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ETHICAL PRACTICES :- 2

Corporate Governance, ultimately, is about promoting corporate fairness and

transparency. Therefore, a cornerstone of Corporate Governance is a companys

commitment to maintain the highest standards of ethical practices in all itstransactions.

ICRAs analysis thus covers:

Comprehensiveness of code of ethics and integrity:-3Since its founding, Nestls business practices have been governed by

integrity, honesty, fair dealing and full compliance with all applicable laws.

Nestl employees worldwide have upheld and lived this commitment in their

every day responsibilities ever since, and Nestls reputation remains one of

the Companys most important assets today. Employees should always be

guided by the following basic principles:

avoid any conduct that could damage or risk Nestl or its reputation; act legally and honestly; Put the Companys interests ahead of personal or other interests.

The Nestl Corporate Business Principles prescribe certain values and

principles which Nestl has committed to worldwide. The Code of Business

Conduct specifies and helps the continued implementation of the corporate

business Principles by establishing certain non negotiable minimum

standards of behavior in key areas.

But nestle has faced a lot of criticism on account of various reasons such as

child labor, promoting infant formula etc which has been discussed later

which hampers the ethical reliability of nestle.

Steps taken to effectively communicate the principles of corporateethics:-2

Nestle takes effective steps in communicating these principles to itsemployees as well as stakeholders. Its website consists of all the important

corporate business principles, code of conduct and its ten principles of

business operations including consumers, human rights and labor practices,

suppliers and customers and the environment.


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Extent to which compliance with the codes and guidelines is monitored:-2

1. Nestl and its employees are bound by the law. Compliance with allapplicable laws and regulations is never compromised. Additionally,employees adhere to internal rules and regulations as they apply in a

given situation. Those internal rules are specific to the Company and

may go beyond what is required by the law.

2. Unless required by law or authorized by their management, employeesdo not disclose confidential information or allow such disclosures.

This obligation continues beyond the termination of employment.

3. Employees never engage in fraudulent or any other dishonest conductinvolving the property or assets or the financial reporting andaccounting of Nestl or any third party. This not only entails

disciplinary sanctions but also results in criminal charges. To the

extent permitted under applicable law, the Company reserves the right

to monitor and inspect how its assets are used by employees,

including inspection of all e-mail, data and files kept on Company

network terminals.

4. Any failure to comply with the Code results in disciplinary action,including the possibility of dismissal and, if warranted, legalproceedings or criminal sanctions.

Extent to which feedback systems have been established to encouragewhistle-blowing. :- 2

1. It is each employees responsibility to ensure full compliance with allprovisions of the Code of conduct of nestle and to seek guidance

where necessary from their Line Manager, or from the HR or the

Legal or Compliance Function. To do the right thing and to ensure

the highest standards of integrity is each employees personal

responsibility that cannot be delegated.

2. Employees can report any practices or actions believed to beinappropriate under Nestls Code or even illegal to their Line

Managers or the appropriate members of the HR or the Legal or

Compliance function. If it is appropriate, in view of the nature of the


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reported matter, reports of violations may be made directly to higher

levels including the Groups Chief Executive Officer and/or Chief

Compliance Officer.

3. Where appropriate, complaints may be made on a confidential basis orthrough employee Hotlines.

4. All complaints shall be properly investigated. Nestl prohibitsretaliation against any employee for such reports made in good faith,

while it also protects the rights of the incriminated person.

5. Employees can report to the Company Secretary on a confidentialbasis any practices or actions believed to be inappropriate under the

Nestl India Code of Business Conduct or believed to be illegal.

Further, the Company has appointed Ombudsman for Infant Code,

under which employees can report suspected Code violations directlyto the Ombudsman, with adequate safeguard to protect the employee

reporting.

Social ethics:-41. The 2010 documentary The Dark Side of Chocolate alleges that Nestl

purchases cocoa beans from Ivory Coast plantations that use child

slave labor. The children are usually 12 to 15 years old, and some are

trafficked from nearby countries.

2.

One of the most prominent controversies involving Nestl concernsthe promotion of the use of infant formula to mothers across the

world, including developing countries an issue that attracted

significant attention in 1977 as a result of the Nestl boycott, which is

still ongoing.

3. In June 2009, an outbreak of E. Coli O157:H7 was linked to Nestl'srefrigerated cookie dough originating in a plant in Danville, Virginia.

In the USA, it caused sickness in at least 69 people in 29 states, half

of whom required hospitalization. Following the outbreak, Nestl

voluntarily recalled 30,000 cases of the cookie dough. How the dough

became contaminated is unclear, because E. Coli is not known to live

in any of its constituent ingredients


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Stakeholder Relationship:- 2

An organizations shareholders are its owners, and their basic rights include:

the right to have their shares transferred and registered smoothly; the right to

access timely information; the right to participate in, and vote at,

shareholders meetings; the right to elect members on the Board; and the

right to share the organizations profits through dividends. Shareholders also

have a say on issues such as amendments to the organizations

Memorandum and Articles of Association, reduction or augmentation of

share capital, and sale/lease/disposal of any undertaking. Most importantly,

all shareholders need to be treated equitably. Also, an organization must

have appropriate systems in place to enable its shareholders participateeffectively in shareholders meetings and cast their votes. The emphasis of

ICRAs analysis is on evaluating the extent to which a company goes

beyond what is mandatory under law to serve the rights and interests of its

shareholders. The issues analyzed include:

Conduct of Annual/Extraordinary General Meetings (AGMs/EGMs) and theextent of disclosures at such meetings:-2

Nestle regularly conducts annual general meetings generally in the month of

April or May and it announces the meetings well in advance. The dividends

to be given are declared in these meetings along with the election and re-

election of boards, appropriation of profits etc.

Procedures for transfer and registration of shares and payment of dividend:-2Share transfers are registered and returned in the normal course within an

average period of 21 days from the date of receipt, if the documents are clear

in all respects. Requests for dematerialization of shares are processed and

confirmation is given to the respective depositories i.e. National Securities

Depository Limited (NSDL) and Central Depository Services India Limited

(CDSL) within 15 days.

Companys responsiveness to investor complaints:-2The Shareholder / Investor Grievance Committee oversees redressal of

shareholder and investor grievances, transfer of shares, non-receipt of

balance sheet, non-receipt of declared dividends and related matters. Mr.


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Ravinder Narain, a Non-Executive and Independent Director, is the

Chairman of the Shareholder/ Investor Grievance Committee. The other

member is the Managing Director, Mr. Antonio Helio Waszyk. Mr. B.

Murli, Company Secretary acts as the Compliance Officer. The Committee

met four times during the year 2010. All members of the Committeeattended the aforesaid meetings. During the year, 23 complaints were

received from shareholders and investors. All the complaints have generally

been solved to the satisfaction of the complainants and no investor complaint

was pending at the beginning or at the end of the year. The Company has

acted upon all valid requests for share transfer received during 2010 and no

such transfer is pending.

History of penalties levied by regulators for violations of statutoryprovisions, if any:-2The Company has complied with the requirements of regulatory authorities

on capital markets and no penalties or strictures have been imposed on the

Company by Stock Exchange, SEBI or any other statutory authority, on any

matter relating to the capital markets, during the last three years.

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