Module-1 Ethics Programme: Ethics Committee

 Ethics committee may be for industry or for the specific company depending on the level and nature of control that needs to be adhered to. In research institutions there are sectorial ethical committees like health , scientific research/education etc. For health sector, WHO has issued broad guidelines on various aspects affecting human life for smooth functioning of the ethics committee


For companies Ethics Committee needs to be constituted as per requirements of listing agreement and also the provisions of the Companies Act 2103. For public servants the Whistle blowers Act 2011 insists of setting up Ethics Committee at Board level to which the triggering could be done by anyone who wants to uncover some illegal/unethical behavior in the organization.

Ethics Committee – Health Sector- India

Amendments to Drugs andCosmetics Rules were published vide G.S.R.72 (E) dated 08.02.2013 specifying the requirements and guidelines for registration of Ethics Committee and re-registration under Rule 122DD to the Drugs and Cosmetics Rules 1945.

For the purpose of the Rule 122DD, an Ethics Committee is a committee comprising of medical, scientific, non-medical and nonscientific members, whose responsibility is to ensure the protection of the rights, safety and well-being of human subjects involved in a clinical trial and it shall be responsible for reviewing and approving the protocol, the suitability of the investigators, facilities, methods and adequacy of information to be used for obtaining and documenting informed consent of the study subjects and adequacy of confidentiality safeguards. In the case of any serious adverse event occurring to the clinical trial subjects during the clinical trial, the Ethics Committee shall analyze and forward its opinion as per procedure specified under APPENDIX XII of Schedule Y.

The Ethics Committee shall allow inspectors or officials authorized by the Central Drugs Standard Control Organization to enter its premises to inspect any record, data or any document related to clinical trial and provide adequate replies to any query raised by such inspectors or officials, as the case may be in relation to the conduct of clinical trial. If the Ethics Committee fails to comply with any of the conditions of registration, the Licensing Authority may, after giving an opportunity to show cause why such an order should not be passed, by an order in writing stating the reasons therefor, suspend or cancel the registration of the Ethics Committee for such period as considered necessary.


Common formats for reporting are prescribed for EC reviews, adverse events, protocol violations, clinical trials, socio-behavioral, public health research, and human genetics testing research.


Ethics Committee – IT Sector

NASSCOM, the premier trade body and the “voice” of the Indian IT – BPO industry announced on 25 Januray 2013, that it is forming a Corporate Governance and Ethics Committee. This will be chaired by Mr. N. R. Narayana Murthy, Chairman and Chief Mentor, Infosys Technologies Ltd. This committee will function as a permanent sub-committee under the aegis of the Nasscom Executive Council. This is one of the initiatives being taken by Nasscom to strengthen corporate governance practices in the Indian IT-BPO industry

Envisaged as an 8 member committee, members will include industry experts, independent directors as well as academicians and will meet at least three times a year to formulate strategies and measure implementation schedule. The objectives of this committee will include sharpening the existing appropriate code of ethics, values and corporate code of conduct for industry; emphasising existing regulations and practices on corporate governance and re-drafting and re-affirming appropriate code of ethics, values and corporate code of conduct for industry. This committee will look to establish and maintain credibility for the industry among customers, analysts, government, employees, society etc, and will also look to engage with relevant stakeholders and build a desirable framework for the industry that includes a “model code of governance and best practices” and a “model set of financial information disclosures”. Additionally, it will also develop and create awareness of best practices to be followed by the Board, Audit committees and Independent Directors of organisations.

Creating awareness across various levels of management and encourage formulating and strengthening of whistle blower policy will be additional focus areas for this committee.

 


Listing Agreement with Stock Exchanges by Companies in India

The Securities and Exchange Board of India (SEBI), on September 2, 2015, notified the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“the Regulations”). As per Regulation 17(5)(a) of the Regulations, every Company has to adopt the code namely “Code of Conduct for Directors and Senior Management” by passing a Board resolution. The Company has to formulate the Code to ensure that the business of the Company is conducted in accordance with the applicable laws, the Regulations and with the highest standard of integrity, ethics and values

Ethics Committee as per Companies Act 2013

As per Section 177 of the Companies Act, 2013 and relevant Rules thereon, every listed company and the companies belonging to such class or classes shall establish a vigil mechanism for their directors and employees to report their genuine concerns or grievances. Further, regulation 18 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations {SEBI (LODR) Regulations} inter-alia provides for a mandatory requirement for all listed companies to establish a vigil mechanism called ‘Whistle Blower policy’ for directors and employees to report concerns about unethical behaviour, actual or suspected fraud or violation of the company’s code of conduct or ethics policy. Further SEBI (LODR) Regulations also provides that the company should devise an effective whistle blower mechanism enabling stakeholders, including individual employees and their representative bodies, to freely communicate their concerns about illegal or unethical practices

Functions of the Ethics Committee

Ethics committees can raise concerns of ethical nature; prepare or update code of conduct, and resolve ethical dilemma in organization. They formulate ethical policies and develop ethical standards.

They evaluate the compliances of the organisation with these ethical standards. The committee members should be conscious about the corporate culture and ethical concise of the organisation.

The following committees are to be formed:

a. Ethics committee at the board level- The committee would be charged to oversee development and operation of the ethics management programme.

b. Ethics management committee – It will be charged with implementing and administrating an ethics management programme, including administrating and training about policies and procedures, and resolving ethical dilemmas.

(iii) Ethical Communication System:

Ethical communication system helps the employees in making enquiries, getting advice if needed and reporting all the wrong done in the organisation.

Objectives of ethical communication system are:

a. To communicate the organizations values and standards of ethical conduct or business to employees.

b. To provide information to employees on the company’s policies and procedures regarding ethical code of conduct.

c. To help employees get guidance and resolve queries.

d. To set up means of enquiries such as hotlines, suggestion boxes and e-mail facilities.

Top management can communicate the ethical standards to the lower management which can be further transferred to the operational level.

(iv) An Ethics Office with Ethical Officers:

The job of an ethics officer is to communicate and implement ethical policies amongst employees of the organisation. Ethics officer should develop a reputation for credibility, integrity, honesty and responsibility.

Modus operandi of Ethics Committee

Ethics hotlines are anonymous communication facilities that can be used to report ethical violations, in order to notify the Ethics Committee, so that they can take action accordingly. Once the tip is received, the Ethics Committee or Chief Ethics Officer begins to investigate, finds proof and if the complaint is true, then punishes the violator

 

The Confidential section, as nominated by CMD, shall maintain a record of the protected disclosure received. The Confidential Section shall inform Audit & Ethics Committee about receipt of the protected disclosure within three days of its receipt and it shall submit the same to the Audit & Ethics Committee in the sealed condition in its immediate next meeting.

The Audit & Ethics Committee shall meet, where CMD will be special invitee for this purpose, and weed out frivolous complaints and the protected disclosures(s) which require further investigation shall be forwarded to the investigator(s), to be appointed in consultation with CMD, through the Confidential Section. The Audit & Ethics Committee shall also have powers to seek opinion from any expert

Investigation shall be launched if the Audit & Ethics Committee is satisfied after preliminary review that:

(a) the alleged act constitutes an improper or unethical activity or conduct, and

(b) the allegation is supported by information and specific enough to be investigated or in cases where the allegation is not supported by specific information, it is felt that the concerned matter deserves investigation.

The decision taken by the Audit & Ethics Committee to conduct an investigation is, by itself, not to be construed as an accusation and is to be treated as a neutral fact finding process. The identity of the subject(s) and the Whistle Blower will be kept confidential.


 

The possible roles for an Ethics Committee are:

  • Contribute to the continuing definition of the organization’s ethics and compliance standards and procedures.
  • Assume responsibility for overall compliance with those standards and procedures.
  • Oversee the use of due care in delegating discretionary responsibility.
  • Communicate the organization’s ethics and compliance standards and procedures, ensuring the effectiveness of that communication.
  • Monitor and audit compliance.
  • Oversee enforcement, including the assurance that discipline is uniformly applied.
  • Take the steps necessary to ensure that the organization learns from its experiences.

But an ethics committee can do much more. The committee can be charged to meet all seven requirements for an effective ethics management process. For each of the above arenas of responsibility there may be several specific roles


Role and Significance of Board committee is in lending of crucial assistance to the harmonious functioning of the company is summed up here.

Committees allow the board to –

  • handle a greater number of issues with greater efficiency by having experts focus on specific areas
  • develop subject specific expertise on areas such as compliance management, risk management, financial reporting
  • enhance the objectivity and independence of the board’s judgment

Greater specialization and intricacies of modern board work is one of the reasons for increased use of board committees. The reasons include:

  • responsibilities are shared
  • more members become involved
  • specialized skills of members can be used to best advantage
  • inexperienced members gain confidence while serving on matters may be examined in more detail by a committee

 

The committees focus accountability to known groups. While the board as a legal unit always retains responsibility for the work of its committees, the committees because of its focus on the mandate, the size of the committee being relatively smaller than the board tend to be more effective. However, committees may dilute governance integrity to the extent that they may obscure the direct board to CEO accountability and fragment the board’s wholeness. Therefore, it is important that there is clarity of delegation and it should be ensured that committees are not put between the board and the CEO, either by giving committees official instructional authority or by allowing them to evaluate performance using their own criteria.

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