Annual Report — Form 10-K Filing Table of Contents
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“ My expectations
are that every
officer and
employee will commit to the
highest standards of
business conduct and
corporate governance and
will act with the utmost
integrity.”
Letter from the CEO
As you know, we have set the bar high for all of our activities in
remaking Nortel into a great company. One of our key areas of focus is
ethics and integrity, and my expectations are that every officer and
employee will commit to the highest standards of business conduct and
corporate governance and will act with the utmost integrity. You can be
assured that every member of the Board, including myself, has made the same
commitment.
Without this personal commitment, we won’t reach our full potential as a
world-class company. Honesty and integrity must underpin everything we do,
and our Code of Business Conduct will help all Nortel employees, officers
and directors maintain this commitment.
The Code describes what acting with integrity means at Nortel and how it
relates to our core beliefs and leadership. It outlines principles to guide
ethical decision making and gives practical answers to many of the ethical
questions we face in the course of our work. Often these questions are
difficult, and the Code directs us to resources within the company for
assistance. Scrupulously and consistently adhering to these guidelines
ensures that our customers, employees, suppliers and investors can rely on
our integrity and establishes the climate for our long-term success.
Our commitment to the Code will help ensure that leaders in the company“walk the talk” and that together we maintain a culture based on trust
and truthfulness. It’s about taking responsibility for all business
actions and commitments made in the name of Nortel.
By signing up to the Code, we agree to abide by its guidelines, including
all applicable laws and regulations, and all Nortel policies and
procedures. In doing so, we commit to report any violation of the Code and
to challenge any action that may undermine the principles in this Code and
Nortel’s reputation for integrity and honesty.
The Code of Business Conduct, and your commitment to it, is an essential
component of our plan for growing Nortel’s future as a profitable,
world-class networking and innovation leader.
Employee Duties Regarding Nortel’s Confidential Information
25
Confidential Information Received from Third Parties
26
Protecting Intellectual Property — Nortel’s and Others’
27
Copyright Protection
27
Inside Information
28
Communications with Media and Speaking on Nortel’s Behalf
29
Responding to Legal Proceedings
30
Our Commitment to Each Other
31
Nortel Forbids Discrimination and Harassment
32
Nortel Promotes Diversity
32
Drugs and Alcohol
33
Workplace Health and Safety
33
Privacy
34
Our Commitment in Doing Business Globally
35
Export Control
36
Customs
37
U.S. Anti-Boycott Act
37
Foreign Bribery and Corrupt Practices
37
Our Commitment to Our Communities
38
Social Responsibility
39
Environmental Responsibility
40
Political Involvement
40
Contact Information for Ethics Resources
41
Index
42
4
Code of Business Conduct
Introduction to the Code
Why Nortel has a Code of Conduct
This Code of Business Conduct provides guidance on how we should
conduct ourselves as Nortel directors, officers, and employees. It is
Nortel’s policy to comply with all applicable laws and regulations. Nortel
is also committed to conducting business in an ethical manner and to acting
with integrity in dealing with our customers, suppliers, partners,
competitors, employees, and other stakeholders. Integrity is one of our
core values and underpins everything we do.
Responsibilities under the Code
Every Nortel director, officer, and employee is responsible for:
>
Abiding by the Code and Nortel policies and procedures.
>
Requesting advice from a manager, Human Resources, the Law Department, the Ethics
Office, the Ethics Action Line, or the Ethics Action Web Tool when an ethical issue
arises.
>
Promptly reporting any known or suspected violations of the Code, laws and
regulations, and Nortel policies and procedures or requests that might constitute
violations using the reporting procedures set forth in this Code.
>
Challenging any business practice or behavior that may undermine the principles in
this Code and the integrity of our Company.
>
Cooperating in internal investigations about a reported violation.
Managers have additional responsibilities to:
>
Create an atmosphere that promotes ethical behavior and encourages employees to ask
questions and raise concerns.
>
Make sure that employees are aware of the principles contained in the Code.
>
Answer employees’ questions about the Code or direct them to an appropriate source
for information.
>
Demonstrate a commitment to the Code through their words and actions.
>
Use reasonable care to prevent and detect violations of the Code.
>
Report any compliance risks or Code violations and promptly seek guidance on how to
implement appropriate remedial measures.
>
Handle all employee reports promptly, confidentially, and in a manner consistent
with Company policy.
Q & A:
Q: My manager
asked me to do
something improper. I
told him it would
violate the Code, but
he persisted. I didn’t
do what he asked. Do I
have any other
responsibilities?
A. Yes, because your
manager persisted in his
request for you to do
something that you believe
would violate the Code,
you must report the
request using the
procedures set forth in
the Code.
5
Q & A:
Q. As a manager,
how do I promote ethical
behavior?
A. There are many ways.
One is by setting an
ethical example by the
way you conduct yourself.
A second is to invite
questions and feedback
from employees. A third
is that when an ethical
issue arises, use it as a
teaching opportunity.
Reporting Violations or Requesting Advice
To report known or suspected violations or ethical concerns or
request assistance, you have the following options:
1)
Discuss the issue with your manager (unless you are uncomfortable
doing so or believe that the issue will not be satisfactorily
resolved). Or discuss the issue with Human Resources, the Law
Department, Compliance, Corporate Security, or Internal Audit.
2)
Call the confidential Ethics Action Line: ESN 333-3014 or (905)
863-3014 (worldwide); 1-800-683-3503 (North America only) or use the
Ethics Action Web Tool. Your identity will not be revealed when you
use either of these reporting tools, if you choose. (However,
identifying yourself may assist the Company in investigating your
report.) You also have the option of reporting financial concerns
directly to the Audit Committee of the Board of Directors.
3)
Contact Chief Ethics Officer Susan Shepard by telephone (ESN
324-4220) or email (sshepard@nortel.com) or send a written
communication marked “Private and Confidential — Complaint” to her at
Nortel, 320 Park Avenue, New York, NY10022. Or you may contact any
other member of the Ethics Office. Contact information can be found on
page 41.
4)
Contact one of the Ethics representatives in your region as
listed on the Ethics web page under “Contacts.”
5)
You may also communicate your concerns directly to the Nortel Board
of Directors, the Chairman of the Board, or any individual director,
including the Chairman of the Audit Committee, by writing to him or
her in care of the Corporate Secretary at Nortel headquarters at 195
The West Mall, Toronto, Ontario, Canada M9C 5K1. Mark your envelope
“Private and Confidential — Complaint.” All such correspondence will
be forwarded to the director to whom your correspondence is addressed.
6)
Members of the Board should consult with the Chairman, the
President and Chief Executive Officer, the Chief Financial Officer,
the Chief Legal Officer, the Corporate Secretary, the Chief
Compliance Officer, or the Chief Ethics Officer.
If you choose to identify yourself when you report a known or suspected
violation or ethical concern or otherwise seek guidance, your identity and
the information that you provide will be treated confidentially and shared
strictly on a ‘need to know’ basis.
6
Investigations
Nortel will investigate all reports of known or suspected wrongdoing
and will not permit retaliation against any employee who makes a report in
good faith, even if it turns out, after investigation, that there has not
been a violation of law or policy.
Retaliation against an employee or other person who in good faith reports
known or suspected wrongdoing is grounds for disciplinary action,
including possible termination of employment.
Violation of a Provision of the Code
Employees who violate the Code are subject to disciplinary action
including possible termination of employment (subject to applicable law).
The following are examples of conduct that may result in discipline:
>
Violating the Code, Nortel policy or procedure, or applicable law or regulation.
>
Requesting or permitting others to violate the Code, Nortel policy or procedure, or
applicable law or regulation.
>
Assisting another person in violating the Code.
>
Failing to promptly report a known or suspected violation of the Code, law or
regulation, or Nortel policy or procedure.
>
Failing to cooperate fully with Nortel investigations or audits.
>
Retaliating against another employee or a third party for reporting a violation or
for cooperating with a Nortel investigation.
>
For managers and supervisors, failing to use reasonable care to prevent or detect a
violation.
Limitations to the Code
The Code addresses only some of the legal and ethical issues that can
arise in the course of business. Because no code of conduct can anticipate
all such issues, it is also your responsibility to be aware of all Nortel
policies and procedures applicable to your job. While such policies and
procedures are not part of the Code, they are an important source of
additional information. Some of them are provided as links in this Code.
From time to time, there may be revisions to the Code. When this happens,
you will receive notice that the Code has been revised and will be
responsible for familiarizing yourself with the revised Code. The Code is
not contractual in nature and does not confer any rights on individuals.
As a global company, we are sensitive to local customs and requirements,
but we must always conduct ourselves in a way that is consistent with the
Code. The Code is sometimes more restrictive than applicable laws and
regulations, and you are required to abide by the Code even when it imposes
requirements that go beyond legal obligations.
Q & A:
Q. How do I know that
my reporting through the
Ethics Action Line or the
Ethics Action Web Tool is
really anonymous?
A. The
Ethics Action Line and
Ethics Action Web Tool are
managed by an independent
outside vendor, which does
not track identifying
information and reports it
only if you agree to provide it.
Q & A:
Q. I reported an
ethics concern about my
manager. I know my manager
was unhappy with my
actions, and a short while
later my manager took a
couple of accounts away
from me with no
explanation. What should I
do?
A. You should report
the matter to the Ethics
Office, which will ensure
that the issue is
investigated and that, if a
violation has occurred,
appropriate discipline is
imposed, which in serious
cases could lead to
terminating the manager’s
employment.
7
Questions to Ask
Some ethical issues are
obvious, but many are not. If
there is no Company policy
that addresses an issue it
may help you to analyze the
issue by asking yourself the
following questions:
>
Would the action feel right?
>
Would the action be honest in all respects?
>
How would the action affect others?
>
Would the action embarrass me if it became known to my customers, co-workers,
professional colleagues, family, or friends?
>
How would I feel seeing my action reported in a newspaper?
>
Would additional advice or information help me in resolving this issue?
Of course, you may also
seek assistance from one
of the resources listed
in the Code.
The country in which you work has additional laws or standards that
apply to you. In addition, you may be subject to the laws of other
countries in which Nortel operates even if you do not work in those
countries.
If you are uncertain of the applicable legal requirements or if you believe
that you are subject to conflicting legal obligations, you should bring the
matter to the attention of the Law Department immediately. If you have
questions or are unsure about an ethical or legal matter, you must consult
with your manager, Human Resources, the Law Department, the Ethics Office,
the Ethics Action Line, the Ethics Action Web Tool, or other appropriate
Company resource, as set forth in this Code, for guidance.
Waivers of the Code
The Company will waive application of the provisions of this Code only
in rare circumstances based upon a clear showing that such a waiver is in
Nortel’s best interests. Waivers of the Code for directors and executive
officers may be made only by the Board of Directors as a whole or the Audit
Committee of the Board and will be disclosed as required by law or
regulation. Any requests for waiver by others must be made to the Ethics
Office.
Under certain circumstances, our failure to take action regarding a
possible violation within a reasonable period of time may expose Nortel to
liability if such incident has not been addressed by the Company and
publicly disclosed if required. For this reason it is very important that
all incidents be reported to the Ethics Office.
8
Our Commitment to our Customers and to Fair Competition
We always compete vigorously. However, we must take care to avoid
any unlawful or unethical conduct; such conduct undermines the trust that
our customers place in Nortel, and their trust is the foundation of our
success.
>
Competition Laws
>
Other Sales and Marketing Standards
>
Bribery and Corruption
>
Gifts, Entertainment, and Third Party Travel
>
Information about Competitors
>
Quality
>
Selling to the Government
>
Money Laundering and Exchange Control
9
Competition Law Risks
>
Do not have any discussions or other communications, including the exchange of
emails, with competitors regarding prices, costs, product or service offerings, or
contractual terms.
>
Use caution when attending industry conferences or standards organization
meetings.
>
Do not accept competitors’ confidential pricing information from anyone, including
an agent, representative, consultant, or customer.
>
When in doubt, consult with the Law Department before engaging in any activity
that could violate competition laws.
Q & A:
Q. My manager told a
customer that we were ready
to begin testing the
product, but I know that we
haven’t even developed all
the software yet. What
should I do?
A. Misleading customers
about our products
violates the Code. You
should report the matter,
using the procedures set
forth in the Code.
Competition Laws
Competition laws, also known as antitrust or cartel laws, preserve
fair, honest, and vigorous competition. While competition laws in
countries differ, they generally prohibit similar conduct.
Agreements with Competitors
Competition laws generally prohibit agreements with
competitors that unreasonably restrict competition, such as:
>
Price-fixing.
>
Dividing or allocating customers, bids, markets, or territories.
>
Refusing to sell to particular customers or to buy from particular suppliers.
>
Exchanging non-public sales, cost, profit, or price information.
Both express agreements and informal understandings between competitors
may constitute illegal agreements.
It is inevitable that you will meet competitors from time to time, attend
the same industry conferences, or participate together in meetings of trade
associations or standards organizations. In all contacts with competitors,
do not discuss pricing policy, contract terms, sales, costs, profits,
product plans, production levels and capacity, or any other confidential
information. Because discussions of these subjects with a competitor can be
illegal, if a representative of a competitor raises any of them, you should
object, stop the discussion, and, if necessary, leave the meeting. You
should report immediately to the Law Department any incident involving a
‘prohibited’ subject.
Agreements with Suppliers and Customers
Competition laws generally prohibit agreements with customers to
restrict the price at which the customer may resell a product or service to
a third party. Similarly, they prohibit agreements with suppliers to
restrict the price at which Nortel may resell a product or service.
Nortel may have a number of different relationships with another
organization. For example, a customer may be a reseller of Nortel’s
products, and a supplier may also be a customer. It is important to
understand each of the relationships Nortel has with another organization
and to act in a way appropriate to each such relationship.
Competition laws are complex and the penalties for violations — for both
companies and individuals — can be severe. If you are not sure how to
handle an issue that arises, you must discuss it with your manager, the Law
Department, or the Ethics Office. (See also, ‘Other Sales and Marketing
Standards.’)
10
Other Sales and Marketing Standards
All sales and promotional efforts must be free from deliberate
misrepresentations. Moreover, it is Nortel’s policy to sell products and
services on their own merits and not to disparage our competitors or their
products. Among other things, you must not:
>
Mislead customers or prospective customers regarding Nortel products and services.
>
Make false or misleading comments about our competitors or their products and
services. Any comparisons to competitors and their products and services must be
substantiated, accurate, and not misleading.
>
Urge a company to violate a contract it has with a competitor.
(See also, ‘Competition Laws’ and ‘Quality.’)
Maintaining the Trust of Our Customers
We want to build long-term relationships with our customers. Every time
we commit to a timetable that is not met or a feature that is not
delivered, hard-earned trust may be lost.
We must not make promises to our customers unless we are reasonably
confident that we will be able to keep them. This means that each person
who provides input to support a contract proposal or other commitment
must be reasonably confident that the information that he or she
provides is accurate.
If
unforeseen circumstances make it impossible to meet a commitment, or if we have made an error, we should let the customer know as soon as practicable.
Bribery and Corruption
Giving or receiving bribes or other corrupt or improper payments,
directly or indirectly, is prohibited. Among other things:
>
Countries generally prohibit the bribery of their government officials, and it is
Nortel policy to comply strictly with all such laws.
>
Giving bribes and kickbacks to employees of private businesses and entities, as
well as government employees, is prohibited.
>
This prohibition applies even if you believe that such conduct is commonplace in a
given location or market.
Foreign Bribery and Corrupt Practices
Many countries in which we do business have laws that prohibit the
bribery of officials, including officials of other countries. These laws
may also prohibit bribery of employees of entities owned or controlled in
whole or in part by the government. Violations of these laws can result in
significant criminal and civil penalties.
Q & A:
Q. I know it is
unlawful to give money to
a government official, but
can I help arrange a
scholarship for her
college-bound daughter, or
make a contribution to the
official’s favorite
charity?
A. In either case, you may
be seen as providing
something of value, and
therefore could violate
anti-corruption laws.
Whenever an issue arises
concerning providing gifts
or entertainment to a
government employee, you
must follow the procedures
set forth in the
Guidelines for Gifts,
Entertainment, and Third
Party Travel or consult
the Law Department.
11
Be
Alert about Using Agents and Other Third Parties
Because Nortel may be liable
for the actions of third
parties — even if we are not
aware of their actions — it
is essential that we use due
care in all our dealings with
agents.
>
Do not engage as a Nortel agent any individual with a reputation for paying bribes
or engaging in other unlawful practices.
>
Beware of individuals with family or other relationships that could improperly
influence the decision of a customer or government official.
>
Beware of a demand for a cash payment prior to an award decision.
>
Beware of requests to make payments in countries or to entities not related to the transaction.
>
Do not agree to pay a commission that is disproportionate to the services the individual provides.
For example, under the Canadian Corruption of Foreign Public
Officials Act and the U.S. Foreign Corrupt Practices Act — both of which
apply to all Nortel employees wherever they are located — it is illegal,
among other things, to make a payment, directly or indirectly, to a
government employee of any country for the purpose of obtaining or keeping
business.
These laws have a broad reach. They prohibit:
>
Providing anything of value — not just monetary payments — as consideration for
an act or omission. For example, gifts and other forms of entertainment could be
considered unlawful, as could loans, services, or using one’s influence to benefit the
official.
>
Improper payments made by representatives, agents, sales consultants, and other
third parties on behalf of Nortel, if Nortel has actual knowledge of such conduct or acts
with conscious disregard or deliberate ignorance of the impropriety. Thus, when a
representative, agent, or sales consultant is retained, a clear record of reasonable due
diligence and resolution of any ‘red flags’ is essential to demonstrate compliance with
applicable law.
To ensure compliance with these laws, you must not provide money, gifts,
entertainment, business travel, or anything else of value to government
employees or employees of government-owned entities, unless permitted under
the Guidelines for Gifts, Entertainment, and Third Party Travel, which
generally require prior written approval. If you have any questions
in this area, contact the Law Department. (See also, ‘Financial Reporting,’
‘Gifts, Entertainment, and Third Party Travel,’ ‘Selling to the
Government,’ ‘Conflicts of Interest,’ and ‘Political Involvement.’)
Canadian and U.S. law also impose significant civil and criminal penalties
for creating false financial records. Our policy requiring accurate
financial records is addressed on page 18 of this Code.
Related Policies and Procedures:
200.09—
Representatives, Agents, Sales Consultants and Similar Appointments
209.01—
Appointment, Termination and Approval of Representatives,
Agents, Sales Consultants and Other Similar Appointments
Anti-corruption laws can be very complex, and for this reason Nortel
has established a more detailed policy, including a specific procedure
applicable to the appointment, termination, and approval of
representatives, agents, and sales consultants which can be accessed at the
link above. You are responsible for being familiar with and following this
policy if you sell to or otherwise deal with government bodies (including
government-owned entities), manage employees with such responsibilities, or
work in a related finance or accounting function.
12
Gifts, Entertainment, and Third Party Travel
Business gifts and entertainment are courtesies designed to build
understanding and goodwill among people in a business relationship, and
in some cultures they play a very important role. Problems arise when
they compromise — or even appear to compromise — the recipient’s ability
to make objective and fair business decisions or when they are contrary
to applicable laws. Directly or indirectly offering or receiving any
gift or entertainment that might be perceived to improperly influence a
business interaction violates our commitment to maintaining objectivity
and transparency in our relationships. Similar issues can arise in the
context of business travel involving other companies, provided to or by
Nortel employees.
All gifts, entertainment, and business travel provided to or by third
parties must be moderate and reasonable and within regional expense
limits, which are set forth in the Guidelines for Gifts, Entertainment,
and Third Party Travel.
They must also:
>
Comply with applicable law and the policies of the employer of the other party;
>
Contribute to the business relationship and be consistent with business goals.
If, for example, you are offering tickets to a sporting or cultural event, you must attend
the event as well; and
>
Not be of such a nature that they could embarrass Nortel if they were publicly
disclosed. “Adult entertainment,” for instance, is always inappropriate.
These rules may not be circumvented by giving or receiving
gifts, entertainment, or third party travel through family,
friends, or others.
Giving and Receiving Gifts Generally
Certain types of gifts may not be given to or received from
persons doing business or seeking to do business with Nortel:
>
Cash, gift certificates, or any other cash equivalent
>
Stock, stock options, or “friends and family stock”
>
Discounts not generally available to the public
As a general rule, business entertainment is a more appropriate way to
build relationships than an exchange of gifts.
Receiving Gifts and Entertainment from Companies Doing or Seeking
to do Business with Nortel
Receiving gifts and entertainment from suppliers and others doing
business or seeking to do business with Nortel may pose special problems
as it may create unfairness or the appearance of unfairness in how we
procure goods and services. Gifts and entertainment provided by
companies doing or seeking to do business with Nortel must comply with the Guidelines for Gifts, Entertainment, and Third Party Travel, including the requirement
that the receipt of certain items must be reported.
Q & A:
Q. May I
invite an employee
from a
telecommunications
company to a company
golf outing?
A. A telecommunications company
could be owned by the
government, so you must
first check with the Law
Department.
13
Q & A:
Q. Nortel sometimes
selects distributors or
“channels” to sell our
products to customers. Do
our policies and
procedures on gifts,
entertainment, and
business travel apply to
dealings with or through
them?
A. Yes. They apply to all
companies with whom we are
doing business (as well as
those with whom we are
seeking to do business or who
are seeking to do business
with us.)
Receiving gifts in special circumstances
In rare circumstances, the business custom in a country may effectively
require the exchange of gifts of a greater value than generally allowed
under the Guidelines for Gifts, Entertainment, and Third Party Travel.
This is particularly true when you are visiting a country as a guest and
the gift is offered as part of a public occasion and refusal would cause
embarrassment to the person offering it. In that case, the best practice
is usually to accept the gift on behalf of Nortel, report it to your
manager or the Ethics Office, and turn the gift over to the Company for
appropriate handling.
Providing Gifts and Entertainment to Government Employees
The laws in many jurisdictions strictly limit or prohibit
providing gifts and entertainment to government employees, including the
employees of enterprises owned in whole or in part by the government. Do
not provide gifts and entertainment to government employees unless
permitted under the Guidelines for Gifts, Entertainment, and Third Party
Travel, which generally require prior written approval.
Paid Speaking Engagements
If you are authorized to speak or appear at an outside event on
Nortel’s behalf, it is considered part of your job. Therefore you should
not request or receive a fee without prior permission in writing from
the Ethics Office. (See also, ‘Communications with Media and Speaking on
Nortel’s Behalf.’)
Business Travel Involving Third Parties
In some circumstances, Nortel may need to provide business travel
to third parties (such as customers). Similarly, other companies — such
as suppliers — may offer business travel to Nortel employees. In all such
circumstances, you may provide or receive travel-related expenses (such
as transportation, lodging, and meals) only if and to the extent that
such expenses are reasonably related to a legitimate Nortel business
purpose and you comply with Guidelines for Gifts, Entertainment, and
Third Party Travel. In addition, providing travel to employees of
government agencies or government-owned entities could raise issues
under the anti-corruption laws. In all such cases, you must follow
the Guidelines for Gifts, Entertainment, and Third Party Travel, which
require prior written authorization.
(See also, ‘Bribery and Corruption,’ ‘Selling to the Government,’ and
‘Conflicts of Interest.’)
14
Information about Competitors
It is often useful to obtain information about competitors. There
are, however, restrictions on receiving and using such information,
particularly confidential information.
Competitors’ Information
Competitive information is essential to enabling Nortel to compete
effectively in the telecommunications market. However, we must not
violate Company policies when obtaining, accepting, and retaining
competitive information that may contain confidential information of
another company.
This means, first, that you may receive certain information about other
companies only if you have received appropriate assurance that the person
providing the information is authorized to do so. Our policy regarding
confidential information provides comprehensive rules regarding what
types of assurance is required for specified types of information. You
must be familiar with and strictly abide by this policy. Second, under no
circumstances should an employee use improper means to obtain
competitors’ information, whether or not that information is
confidential, such as by posing as an employee of a fictitious company or
using other false pretenses, or by participating in a competitor’s
telephone conference call without the competitor’s approval with full
knowledge of the person’s identity and actual employer. Also prohibited
is bribery or unauthorized access to a computer network. Such conduct
could subject both Nortel and the individual involved to serious legal
consequences. Third, we should not hire competitors’ employees for the
purpose of obtaining confidential information. (See also, ‘Nortel’s
Confidential Information.’)
Related Policies and Procedures:
200.17 — Collection and Retention of Competitive Information
252.05 —Review and Approval of the Collection and Retention of Competitive Information
400.02 —Handling Unsolicited Disclosure of Ideas from Third Parties
401.03 —Handling Unsolicited Disclosure of Ideas from Third Parties
712.02 —Procurement Business Conduct
712.04 —Supply Agreements
Confidential Information: What Is It?
It is any information that is not public, including financial, business,
and technical information, no matter what form it is in, when reasonable
measures have been taken by the owner to keep the information secret,
and the information is actually or potentially valuable from not being
publicly known. Laws regarding the protection of confidential
information vary by jurisdiction and depend on a variety of factors. If
an issue arises concerning the possible receipt of a competitor’s
confidential information, it is your responsibility to promptly seek
guidance from the Law Department.
Confidential
Information of
Competitors:
When Do
Issues Arise?
Such issues may arise:
>
When we work with
Nortel employees
who previously
worked for
competitors.
>
When customers,
suppliers, channels,
or others offer to
provide price or other
information about
competitors.
>
During competitive bids.
>
In a merger,
acquisition, or
divesture context.
In addition to creating
significant legal risks,
inappropriate actions
regarding confidential
information of competitors
and other parties could have
serious business
consequences. For instance,
our independent efforts to
develop an idea, technology,
or product could be stalled
by a claim of
misappropriation.
15
Employees Should Watch Out for Transactions...
>
That are inconsistent with your knowledge of the customer’s business and its sources of funds.
>
Involving transfers of funds to or from third parties, or countries, unrelated to the transaction.
>
Involving locations identified as bank secrecy havens.
>
Involving complex or multiple transactions in unusual patterns that have no clear purpose.
>
Involving a shell bank incorporated in a place where it has no physical presence and
that is unaffiliated with a regulated financial group or unlicensed money remitters or
currency exchangers or non-bank financial intermediaries.
>
Where the customer seeks to avoid record-keeping or reporting requirements, through
multiple transactions below a threshold amount that would trigger a reporting requirement,
or through other means.
>
Involving payments in cash or cash equivalents.
Quality
Nortel is committed to making our technology work for our
customers. Our promise is to collaborate with customers to design and
deliver solutions that enhance their competitiveness. We work to be the
most valued supplier, delivering reliable products and services that
are of the highest quality, competitively priced, and deployed on time.
We are not satisfied with “good enough.” We focus on quality in every aspect of
our business — in products and in processes, services, and our work
environment as well. Among other things, this commitment means that you
should bring any concerns about quality promptly to the attention of
Nortel management. (See also, ‘Other Sales and Marketing Standards.’)
Selling to the Government
The laws and regulations that govern doing business with
governments and government-owned entities are often more restrictive
than those relating to commercial customers. Employees involved in
government business are required to be aware of all applicable laws and
regulations in this area. If you have any questions or concerns, you
should consult with the Law Department.
You should avoid:
>
Improperly seeking or accepting confidential bid information belonging to another
party (such as the government or a competitor).
>
Noncompliance with applicable government pricing, billing, and other procurement
rules.
You must also use caution when initiating discussions regarding
possible Nortel employment with a current or former government
employee where Nortel has had recent business dealings with such
person or in any other circumstance where the negotiation could give
rise to a possible violation of law or appearance of impropriety. In
such circumstances you must first consult the Law Department or Human
Resources. (See also, ‘Bribery and Corruption’ and ‘Gifts,
Entertainment and Business Travel.’)
Money Laundering and Exchange Control
Money laundering laws prohibit moving the proceeds of crimes to
hide their source or transferring funds for criminal purposes,
including terrorism, narcotics trafficking, or corruption.
>
If you have any concern about the source of a customer’s funds, you must err on
the side of caution and escalate the issue using the reporting procedures set forth in
this Code or consult with the Law Department.
>
Be aware of and comply with laws requiring that the receipt or importing of
specified amounts of cash or cash equivalents be reported to the appropriate authorities.
Many countries also have currency and exchange control laws, which,
among other things, may restrict the flow of such countries’ funds
outside of that country. Nortel requires employees doing business in
such countries to be familiar with and abide by these laws.
We must be guided by what is best for Nortel in all aspects of our work.
>
Financial Reporting
>
Recording and Reporting Other Types of Information
>
Maintaining Information
>
Conflicts of Interest
>
Use of Company Assets
>
Nortel’s Confidential Information
>
Communications with Media and Speaking on Nortel’s Behalf
>
Responding to Legal Proceedings
17
Be Alert for Inaccurate Financial Reporting:
The following are warning
“red flags” which should
cause you to carefully
consider whether
activities or reporting
may be inappropriate:
>
Inaccurate or
unrecorded
expense, revenue,
asset, or
liability entries.
>
Financial records that
do not accurately
reflect the nature of
the transaction or do
not match underlying
performance.
>
Pressure to
produce certain
accounting results.
>
Efforts to avoid
standard review and
control processes.
>
Failure to perform
required reviews of
financial practices,
records, and
results.
>
Estimates or
reserves that are not
supported by facts or
appropriate
documentation.
>
Transactions that do
not appear to have a
reasonable business
purpose.
Financial Reporting
Maintaining accurate and complete financial records is
required by law and is fundamental to our ethical commitment to our
shareholders. Inaccurate records can harm Nortel in many ways,
including, but not limited to, subjecting us to legal sanctions,
breaching our promises to stakeholders, and weakening the
effectiveness of our internal controls.
Obligations of All Employees
All employees have the following responsibilities to help
ensure accurate financial record keeping:
>
Record transactions accurately, completely, consistently, and in a timely manner.
>
Maintain books, accounts, and records using sufficient detail to reflect Nortel
transactions accurately and fairly.
>
Never mislead an internal or external auditor through false, incomplete, or
non-responsive information.
>
Maintain the confidentiality of Company information and disclose records and
information as authorized by Company policy.
>
Report any pressure to inappropriately influence reporting of financial results.
>
Challenge any business practice or behavior that may undermine the principles in
this Code and the integrity of our Company.
Additional Obligations of All Employees with Financial or Accounting Responsibilities
Employees with financial or accounting responsibilities must be
aware of their special responsibilities. For example, they are obligated
to:
>
Fairly and accurately record all transactions and maintain records in accordance
with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).
>
Ensure there is adequate and appropriate review and approval of all transactions
recorded in accordance with U.S. GAAP and other applicable principles and standards.
>
Communicate unfavorable as well as favorable information and provide professional
judgments and/or opinions.
>
Maintain awareness of and perform their duties in a manner consistent with
finance and accounting-related laws, regulations, and professional standards and request
appropriate professional advice as required.
>
Be alert for and cognizant of potential violations of law and Nortel policies and
procedures that may become apparent in the course of their work through financial data
processing and knowledge of business operations and report these as appropriate.
>
Retain financial records according to Company record retention policy.
18
Senior Financial Managers also have obligations to:
>
Ensure that financial and accounting staff have the appropriate level of
functional expertise and resources to accomplish operational objectives and maintain
professional standards.
>
Support and promote continuous training and development of financial and
accounting staff and ensure appropriate transition of duties to new personnel.
>
Prevent and detect any pressure on financial or accounting personnel, with
respect to accounting judgments and estimates, for the purpose of inappropriately
influencing the reporting of financial results.
>
Take all other steps necessary to ensure that the reports and other documents
filed with government agencies, including the Canadian Securities commissions and the U.S.
Securities and Exchange Commission, and all other public accounting and finance-related
communications are accurate and complete in every respect and are filed in a timely
manner.
(See also, ‘Bribery and Corruption.’)
Related Policies and Procedures:
100.22 — Disclosure of Material Information
101.01 — Disclosure of Material Information
300.33 — Financial Reporting
300.34 — General Auditor and Compliance
301.06 — Audit Report Follow-up Process
301.07 — Internal Audit Implementation Procedure
GB 001 — Payment and Reporting of Taxable Benefits
US 002 — Payroll Tax Reporting
US 003 — Internal Revenue Service Boycott Reporting Requirements
300.03 — Travel, Living and Entertainment Expenses
Recording and Reporting Other Types of Information
In addition to financial matters, information of all kinds must be
recorded and reported accurately and promptly and in sufficient detail so
that the nature of the underlying transaction is clear. This includes,
but is not limited to, information concerning research, development,
production, marketing, sales, purchasing, and environmental and product
test results. Travel and expense claims must be justified, accurate, and
in accordance with Company policy.
Maintaining Information
Nortel has procedures to ensure that information is maintained
and, when appropriate, disposed of in a manner consistent with
applicable legal requirements and sound business practices. You are
expected to be familiar with information handling policies and
procedures, including classification, retention, safeguarding, and
transmission requirements specific to your job.
19
Special considerations
applicable to serving on a
board of directors or
technical advisory board or
otherwise advising another
company that does not and is
not likely to do business
with or compete against
Nortel.
Your serving on a board of
directors or a managerial,
advisory, or technical board
of a commercial enterprise
may be advantageous to
Nortel. At the same time, it
may present a conflict with
Nortel interests, even where
that company does not and is
not likely to do business
with or compete against
Nortel. This is particularly
true where such service could
expose you to third-party
intellectual property or
adversely affect Nortel’s
reputation. Accordingly, in
all such cases, you must
disclose all such
relationships pursuant to the
Conflicts Disclosure Process.
In addition, any regular document disposal must cease
immediately if you are aware of a legal request for such documents.
(See also, ‘Responding to Legal Proceedings.’)
Related Policies and Procedures:
205.04 — Protection of Confidential Information
252.01 — Retention, Storage, and Destruction of Company Records
Conflicts of Interest
Avoidance and Disclosure of Conflicts of Interest
Your duty of loyalty to Nortel requires that when acting on the
Company’s behalf you make all decisions with only Nortel’s best
interests in mind. If you believe that you have a conflict of interest,
you must promptly disclose it pursuant to the Conflicts Disclosure
Process (page 22). Moreover, even if you believe that the conflict will
not affect your work or be detrimental to Nortel, if others could
reasonably believe otherwise, you must disclose it. Apparent conflicts
of interest can harm Nortel by undermining the trust of key
stakeholders — shareholders, customers, suppliers, employees and others
— which is necessary for our continued success.
You have a conflict of interest when any outside interest or activity:
>
Prevents you from effectively and efficiently performing your regular duties.
Influences your judgment when acting on behalf of Nortel in a way that could hurt
the Company.
>
Causes you to misuse Company resources.
Apparent conflicts are any circumstances that could cause another
person to reasonably suspect that you might have a conflict of
interest.
The following are examples of situations that may give rise to
conflicts of interest in the business world. However, conflicts can
arise in many other forms, and any actual or apparent conflict is
subject to our policy.
You must promptly disclose, pursuant to the Conflicts Disclosure
Process, the nature and extent of any interest that you have in a
contract or transaction between Nortel and a third party.
Corporate Opportunities
Directors, officers, and employees must advance Nortel’s
interests when the opportunity arises. You should not appropriate to
yourself or to any other person or organization the benefit of any
actual or potential business opportunity that belongs to Nortel. If you have any questions regarding this policy,
it is your responsibility to contact the Law Department or the Ethics
Office.
20
Relationships with other Companies
Working for, serving as a director or advisor to, or having
investments in competitors or companies with which Nortel has or is
likely to have a business relationship, including business partners,
distributors, suppliers, vendors and customers. You must avoid any
circumstances that could affect judgments you make on behalf of the
Company or that could create the appearance of divided loyalties. For
this reason, as a general rule and subject to the Conflicts Disclosure
Process and any contractual agreements with the Company, directors,
officers and employees should not:
>
Serve as directors, officers, employees, advisors, contractors, or consultants to
any company that does or is likely to do business with or compete against Nortel.
>
Have any direct or indirect investment in any such company (with the exception of
a public company when the investment does not exceed one percent of the issued shares.)
You must disclose all such relationships and investments pursuant
to the Conflicts Disclosure Process.
Doing part-time work for, or running, an outside business that is not,
or is not likely to become, a competitor or have a business relationship
with Nortel. Employees and officers may wish to run or be employed by an
outside business or perform additional part-time work for commercial
enterprises that are not competitors, suppliers, or customers. This, in
and of itself, does not constitute a conflict of interest. However, a
conflict may arise if, for instance:
>
You interact with some of the same people as in your Nortel job;
>
You use skills or tools paid for or developed by Nortel;
>
You do the same or similar work for Nortel; or
>
Your work prevents you from performing your Nortel job effectively and efficiently.
Before running or being employed by an outside business, you must seek
prior approval pursuant to the Conflicts Disclosure Process.
Family and close personal relationships
If an immediate family member or someone with whom you have a close
personal relationship works or consults for or is a director of an
organization that competes or does or seeks to do business with Nortel,
you should disclose that fact. You must also make disclosure if you are
aware that such person has an ownership interest in such an organization
(exceeding one percent of the issued shares if it is a public company.)
Q & A:
Q. My manager
has a romantic
relationship with the
leader of an organization
that she supports as
Human Resources prime. Is
this permissible under
the Code?
A. Such a relationship
creates at least an
apparent conflict of
interest and must be
disclosed pursuant to the
Conflicts Disclosure
Process.
21
Managerial Relationships with Family Members and Close Personal Friends
An actual or apparent conflict of interest may arise when family
members or persons with whom employees have close personal relationships serve
as their direct or indirect managers or are otherwise in a position to
affect their employment. Accordingly, in all such cases, you must
disclose all such relationships pursuant to the Conflicts Disclosure
Process.
Receiving Gifts, Entertainment, and Third Party Travel
Receiving gifts, entertainment, and business travel from those
doing or seeking to do business with Nortel can present conflicts of
interest, as discussed previously in this Code. (See, page 13.)
Loans and Guarantees of Indebtedness
Nortel will not make loans to or guarantee the indebtedness of
directors or executive officers.
Conflicts Disclosure Process
If you have an actual or apparent conflict of interest — or are
uncertain whether you have a conflict or apparent conflict — such as
those previously described or others, you must promptly and completely
disclose the facts and receive authorization from the Ethics Office.
Decisions about outside activities will be based on such factors as the
scope of your proposed role, the nature of the enterprise, and the time
commitment involved. If it is determined that the activity is not likely
to raise conflict of interest issues, you will be allowed to engage in
the activity. However, no such permission is valid unless received in
writing. If it is determined that the activity is likely to be a
conflict of interest, Nortel will require that you not engage in, or
cease, the activity or modify your involvement, on penalty of
disciplinary action that could include dismissal (subject to applicable
law.) In certain circumstances, an activity may be permitted if a
potential conflict of interest can be avoided by implementing adequate
controls.
There may be circumstances where an activity is approved and later
circumstances change to make a conflict of interest more likely. As an
example, if the company for whom you are doing consulting work seeks to
become or becomes a supplier to Nortel, this could give rise to a
conflict of interest. Where changed circumstances make a conflict more
likely, you are obligated to bring the matter to the attention of Nortel
and seek renewed approval through the Conflicts Disclosure Process.
Special rules apply to executive officers and directors. Before engaging
in conduct or transactions that may create a conflict of interest,
executive officers and directors must disclose all facts and
circumstances to the Corporate Secretary, who shall inform and seek the
prior approval of the Audit Committee of the Board of Directors.
22
(See also, ‘Bribery and Corruption’ and ‘Gifts, Entertainment,
and Third Party Travel.’)
Related Policies and Procedures:
200.01 — Ethical Business Practices
200.13 — Representation on Unaffiliated Boards of Directors
201.06 — Guide to Ethical Business Practices: Compliance, Enforcement, and Conflict of Interest
Use of Company Assets
Efficient and appropriate use of Company resources is critical to
our success. We must therefore exercise good judgment and discretion
when using Nortel’s tangible and intangible property.
Related Policies and Procedures:
200.05 — Corporate & Systems Security
205.04 — Protection of Confidential Information
206.01 — Systems Security
300.01 — Risk Management
320.28 — Use of Undisclosed Material Information
303.23 — Travel, Living and Entertainment Expenses
400.03 — Possession and Use of Third Party Software
Safeguarding Company Property
All employees are responsible for safeguarding Company funds and
other property against loss, theft, or misuse, including unauthorized
use. You must follow all procedures regarding the use of Company
property and report any violations of which you become aware.
Charitable contributions of Nortel property must be made in accordance
with Company policy.
Use of Nortel Name, Facilities, and Relationships
You should not use Nortel’s name, facilities, or relationships
for personal benefit (or for the benefit of a third party). Use of
the Company’s name, facilities, or relationships for charitable or
civic purposes may be made only with prior approval of the Chief
Marketing Officer.
Travel and Living Expenses
We are all responsible for ensuring that business travel and
living expenses are reasonable and commensurate with the business
conducted and in compliance with Nortel’s expense policies and
procedures.
Related Policies and Procedures:
300.33 — Financial Reporting
23
Computer and Network Use
Nortel permits reasonable personal use of Company
computers and telephones. However, such use must not:
>
Interfere with or adversely affect your job performance or that of any other
employee.
>
Interfere with or impede the intended operation of the computer and associated
network access provided to you or others. (For instance, music and games can consume
significant storage capacity.)
>
Be for personal business or the business of another person or company.
>
Support any unlawful or other purpose that could cause embarrassment to the
Company or otherwise adversely affect its interests.
>
Be disruptive or offensive, involving, for instance, sexually explicit materials
or materials that are discriminatory, hateful, or threatening to others. Nortel computers
may not be used to access pornographic or other offensive web sites.
(See also, ‘Nortel Forbids Discrimination and Harassment.’)
You must also be familiar with and adhere to our information security procedures.
All data that moves over our network is and remains Company property
(subject to the intellectual property rights of third parties.) Nortel
may review voice and data transmissions on the network at any time
without notice, subject to the requirements of applicable law.
Related Policies and Procedures:
200.05 — Corporate & Systems Security
200.19 — Appropriate Use of Nortel’s Network
205.04 — Protection of Confidential Information
206.01 — Systems Security
901.05 — Network Data (Recording and Use)
Contractual Commitments
Nortel has designated the corporate personnel who are authorized
to commit the Company to specific obligations. You must not sign any
agreement on Nortel’s behalf or enter into any obligation that binds
Nortel unless you are authorized to do so in accordance with Company
procedures.
Conducting Research
Employees who conduct scientific and technical research must be
aware of and comply with the standards of ethical conduct governing such
work.
24
Nortel’s Confidential Information
Nortel’s confidential information is one of its key corporate assets.
The unauthorized release of confidential information can cause the Company
to lose a critical competitive advantage, hurt relationships with customers,
and embarrass or harm fellow employees. Nortel’s confidential information
includes any information that is not public knowledge, including financial,
business, and technical information, no matter what form it is in, when
Nortel has taken reasonable measures to keep the information secret, and the
information is actually or potentially valuable from not being publicly
known. It may include technical information as well as business, and
financial records, such as business plans, sales and marketing data, and
employee personnel information.
Of particular concern is Nortel’s technical information, such as product
plans; future product direction; technical information concerning Company
products and services; manufacturing and development process information;
engineering designs, drawings, and layouts; software code; trade secrets;
know-how; pending patent applications; invention disclosure statements, and
the like. All such information must be accessed, stored, and transmitted in
a manner consistent with Nortel’s policies and procedures. The inappropriate
release of Nortel’s confidential information can damage the Company and
violate the law. The inappropriate release of this and other types of
confidential information can also diminish Nortel’s rights to such
information, give others implied rights that we would not have knowingly
permitted, or cause us to lose valuable information to competitors.
Other important reasons for preserving the confidentiality of
Nortel’s information are addressed in the ‘Inside Information’
(page 28) and ‘Communications with Media’ (page 29) sections of
this Code.
Related Policies and Procedures:
205.04 – Protection of Confidential Information
Employee
Duties Regarding Nortel’s Confidential Information
>
Ensure that information under your control is properly
classified and safeguarded in accordance with Nortel policies
and procedures.
>
Be careful when you discuss or transmit confidential information:
–
Outside Nortel (for instance, on cell phones or in public places);
–
In situations where third parties are on Nortel premises. (For example,
do not leave confidential information visible on an unattended
computer monitor);
–
In emails. Use encryption technology if feasible, as defined in Nortel
policies and procedures; and
–
In faxes that may be seen by third parties.
25
>
Safeguard the confidentiality of information provided to third
parties, such as suppliers or customers, pursuant to applicable
Company policies and procedures. For example, when engaging in
discussions or negotiations that involve disclosing Nortel
confidential information to third parties under a non-disclosure
agreement, make sure that no statement, agreement, or transfer of
technology is made that inadvertently grants the party a license or
rights to use Nortel intellectual property. Prior to Nortel
receiving any oral or written confidential information a
non-disclosure agreement will usually need to be executed by Nortel
and the other party. If you think a non-disclosure agreement may not
be required in a particular case you should discuss this with the
Law Department.
>
Report any actual or suspected unauthorized release of
confidential information, whether intentional or
unintentional, to the Law Department immediately.
>
If you see Nortel confidential information left unattended or
otherwise made accessible to people who should not have it (even
other Nortel employees), report this immediately to your manager.
Discuss confidential information only with those employees who
have a legitimate need to know.
>
Make sure that tangible and electronic copies of Nortel
confidential information are clearly and consistently marked as
required by applicable corporate procedures.
Remember that your obligation to maintain the confidentiality of Nortel
information continues even when your employment with the Company ends.
Related Policies and Procedures:
100.22 — Disclosure of Material
Information
101.01 — Disclosure of
Material Information
205.04
— Protection of Confidential Information
300.28 — Use of Undisclosed Material Information
320.28 — Use of Undisclosed Material Information
Confidential Information Received from Third Parties
Sometimes we receive information from our customers, suppliers,
business partners, and other third parties on the condition that it be
kept confidential. If we agree to those terms, we must take care to
safeguard the confidentiality of such information, as provided in Nortel
policies and procedures.
You should be aware of these guidelines concerning third-party
confidential information:
>
Nortel does not want third-party confidential information unless
having such information is necessary in the context of a business
transaction (such as a request for proposal or bid request,
evaluation of a component or product to be incorporated into a
Nortel system design, service for a customer’s system, or due
diligence for a potential transaction).
26
>
Prior to Nortel receiving any oral or written confidential
information, ask the Law Department if a non-disclosure
agreement must first be signed and delivered by Nortel and the
other party.
>
If you accept third-party confidential information under a
non-disclosure agreement, be sure an appropriate process has been
established to meet our obligations and that the information is
used only for the purposes permitted under the agreement.
>
Do not accept or review an unsolicited disclosure of ideas (such
as concepts, technologies, patent applications, invention
disclosures, or license or marketing offers) from a person outside
the Company. Instead, report the matter immediately to the Law
Department.
(See also, ‘Confidential Information of Competitors’ and ‘Privacy.’)
Related Policies and Procedures:
200.17
— Collection and Retention of Competitive Information
252.05 — Review and Approval of the Collection and Retention of
Competitive Information
400.02 — Handling Unsolicited Disclosure
of Ideas from Third Parties
401.03 — Handling Unsolicited
Disclosure of Ideas from Third Parties
Protecting
Intellectual Property — Nortel’s and Others’
Certain information is characterized as “intellectual property,” such
as patents, trade secrets, trademarks, copyrights, and other proprietary
information. It is Nortel policy to establish, protect, maintain, and
defend its rights in all commercially significant intellectual property and
to use those rights in responsible ways. All employees must be aware of and
comply with Company procedures necessary to safeguard these assets,
including complying with any agreement relating to intellectual property
and confidentiality signed upon the commencement of or during employment.
In addition to protecting its own intellectual property rights, Nortel
respects the valid intellectual property rights of others. Unauthorized
receipt or use of the intellectual property of others may expose the
Company to civil law suits and damages. You must follow all Company
procedures, including those governing the appropriate handling of
unsolicited intellectual property.
Copyright Protection
You must not use copyrighted materials without appropriate permission.
Copyright laws protect many of the materials we use in the course of our
work: software, books, audio and videotapes, trade journals, and magazines
are a few examples. Presentation slides, training materials, management
models, and problem-solving frameworks produced by outside consultants or
organizations may also be copyrighted. Copyright laws also cover songs,
games, movie clips, text, and images found on the Internet. Copyrighted
materials must not be produced, reproduced, distributed, modified,
published, displayed, or performed in public without authorization (such as
written
27
permission or a license agreement) from the copyright owner or the
owner’s authorized agents. (See also, ‘Computer and Network Use.’)
Related Policies and Procedures:
501.02 — Intellectual Property
501.03
— Patents, Industrial Designs and Inventions by Employees
400.06 — External Publication of Technology Information
401.02
— Review and Approval Process for External Publication or Presentation of Technology Information
Computer software licensed by Nortel must not be illegally copied for
personal, company, or customer use. Also, use or incorporation of “free
use” or “free trial” third-party software with Nortel products or services
should be approached with the utmost caution. Approval for such use is
determined by Nortel on a case-by-case basis according to Company policies
and procedures.
Inside Information
If you are in possession of material inside (non-public) information
about Nortel, you may not trade in Nortel securities including shares,
units in stock funds under investment plans, or options. The same
prohibition applies to trading in the securities of any other company,
such as a Nortel customer, where you have material inside information
about that company.
Trading (either buying or selling) securities of a company when you have
material inside information about that company is “insider trading.” It is
illegal, carries severe penalties, and is frequently prosecuted, even in
cases involving small trades or where the violator received no profits from
the trade. It is also illegal to pass on material inside information to
anyone else, other than in the necessary course of business and with an
appropriate nondisclosure agreement. This is sometimes known as “tipping.”
Generally, information will be considered material if:
>
There is a substantial likelihood that a reasonable investor would
consider it important in deciding whether to make an investment in
a security or would view the information as having significantly
altered the “total mix” of information available about the security
or the company that issues it; and/or
>
Public disclosure of such information would reasonably be
expected to have a significant impact on the market price or
value of the security.
Common examples of material information include financial results,
financial forecasts, possible mergers, acquisitions or divestitures,
significant product developments, and major changes in business direction.
Any Nortel director, officer, or employee who engages in any form of
insider trading or tipping is subject to dismissal and prosecution (and,
in the case of directors, a request to resign from the Board).
28
While all Nortel directors, officers, and employees are subject to insider
trading laws generally, there are certain individuals who, by virtue of
their role, are “deemed insiders.” Generally, deemed insiders are Nortel
officers, directors, senior executives and other leaders, and employees who
frequently have access to material information. The trading activities of
these individuals are restricted by Nortel: they may not engage in any
trading activity in Nortel securities for specified periods of time
throughout the year, known as “black out periods.” Deemed insiders can only
trade during prescribed “window periods” and, even then, only if they do
not have knowledge of any Nortel material inside information at that time.
In addition, Nortel directors, officers, and employees are prohibited at
all times from engaging in certain types of transactions involving
“calls,”“puts,” or “short sales” in Nortel securities.
The rules governing trading by insiders are complex and sometimes seem
unclear. If you need assistance or are uncertain about whether or how
the restrictions apply to you, you should contact the Law Department
before taking any action.
(See also, ‘Communications with Media and Speaking on Nortel’s Behalf.’)
Related Policies and Procedures:
300.28 — Use of Undisclosed Material Information
320.28 — Use of Undisclosed Material Information
Communications with Media andSpeaking on Nortel’s Behalf
Securities laws require fair public disclosure of information
concerning publicly-traded companies, such as Nortel, with serious
penalties for companies and individuals who violate these requirements.
Other legal and business considerations also govern the transmission of
information about the Company to outside parties.
If you are contacted for an interview, comments, or other information by
the media, you must refer them to Corporate Communications. If you are
contacted by a securities analyst, investor, or other third party, you
must refer them to Investor Relations.
In addition, comments made by Nortel employees — at trade shows or even
on-line chat rooms — may be seen by others as representing an “official”
Company position. You must refrain from speaking on Nortel’s behalf
unless authorized to do so by appropriate Company personnel. (See also,
‘Inside Information.’)
29
Responding to Legal Proceedings
The Law Department must be notified immediately of any lawsuit,
investigation, inquiry, or legal proceeding in which the Company is or
might be involved. This includes situations where an employee is involved
as a third party (for example, as a witness) if the matter concerns the
Company. No information, whether oral or written, or records or files of
any nature should be furnished to any outside party in connection with a
lawsuit or government investigation except with the prior approval of the
Law Department.
In addition, employees must never, under any circumstances:
>
Destroy, alter, or conceal any documents in anticipation of or
following a request for those documents from any government agency
or a court or in connection with any pending or threatened
litigation, investigation, or official proceeding.
>
Lie or make misleading statements in connection with any
government or other investigation or any legal proceeding, or cause
another employee to do so.
(See also, ‘Maintaining Information.’)
Related Policies and Procedures:
252.01 — Retention, Storage, and Destruction of Company Records
30
Our Commitment to Each Other
Nortel employees have an obligation to treat each other with dignity
and respect and to maintain a safe and healthy work environment.
>
Nortel Forbids Discrimination and
Harassment
>
Nortel Promotes Diversity
>
Drugs and Alcohol
>
Workplace Health and Safety
>
Privacy
31
Nortel Forbids Discrimination and Harassment
Nortel’s policy is to recruit, hire, train, compensate, promote, and
make other employment decisions affecting employees and applicants without
improper regard to a person’s race, color, religion, national origin,
gender, sexual orientation, age, disability, or marital or family status.
In addition, we must not discriminate based on any other factor protected
by applicable law.
All employees deserve to work in an environment that is free from
harassment based on any such characteristic. Such harassment is strictly
prohibited. Subject to applicable law, breach of this principle will lead
to disciplinary action, which may include dismissal. Harassment may include
(but is not limited to) making unwelcome sexual advances, sending or
displaying obscene or racist materials, or sending or telling offensive
jokes or comments.
The standards referred to above apply in all locations where we do
business, and may be stricter than the legal standards in your own
country.
If you believe that you are being subjected to discrimination or
harassment, you should immediately report the matter using the reporting
procedures set forth in this Code. (See also, ‘Computer and Network
Use.’)
Related Policies and Procedures:
800.09 – Compensation and Long-Term Incentives
800.11 — Employee Development and Performance Feedback
800.18 — Employee Permanent Relocation Assistance
800.28 — Internal Movement of Employees
802.19 — Sexual Harrassment
CA.007 — Employee Permanent Relocation Assistance to or within Canada
US.009 — Employee Permanent Relocation Assistance to or within the United States
Nortel Promotes Diversity
Differences in background, experience, perspective, and talent are
important assets in the work we do. Diversity at Nortel means an inclusive
environment in which differences are valued and appreciated. When we build
on the wealth and variety of ideas that arise from our diverse work force,
we create value and success for our customers.
As an employee, you should make an effort to leverage the benefits of
your co-workers’ unique perspectives and approaches to help drive
innovation. If you are a manager, diversity considerations should be
part of your hiring, training and promotion decisions.
Related Policies and Procedures:
800.25 — Chronic Medical Conditions including AIDS
Any employee who is found to be under the influence of or using,
selling, or possessing illegal drugs on Company or customer property or
while conducting Nortel business is subject to discipline, including
dismissal.
While conducting Nortel business you must not be under the influence of
alcohol or other similar substances or improperly use medication in any way
that could diminish — or raise questions concerning — your ability to
perform your job or result in your doing things that might be harmful to
the Company or your co-workers. While on Nortel’s premises you may not
consume any alcohol, except in accordance with Nortel policies and
procedures.
If you are taking medication that may affect your ability to perform your
work or may affect the health or safety of you or your colleagues, discuss
this with your manager, Human Resources, or a Nortel health professional.
Related Policies and Procedures:
800.24 — Substance-Free Workplace
US.006 — Drugs and Alcohol
Workplace Health and Safety
In every aspect of our business, we must work to ensure the health and
safety of our employees, comply with Company policies and procedures
involving health and safety, and protect the general public from harm that
could be caused by Nortel activities. Among other things, employees must
promptly report to management any job-related injury or illness. Employees
must also comply with Nortel policies and procedures regarding emergency
response and preparedness, business continuity planning, and the security
of our facilities and work sites.
A safe and secure work environment also means a workplace free from
violence. Threats (whether implicit or explicit), intimidation, and
violence have no place at Nortel and will not be tolerated. Any
threatening behavior must be reported immediately to your manager, Human
Resources, or appropriate security personnel.
Related Policies and Procedures:
100.02 — Crisis/Emergency Communications
200.10 — Travel by Nortel Networks Directors, Officers and Employees
200.16 — Protection of Key Corporate Employees
204.01 — Crisis Management
800.01 — Environment, Health and Safety
803.14 — Emergency Response
803.15 — Environment, Health and Safety Management
33
Privacy
We respect employees’ privacy and take care to maintain the
confidentiality of employees’ personal data. We develop, implement,
maintain, and audit privacy and data protection procedures and practices to
ensure compliance with applicable legislation throughout Nortel global
operations.
Employees with access to personal information about other employees (such
as medical records or salary history) must be familiar with Nortel privacy
policies and procedures and act diligently to safeguard its
confidentiality. Personal information may only be shared with or provided
to others for a proper business purpose and when permitted by Company
policies and procedures and applicable law.
(See also, ‘Nortel’s Confidential Information.’)
Related Policies and Procedures:
800.29 — Privacy and Data Protection
802.20 — Privacy and Data Protection
US.010 — Collection, Maintenance and Release of Health Information
CA.009 — Collection, Maintenance and Release of Health Information
34
Our Commitment in Doing BusinessGlobally
Because Nortel is a global company, it is subject to laws that
govern commerce between nations, as well as local laws and regulations in
the countries where we operate.
>
Export Control
>
Customs
>
U.S. Anti-Boycott Act
>
Foreign Corrupt Practices
35
Be Alert for ‘Red
Flags’ that may indicate
Export Control Law
Violations:
>
The customer’s address
is a P.O. Box or the
customer’s facilities
are not suitable for
the product ordered.
>
The product is
incompatible with the
end customer’s business
or its stated end use.
>
The shipping
address is a
forwarding/shipping
agent.
>
The customer is known
to have, or suspected
of having,
unauthorized dealings
in embargoed countries
or with denied
parties.
>
The customer does not
use commonly available
installation and
maintenance services.
>
The customer is
reluctant or refuses
to provide end-user
information.
>
The customer
requests non-standard
payment terms or
currencies.
>
The order amounts,
packaging, or order
routing do not
correspond with normal
industry practice.
>
The parties are
known or suspected to
be engaged in the
development of
biological, chemical,
or nuclear weapons or
ballistic missiles.
Export Control
To promote national security and foreign policy goals, many
countries regulate exports of goods, technology, software, and services.
All such products are exports when they leave the country of origin,
even if they leave only temporarily and the products are not for sale.
Because the U.S. is a high-export country with the most restrictive
export laws, it is our practice generally to apply U.S. export
controls to all products we export, regardless of the country of
origin, manufacture, or departure, in addition to other applicable
export laws. U.S. law restricts exports to (1) people and companies on the U.S. government’s denied persons lists
and (2) embargoed countries. It is your responsibility to check with
Global Logistics or Government Relations to ensure that your proposed
export would not violate any applicable laws.
Under U.S. law, an ‘export’ includes: (1) tangible exports — physical
products that move across international borders, (2) intangible exports,
such as data (including plans and software) and information that moves
across international borders, and (3) ‘deemed exports’ — technology,
technical data, or source codes to which a non-U.S. citizen in the
United States has access.
International trade regulations and export controls are very
complex. Employees should seek the help of Global Logistics or one
of the Export Control Contacts (“ECC Contacts”) listed on Nortel’s
Export Control Compliance web page (http://ecc.ca.nortel.com). They
will help you to ensure that:
>
You follow applicable international trade control regulations, including
licensing, shipping documentation, import documentation, reporting, and record retention
requirements, of all countries in which we conduct business or in which our business is
located. In some cases, these restrictions will apply to international trade in goods,
technology, software, and services as well as to financial transactions.
>
Employees and third parties who are citizens or residents of countries subject
to export control restrictions have access to our network only if and to the extent
permitted by applicable law.
>
All international transactions are processed through Nortel’s trade and
compliance shipping systems, which are designed to help manage Nortel’s export control
compliance. (Many but not all SAP-generated international orders are automatically
reviewed for export control compliance at the time an order is placed with Nortel or at
the time of shipment.) To determine whether an international transaction has been
reviewed, employees should consult one of the ECC Contacts listed on Nortel’s Export
Control Compliance web page (see above).
36
If you are uncertain whether your transaction or tangible or
intangible transmittal of controlled data is compliant or if a Nortel
employee is appropriately licensed, you must contact Global Logistics,
Government Relations, or the Law Department. It is your responsibility
to work with our exporting resources to ensure compliance.
Related Policies and Procedures:
400.06
— External Publication of Technology Information
400.04
— Export Control and Trade Compliance
402.01
— Export Control and Trade Compliance
Customs
You are required to comply with all applicable customs
requirements. All import and export documentation must be accurate and
complete. Where a customer or agent is responsible for preparing such documentation, you
must provide them with all necessary information.
U.S. Anti-Boycott Act
Under U.S. law, Nortel is required to report to the U.S.
Government, and not to cooperate with, any request concerning boycotts or
related restrictive trade practices. Employees may not take any action,
furnish any information, or make any declaration that could be viewed as
participating in an illegal foreign boycott. Requests to engage in
boycotts — even if rejected — must be reported to the Law Department. This
includes requests that are part of an actual order, as well as those that
do not concern a specific transaction.
Foreign Bribery and Corrupt Practices
The strict prohibition under law and Nortel policy against
corrupt activities regarding government officials is addressed
elsewhere in this Code (See also, ‘Bribery and Corruption,’ ‘Gifts,
Entertainment, and Third Party Travel,’ and ‘Selling to the
Government.’)
37
Our Commitment to Our Communities
Our work for Nortel touches many communities. We must respect
them by working to conduct Company business in a socially
responsible manner, as well as by obeying laws dealing with the
environment and the political process.
>
Social Responsibility
>
Environmental Responsibility
>
Political Involvement
38
Social Responsibility
As global citizens, companies have a role that extends well
beyond the payment of taxes, employment of people, and provision of
goods and services. We face a special challenge: to uphold our high
corporate standards of ethical business conduct, while respecting the
culture and varying business customs of the communities and countries in
which we operate.
>
We encourage recruiting qualified local personnel and purchasing local
materials and services, where practical.
>
We do not use forced labor or child labor and will not work with suppliers that
do.
>
We expect suppliers to observe our social responsibility standards, as set
forth in the Supplier Code of Conduct.
Social responsibility means more than avoiding harmful activities. At
Nortel, we aim to contribute directly, and through our directors,
officers, and employees, to the well-being and improvement of the
towns, cities and regions in which we operate. Many of our employees are passionate
about making a difference and contribute time, financial resources, and
experience to address the needs of their communities.
In many locations, Nortel provides support to community programs in such
areas as social welfare, health, and education. For many years, we have
focused our efforts on mathematics, science, and technology education,
by supporting universities, schools, students, and educators in
communities across the globe. By sharing financial resources, equipment,
and expertise, Nortel helps create innovative solutions to community
challenges through the thoughtful application of communications
technology.
When knowledge of product and manufacturing technology can be shared
without harming our competitive position in the marketplace (or
contravening national restrictions on the transfer of technology), we
engage in technology cooperation projects with industry, institutions of
higher education, and industry associations around the world.
Before committing Nortel to a project or undertaking work on the
Company’s behalf in these areas, you should consult with your local
Community Relations prime or, if there is not a prime for your location,
the Corporate Social Responsibility team at NCSR@nortel.com.
Related Policies and Procedures:
100.04
— Corporate Contributions
251.01
— Corporate Contributions for Community Relations
800.27
— Support for Education
39
Environmental Responsibility
We work to comply with all applicable environmental standards established
by governmental agencies in the locations where we operate and with Nortel
policies and procedures. Any violation of environmental law, regulation, or
policy by Company personnel or others acting on our behalf must be reported to
the Environment Health and Safety Department immediately. We must always be
prepared to respond to all environmental accidents and emergencies.
We take the initiative to develop innovative solutions to environmental issues
before they arise. And we take responsibility for the environmental impacts of
our products throughout their lifecycle — from design to final disposition. We
work with customers, suppliers, industry associations, educational institutions,
public interest groups, and governments throughout the world to promote the
development and dissemination of innovative solutions to industry-related
environmental impacts.
Related Policies and Procedures:
700.06
— Environmental Procurement
712.17
— Environmental Procurement
800.01
— Environment, Health and Safety
803.14
— Emergency Response
850.02
— EHS, Audits, Compliance, Assessments and Management Reviews
Political Involvement
Nortel’s interactions with governments must be above reproach in every
respect. As a Company, we express views on local and national issues that affect
our business and our industry. We support and participate in the political process
in accordance with applicable laws and regulations.
>
Employees involved in lobbying and other work for Nortel within the political
process must ensure that they are aware of and comply with all applicable laws.
>
All contacts between employees of Nortel and members of government, other than
direct sales contacts with technical or procurement officials, contacts with the patent or
copyright offices, contacts by or authorized by the Law Department, and those required by
statute, shall be coordinated through Government Relations.
>
When you speak about political issues, always make it clear that your views and
actions are your own and not those of Nortel.
>
While Nortel encourages employees to participate in political activity,
employees shall not contribute Company or subsidiary funds, property, resources, or
employee work time to any political party or candidate unless approved by their manager
and Government Relations. Strict laws govern corporate political contributions.
>
If you plan to seek elective office or political appointment, you should notify
your manager.
(See also, ‘Bribery and Corruption.’)
Related Policies and Procedures:
100.05
— Direct Governmental Financial Assistance
100.07
— Federal Government Relations
207.03
— Political Involvement by Employees
207.04
— Visits by Elected Representatives, Political Candidates and Government Officials
40
Contact Information for Ethics Resources
How you can Report an Ethical Concern
1)
Discuss the issue with your manager (unless you are uncomfortable
doing so or believe that the issue will not be satisfactorily resolved). Or
discuss the issue with Human Resources, the Law Department, Compliance,
Corporate Security, or Internal Audit.
2)
Call the Ethics Action Line: (Operates 24 hours a day, 7 days a week, in many
languages.)
ESN 333-3014 or (905) 863-3014
1-800-683-3503 (toll free within North America) (Your name and number are not displayed when you call these lines.)
This also gives you the option of reporting
financial concerns directly to the Audit Committee of the
Board of Directors.
(Please note that your e-mail address appears on the message. Alternatively, you may send
an email marked
“Private and Confidential — Complaint” directly to the Chief Ethics Officer, at
sshepard@nortel.com.)
5)
Send a written communication:
You may also send a written communication marked “Private and Confidential
—Complaint” directly to Chief Ethics Officer Susan Shepard at Nortel, 320 Park
Avenue, New York, NY10022, or another member of her staff.
6)
Call any member of the Ethics Office directly:
Susan Shepard, Chief Ethics Officer ESN 324-4220 or (212) 317-4220
Communicate your concerns to the Nortel Board of Directors:
You may communicate directly with the Board of Directors, the Chairman
of the Board, or an individual Director, including the Chairman of the Audit
Committee, by writing to his or her attention in care of the Corporate
Secretary at:
Nortel Networks Corporation
195 The West Mall
Toronto, Ontario
Canada M9C 5K1
Mark your envelope “Private and Confidential — Complaint.” All such
correspondence will be forwarded to the Director(s) to whom your
correspondence is addressed. Any communication that relates to accounting,
internal accounting controls, or financial matters will also be referred to
the Chairman of the Audit Committee, if not already addressed to him or her.
In Canada:
Nortel
195 The West Mall
Toronto, Ontario M9C 5K1 Canada
In Caribbean and Latin America:
Nortel
1500 Concorde Terrace Sunrise, FL33323 USA
In Europe:
Nortel
Maidenhead Office Park, Westacott Way
Maidenhead Berkshire SL6 3QH UK
Phone: 00800 8008 9009 or
+44 (0) 870-907-9009
In Asia Pacific:
Nortel
Nortel Networks Centre
1 Innovation Drive
Macquarie University Research Park
Macquarie Park, NSW 2109
Australia
Tel +61 2 8870 5000
In Greater China:
Nortel
Sun Dong An Plaza
138 Wang Fu Jing Street
Beijing 10000
China
Phone: (86) 10 6510 8000
Nortel is a recognized leader in delivering communications
capabilities that enhance the human experience, ignite and power global
commerce, and secure and protect the world’s most critical information.
Our next-generation technologies, for both service providers and
enterprises, span access and core networks, support multimedia and
business-critical applications, and help eliminate today’s barriers to
efficiency, speed and performance by simplifying networks and connecting
people with information. Nortel does business in more than 150
countries. For more information, visit Nortel on the Web at
www.nortel.com.
For more information, contact your Nortel representative, or call
1-800-4 NORTEL or 1-800-466-7835 from anywhere in North America.
Nortel, the Nortel logo and the Globemark are trademarks of Nortel
Networks. All other trademarks are the property of their owners.
