 89
Clause 4: Corporate Opportunities 9
Clause 5: Confidentiality 9
Clause 6: Fair Dealings 9
Clause 7: Protection & Proper Use of Company Assets 10
Clause 8: Record Keeping 10
Clause 9: Competition 10 11
Clause 10: Interaction with Public Officials 11
Clause 11: Discrimination & Harassment 11
Style of Ethics followed 12
How is Breach of Code of Conduct Resolved 13 14
Learnings & Conclusion 15

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 INTRODUCTION
What is Business Ethics?
To understand what business ethics means we must first discuss what is the meaning of
the term ethics in itself. The term ethics is derived from the Greek word ethikos meaning
custom or character. The Chambers Dictionary defines ethics as a code of behavior
considered correct. Ethics is a branch of philosophy and it is considered a normative
science because in this case it is concerned with how an individual behaves thereby
making it distinct from the formal sciences such as mathematics and logic, physical
sciences such as chemistry and physics, and empirical sciences such as economics and
psychology.

Business Ethics is an offshoot of Ethics which deals with what is right and morally
acceptable in a business scenario. To be more specific, business ethics can be defined as,
A code of ethics is a guide of principles designed to help professionals conduct business
honestly and with integrity. A code of ethics document may outline the mission and
values of the business or organization, how professionals are supposed to approach
problems, the ethical principles based on the organization's core values and the standards
to which the professional is held.

The main purpose of this report is to understand, generally what are the kind of clauses
that comes under the code of ethics in an organization and to what extent is it followed.
We shall also make an attempt to understand the style of ethics that is being followed in
the organization and what happens when there is a breach.

Finally, we shall also try to develop some insights from the above ethics that are being
followed which would help us develop our own sense what is morally right and
acceptable.

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 ITC LIMITED ABOUT THE COMPANY
ITC Limited or ITC is an Indian conglomerate headquartered in Kolkata,
West Bengal. Its diversified business includes five segments: Fast-Moving
Consumer Goods (FMCG), Hotels, Paperboards & Packaging, and Agri-
Business & Information Technology.

Established in 1910 as the Imperial Tobacco Company of India Limited, the company was
renamed as the Indian Tobacco Company Limited in 1970 and further to I.T.C. Limited in
1974. The periods in the name were removed in September 2001 for the company to be
renamed as ITC Ltd. The company completed 100 years in 2010 and as of 2012-13, had
an annual turnover of US$8.31 billion and a market capitalization of US$45 billion. It
employs over 25,000 people at more than 60 locations across India and is part of Forbes
2000 list.

Products and Services

Cigarettes

ITC Ltd sells 81 percent of the cigarettes in India, where 275 million people use tobacco
products and the total cigarette market is worth close to $6 billion (around Rs.65,000
crores).

ITC's major cigarette brands include Wills Navy Cut, Gold Flake Kings, Gold Flake
Premium lights, Gold Flake Super Star, Insignia, India Kings, Classic (Verve, Menthol,
Menthol Rush, Regular, Citric Twist, Mild & Ultra Mild), 555, Silk Cut, Scissors,
Capstan, Berkeley, Bristol, Lucky Strike, Players, Flake and Duke & Royal.

Other businesses

Foods: ITC's major food brands include Kitchens of India; Aashirvaad, Mint-O,
Gum-O, B natural, Sunfeast, Candyman, Bingo! and Yippee!. ITC is India's
largest seller of branded foods with sales of over Rs. 4,600 crores in 2012-13. It is present
across 5 categories in the Foods business namely Staples, Snack Foods, Ready-To-Eat
Foods, Juices and Confectionery.

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Lifestyle apparel: ITC sells its products under the Wills Lifestyle and John Players
brands. Wills Lifestyle was accorded the Super brand status and John Players was
included in the top 10 Most Trusted Apparel Brands 2012 by The Economic Times.

Personal care products include perfumes, hair care and skincare categories: Major
brands are Fiama Di Wills, Vivel, Essenza Di Wills, Superia and Engage.

Stationery: Brands include Classmate, PaperKraft and Colour Crew. Launched in 2003,
Classmate went on to become India's largest notebook brand in 2007.

Safety Matches and Agarbattis: Ship, i Kno and Aim brands of safety matches and the
Mangaldeep brand of agarbattis (Incense Sticks).

Hotels: ITC's Hotels division (under brands including WelcomHotel) is India's second
largest hotel chain with over 90 hotels throughout India. ITC is also the exclusive
franchise in India of two brands owned by Sheraton International Inc. Brands in the
hospitality sector owned and operated by its subsidiaries include Fortune Park Hotels and
WelcomHeritage Hotels.

Paperboard: Products such as specialty paper, graphic and other paper are sold under the
ITC brand by the ITC Paperboards and Specialty Papers Division like Classmate product
of ITC well known for their quality.

Packaging and Printing: ITC's Packaging and Printing division operates manufacturing
facilities at Haridwar and Chennai and services domestic and export markets.

Information Technology: ITC operates through its fully owned subsidiary ITC InfoTech
India Limited, which is a SEI CMM Level 5 company.

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 ITC LIMITED CODE OF CONDUCT
ITC Limited has the same of conduct for Suppliers, its Associates as well as for its
Independent and Non-executive Directors. In this report we would be studying the code
of conduct established for the ITC employees which includes but is not limited to:

The employees
The customers
The communities and the environment
The value-chain partners
The financial stakeholders
Governments
The group companies

Herein, we would be specifically looking at the clauses established by the company for its
employees. We shall also be looking at the value that this established code of ethics sets
to serve.

Scope & Purpose of the Code of Conduct

1. This Code sets out how the organization behaves with:

a. The employees, or those who work with the company;
b. The customers of the organization;
c. The communities and the environment in which the company operates;
d. The value-chain partners for the organization, including suppliers and
service providers, distributors, sales representatives, contractors, channel
partners, consultants, intermediaries and agents;
e. The joint-venture partners or other business associates;
f. The financial stakeholders;
g. The governments of the countries in which the organization operates; and
the group companies.
2. In this Code, we or us means the company, the executive directors, officers,
employees, and those who work with the, as the context may require.
3. The term our group companies in this Code typically means companies ITC
Limited intends for this Code to apply to, and / or to whom ITC Limited has
issued this Code.

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 4. This Code sets out the expectations of the company towards of all those who work
with the company. The company also expect those who deal with the company to
be aware that this Code underpins everything the organization does, and in order
to work with the company the people interested needs to act in a manner
consistent with it.

We shall now look at the clauses that are applicable to the associates of ITC Limited
when they are working within the organization:

CLAUSES OF THE CODE OF CONDUCT

The code of conduct for ITC Limited has several clauses within the code of conduct
which the employees within the organization have to abide by. Some of these clauses are
mentioned in here:

Clause 1: Compliance with Laws, Rules & Regulations

All employees & directors must respect & obey all laws that apply to the
Companys business, including state & local laws in the areas in which the
Company operates. Any questions as to the applicability of any law should be
directed to the Companys General Counsel.

If a law conflicts with a policy in this Code, employees & directors must comply
with the law. If a local custom or policy conflicts with a policy in this Code,
employees & directors must comply with the Code.

Clause 2: Insider Trading

The Company has a securities trading policy & all employees & directors must
sign a certification acknowledging that they have reviewed this policy & agree to
be bound by its terms. This policy, among other things, provides that employees &
directors may not buy or sell shares of the Company when they are in possession
of material, non-public information. They also are prohibited from passing on
such information to others who might make an investment decision based on it.

Employees & directors also may not trade in stocks of other companies about
which they learn material, non-public information through the course of their
employment or service. Any questions as to whether information is material or has
been adequately disclosed should be directed to the Companys General Counsel.

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Clause 3: Conflicts of Interest

A conflict of interest occurs when the private interest of an employee or director

interferes or appears to interfere in any way with the interests of the Company.
Conflicts of interest can occur when an employee or director takes action or has
interests that may make it difficult to make objective decisions on behalf of the
Company or to perform his or her duties effectively. Conflicts of interest also arise
when an employee or director, or a member of his or her family, receives improper
personal benefits, including loans or guarantees of obligations, as a result of his or
her position with the Company.

Conflicts of interests are prohibited as a matter of corporate policy. Any employee

who becomes aware of a conflict or potential conflict, or who has a question about
whether a conflict exists, should bring it to the attention of the Companys General
Counsel or the Companys Chief Executive Officer.

On an annual basis, each director must submit a form to the General Counsel
disclosing his or her potential conflicts of interest or certifying that no such
conflicts of interest exist. Throughout the year, if circumstances arise or change,
that would cause the board members annual conflict certification to become
incorrect, the director must inform the General Counsel of such circumstances.
The Nominating/Corporate Governance Committee shall review matters of
potential conflicts of interest & determine whether any further action is necessary,
such as recommending to the Board whether such director should be requested to:

(1) Remain as a director

(2) Offer his or her resignation.

Where the Board makes a determination regarding a potential conflict of interest,

a majority of the Board (excluding the affected member or members) shall decide
upon an appropriate course of action. Additionally, any director who has a
question about whether a conflict exists should bring it to the attention of the
Companys General Counsel or Chairperson of the Nominating/Corporate
Governance Committee.

Clause 4: Corporate Opportunities

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 Employees & directors are prohibited from taking for themselves personally any
opportunities that arise through the use of corporate property, information or
position & from using corporate property, information or position for personal
gain. Employees & directors are further prohibited from competing with the
Company directly or indirectly. Employees & directors owe a duty to the
Company to advance its legitimate interests when the opportunity to do so arises.

Clause 5: Confidentiality

Employees & directors may learn information about the Company that is not
known to the general public or to competitors. Confidential information includes
all non-public information that might be of use to competitors, or harmful to the
Company or its customers if disclosed, or information that associates of the
Company have entrusted to it.

Employees & directors must maintain the confidentiality of information entrusted

to them by the Company or its associates, except when disclosure is authorized or
legally mandated. This obligation to protect confidential information does not end
when an employee or director leaves the Company. Any questions about whether
information is confidential should be directed to the Companys General Counsel.

Clause 6: Fair Dealing

Each employee & director shall endeavour to deal fairly with the Companys
stockholders, competitors, suppliers & employees. No employee or director shall
take unfair advantage of anyone through manipulation, concealment, abuse of
privileged information, misrepresentation of material facts or any other unfair
practice.

Clause 7: Protection & Proper Use of Company Assets

Theft, carelessness & waste have a direct impact on the Companys profitability.
Employees & directors have a duty to safeguard Company assets & ensure their
efficient use. Company assets should be used only for legitimate business

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 purposes & employees & directors should take measures to ensure against their
theft, damage or misuse.

Company assets include intellectual property such as trademarks, business &

marketing plans, salary information & any unpublished financial data & reports.
Unauthorized use or distribution of this information is a violation of Company
policy.

Clause 8: Recordkeeping

All of the Companys books, records, accounts & financial statements must be
maintained in reasonable detail, must appropriately reflect the matters to which
they relate & must conform both to applicable legal requirements & to the
Companys system of internal controls. All assets of the Company must be
carefully & properly accounted for. The making of false or misleading records or
documentation is strictly prohibited. Unrecorded funds or assets should not be
maintained.

The Company complies with all laws & regulations regarding the preservation of
records. Records should be retained or destroyed only in accordance with the
Companys document retention policies. Any questions about these policies
should be directed to the Companys General Counsel.

Clause 9: Competition

The Companys activities are subject to antitrust & trade regulation statutes
designed to promote fair & honest competition. These laws govern the ways in
which employees & directors interact with both competitors & associates &
prohibit activities such as fixing prices, setting discriminatory prices & entering
into agreements with competitors. All employees & directors must comply with
these laws.

In addition to complying with all antitrust laws & regulations, employees &
directors are expected to compete ethically & legally at all times. Stealing or
misappropriating proprietary information from competitors or others is prohibited.

Clause 10: Interaction with Public Officials

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 When dealing with public officials, employees & directors must avoid any activity
that is or appears illegal or unethical. The giving of gifts, including meals,
entertainment, transportation & lodging, to government officials in the various
branches of the U.S. government, as well as state & local governments, is
restricted by law. Employees & directors must obtain pre-approval from the
Companys General Counsel before providing anything of value to a government
official or employee.

In addition, the U.S. Foreign Corrupt Practices Act prohibits giving anything of
value, directly or indirectly, to officials of foreign governments or foreign political
candidates in order to obtain or retain business. Illegal payments to government
officials of any country are strictly prohibited.

Clause 11: Discrimination & Harassment

The Company is an equal opportunity employer & requires strict adherence to

laws regarding discrimination in the workplace. It is the Companys policy to
recruit, hire, train & promote associates regardless of their race, colour, national
origin, religion, sex, sexual orientation, disability, age or any other basis protected
by state or federal law. Discrimination or harassment based on any of these factors
is prohibited.

STYLE OF ETHICS FOLLOWED

What we understood from the clauses mentioned in the code of conduct as mentioned by
ITC Limited is that the company follows a Normative Style of Ethics which focuses

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majorly on how the stakeholders involved in the business are actually supposed to
behave.

The Normative Style of Ethics is one of the more popular categories of ethics that is in
use in the current scenario that defines what is morally right or wrong. Under normative
ethics if we have to define the style of ethics we can say that the company follows the
Ethics of Conduct. To be more specific, however, we can say that the company follows a
Deontological Theory of Ethics, which is a study of that which is an obligation or
duty. If we are to delve further we can say that the company also follows a modified
version of the theory of Kantianism. The theory states that the only intrinsically good
thing is a good will; an action can only be good if its maxim the principle behind it is
duty to the moral law.

Figure 1: Style of Ethics Followed in ITC Limited

HOW IS BREACH OF CONDUCT RESOLVED

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Like every other organization, ITC Limited has also faced instances wherein the code of
conduct had been violated by the associates. Listed below is the process by which ITC
Limited resolves any issues revolving around the code of conduct.

1. Designated Ethics Officer

The Companys General Counsel has been designated as the Companys Ethics
Officer with responsibility for overseeing & monitoring compliance with this
Code. The Ethics Officer reports directly to the Chief Executive Officer & also
will make periodic reports to the Companys Audit Committee regarding the
implementation & effectiveness of this Code, as well as the policies & procedures
put in place to ensure compliance with this Code.
2. Seeking Guidance
Employees & directors are encouraged to seek guidance from supervisors,
managers or other appropriate personnel when in doubt about the best course of
action to take in a particular situation. In most instances, questions regarding this
Code should be brought to the attention of the Companys General Counsel.
3. Immediate Reporting
If an employee or director knows of or suspects a violation of this Code, or of
applicable laws & regulations, he or she must report it immediately to the Legal
Department or the Chief Executive Officer. If the situation requires it, the
reporting persons identity will be kept anonymous. The Company does not permit
retaliation of any kind for good faith reports of violations or possible violations.
4. Investigations
Reported violations will be promptly investigated. It is imperative that the person
reporting the violation not conduct an investigation on his or her own. However,
employees & directors are expected to cooperate fully with any investigation
made by the Company into reported violations.
5. Discipline/Penalties
The disciplinary actions that are followed are undertaken in the following manner:
Employees & directors who violate this Code may be subject to
disciplinary action, up to & including discharge. Employees & directors
who have knowledge of a violation & fail to move promptly to report or
correct it & employees & directors who direct or approve violations may
also be subject to disciplinary action, up to & including discharge.

Furthermore, violation of some provisions of this Code are illegal and may
subject the employee or director to civil and criminal liability

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 LEARNINGS & CONCLUSION
What we have learnt from this report is that today, for the company not only is profit
important, it is also important as to how the company is represented in front of its clients.
The code of ethics thereby forms a set of guidelines as to how the parties involved in
doing business with the company would behave and would react in ethically questionable
situations. Furthermore, it is ethics that helps significantly in building the good will of the

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company and helps it to sustain in the market for a longer duration of time. Unethical
practices might give profits, but they are short term only.

Ethics form a part and parcel of our lives and therefore in the business world. The ethics
that the companies follow helps them to define themselves in the industry, to their
competitors, to their suppliers as well as their customers. As such, the clauses in the Code
of Conduct issued by the management of ITC Limited serves to strike this point. There
might be instances of breach but then it is the duty of the management to ensure that the
frequency of these breaches are reduced to a minimum level and to ensure that the
employees are made aware of the consequences of such breaches and therefore, they are
always encouraged to act in a manner that is harmonious with the culture of the
organization in which they are employed.

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