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CODES OF CONDUCT

[1700] Promoting ethical and responsible decisionmaking

Principle 3 of the ASX Corporate Governance Principles and Recommendations seeks to ensure that the company activelypromotes ethical and responsible decisionmaking through formal and transparent codes of conduct.

Recommendation 3.1 states:

"Companies should establish a code of conduct and disclose the code or a summary of the code as to:

the practices necessary to maintain confidence in the companys integrity

the practices necessary to take into account their legal obligations and the reasonable expectations of their

stakeholders

the responsibility and accountability of individuals for reporting and investigating reports of unethical practices."

The commentary on this recommendation states that companies should formulate policies on appropriate behaviour of directors,

senior executives and employees. Companies should encourage the integration of these policies into companywide

management practices. A code of conduct supported by appropriate training and monitoring of compliance with the code areeffective ways to guide the behaviour of directors, senior executives and employees and demonstrate the commitment of the

company to ethical practices. Companies should ensure that training on the code of conduct is updated on a regular basis.

Companies should consider making advisers, consultants and contractors aware of the companys expectations as set out in the

code of conduct.

The ASX Corporate Governance Council suggests that companies may find it useful to consider the following matters when

formulating a code of conduct:

1. Give a clear commitment by the board and senior executives to the code of conduct. This is often linked to statements

about the aspirations or objectives of the company, its core values, and its views about the expectations of shareholders,

employees, customers, suppliers, creditors, consumers and the broader community.

2. Detail the companys responsibilities to shareholders and the financial community generally. This might include

reference to the companys commitment to delivering shareholder value and how it will do this, and the companys

approach to accounting policies and practices, and disclosure.

3. Specify the companys responsibilities to shareholders, employees, customers, suppliers, creditors, consumers and the

broader community. This might include reference to standards of product quality or service, commitments to fair value, fair

dealing and fair trading, and the safety of goods produced.

4. Describe the companys approach to the community. This might include environmental protection policies, support for

community activities, and donation or sponsorship policies.

5. Articulate the companys responsibilities to the individual. This might include the companys privacy policy, and its

policy on the use of privileged or confidential information.

6. Outline the companys employment practices. This might include reference to occupational health and safety,

employment opportunity practices, special entitlements above the statutory minimum, employee security trading policies,

training and further education support policies, practices on drug and alcohol usage and policies on outside employment.

7. Describe the companys approach to business courtesies, bribes, facilitation payments, inducements and commissions.

This might include how the company regulates the giving and accepting of business courtesies and facilitation payments,

and prevents the offering and acceptance of bribes, inducements and commissions and the misuse of company assets and

resources.

8. State the measures the company follows to promote active compliance with legislation wherever it operates. This might

include stating whether the companys policy is to comply with Australian or local legal requirements regarding

employment practices, responsibilities to the community and responsibilities to the individual, particularly if the host

country follows materially different standards than those prescribed by Australian law or international protocols.

9. Specify how the company handles actual or potential conflicts of interest. This might include reference to how the

company manages situations where the interest of a private individual interferes or appears to interfere with the interests of

the company as a whole, and how the company prevents directors, senior executives and employees from taking improper

advantage of property, information or position, or opportunities arising from these, for personal gain or to compete with thecompany.

10. Identify measures the company follows to encourage the reporting of unlawful or unethical behaviour and to actively

The Directors Manual> ROLE OF THE BOARD > CODES OF CONDUCT > [1700] Promoting ethical and responsible

decisionmaking

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promote ethical behaviour. This might include reference to how the company protects those, such as whistleblowers, who

report violations in good faith, and its processes for dealing with such reports.

11. Describe the means by which the company monitors and ensures compliance with its code.

Recommendation 3.2 states:

"Companies should establish a policy concerning trading in company securities by directors, senior executives andemployees, and disclose the policy or a summary of that policy."

This recommendation includes a requirement for a formal trading policy as well as issues that might be addressed in a trading

policy.

[1710] Recognising the legitimate interests of stakeholders

Principle 3 of the ASX Corporate Governance Principles and Recommendations requires the company, among other things, to

recognise legal and other obligations to all legitimate stakeholders.

This topic is discussed at 1700.

[1720] Elements of codes of conduct

The following elements are usually found in a code of conduct:

A general statement signed by the chairperson and/or the chief executive emphasising the boards and managements

commitment to the code. It may include an overall statement of the companys objectives, a mission statement or a

summary of the companys basic philosophy.

A section dealing with responsibilities to shareholders and the financial community generally. It may include statements

on:

openness and the disclosure of information;

accounting policies and practices;

insider trading, which in listed companies may include specific guidelines; and conflicts of interest.

A section on relations with customers and consumers, which may include reference to:

the standards of service to be offered to customers;

a commitment to offering high quality and fair value;

the safety of goods produced;

product recall and related policies;

pricing polices and practices; and

the use of market power.

A section on relations with suppliers which may include reference to:

procurement procedures, including guidelines to suppliers;

the tendering procedures used, including a commitment to fair and equal treatment of tenderers; and

payment terms and procedures.

A section on employment practices which may include reference to:

the companys policies on occupational health and safety;

any policies covering equality of employment opportunity;

any special entitlements that employees may have to superannuation, above the legal minimum; and

policy and practice on alcoholism and drug dependence, possibly including disciplinary procedures.

A section on responsibilities to the community, which may include references to:

environmental policy;

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support for community activities; and

policy and practice on donations.

A section on personal conduct, which may include reference to:

the offering and acceptance of bribes, inducements and commissions;

policy on the giving and receiving of gifts and entertainment;

use of privileged or confidential information;

the handling of conflicts of interest;

the misuse of company assets and resources; and

personal conduct outside hours of work, including outside employment.

One or more sections dealing with any pieces of legislation, regulations or community standards which are relevant to the

company but not included above.

A section on the monitoring of compliance and the means to be used in ensuring compliance in all of these areas.

[1730] Establishing and reviewing the code of conduct

Setting the tone and establishing the standards must involve both the board and management, and again it must be for the board

to decide on the extent of its own involvement. An effective board is unlikely to involve itself in the drafting of a code of

conduct or a set of policies for the company as a whole but it is likely to show a close interest in their content and to consider

them and discuss them with management when they are first developed. It is also good practice for the board to review the

policies regularly and to see to it that they are updated when necessary. At least it should enquire periodically whether changing

circumstances require the modification of any of the policies it has previously approved.

For reasons of selfpreservation, as well as good practice, the board will also involve itself in the monitoring of compliance.

Where legislation is involved it may well be advisable for legal advice to be taken on the extent of monitoring expected by the

regulatory authorities. In other cases the board will probably wish to discuss with management how the policies are being

communicated throughout the company and the appropriate method and frequency of monitoring arrangements. Methods such as

management sign off arrangements and the use of the internal auditors should be considered.

It is recommended that the code of conduct be reviewed regularly and updated when necessary. It is also important that the code

be communicated to, and be well understood by, all employees.

If the directors are not setting a good example and are not seen to be adhering to the company code of conduct it is unlikely that

the code will be effective. The company code must therefore apply to all directors but it is likely that there will be matters on

which directors need quite detailed guidance, such as trading in the companys shares or asking questions of members of

management, which do not apply outside the boardroom. If these were to be included in the company code it might well become

too long to be of practical use. It is therefore common for companies to develop separate codes of conduct for the board.

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