Corporate Responsibility
Report 2008
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Managing corporate responsibility and business ethics

The 12 principles outlined in the Code:

1 Compliance with all applicable laws and regulations

2 Fair and vigorous competition in the marketplace

3 Integrity and ethical conduct as the standard individual and corporate business behaviour

4 Fair and honest treatment of suppliers, business partners and customers

5 Proper and respectful treatment of employees

6 High standards for health, safety and security in the workplace

7 Respect for the environment

8 Contributing to the communities in which we live and work

9 Engaging appropriately with government departments and agencies

10 Respect for human rights

11 Prudent and transparent public accounting and reporting

12 A culture of compliance throughout the entire Smiths organisation embracing all employees

The Code of Business Ethics

In 2004 we introduced a Code of Corporate Responsibility and Business Ethics (‘the Code’) which sets out 12 broad principles for how Smiths does business, based on common values of integrity, honesty, fairness and transparency. It was acknowledged that the principles cannot address all areas or all circumstances, but they provide a framework for wider policies and programmes.

In early 2008, Smiths retained the consultancy URS to conduct a benchmarking exercise of our Code of Corporate Responsibility and Business Ethics against guidance on content and implementation from the Institute of Business Ethics (IBE). We took the opportunity to benchmark against companies operating in similar segments, from both a product and an investor perspective, using publicly available materials. The purpose was to establish the comparative strengths, weaknesses and opportunities for development of our Code.

Whilst URS highlighted many strengths, they helped us to identify the following changes that in the main describe areas covered by policies but not previously set out explicitly in the Code:

• we have incorporated more references to the shareholders as a key group of stakeholders;
• we have strengthened the non-retaliation language;
• we have made more explicit the principles in relation to confidential information and use of Smiths and third parties' assets (including IT and communications equipment);
• we have included reference to protection from potential security threats;
• we have included references to payment of taxes and assessment of risk;
• we have expanded references to the availability of resources to support the Code; and
• we have expanded provisions and advice for reporting issues, and have included, at the end of the Code, a section on governance which previously appeared on the website and intranet, but not in printed versions of the Code.

The revised Code, although expanded, retains the 12 core principles structure and has the simplified title ‘Code of Business Ethics’. It has been produced in all of the main Smiths operating languages, and is available in both hard copy format for each employee and on Smiths intranet.

In order to communicate the revised Code and provide training to individuals across the Group, we are working on an online training module. The online training will be supported by training on CD-Roms, so that those employees without access to individual work email accounts, or whose native language is not available online, can be trained in a classroom-style setting.

The new Code is available on the Smiths website.

Managing the Code

The Code is approved by the Board of Directors of Smiths Group plc and is supported by the Chief Executive, the directors and the management of Smiths at all levels.

The Board has ultimate responsibility for the Code and its application across Smiths businesses worldwide.

The Audit Committee of the Board has particular responsibility for monitoring the implementation of the Code, in addition to the programmes and functions that underpin compliance.

The Code of Business Ethics Compliance Council (‘the Council’) is responsible for reviewing issues, determining priorities and making recommendations to the Audit Committee. Members of the Council brief the Audit Committee periodically on ethical issues and suspected or actual breaches of the Code. Responsibility for managing specific issues lies at different levels within Smiths Group, depending on the nature of the issue and how it can most effectively be managed:

• health, safety and environment issues are managed through a Group-wide steering committee, a technical implementation committee and local co-ordinators;
• employee issues are managed through the human resources function and by line management;
• supplier and customer programmes are managed by each business; and
• community programmes are principally managed locally, although there is also some Group-level activity.

The Chief Executive and his leadership team actively champion the Code, securing its ongoing relevance and profile via several routes. These include:

• the discussion of ethics issues and Code compliance at management meetings;
• the review of ethics issues in the performance review system for managers; and
• the examination of Code compliance issues in site-level internal audit reviews.

Day-to-day responsibility for compliance with the Code has to rest with each and every Smiths employee.

Managing specific issues

Employees who have concerns or queries in relation to the Code are encouraged to raise these through a number of routes: by raising the issue with line management, or with the human resources or legal support for their business or division, or by using the confidential ethics helplines established across the Group.

Ethics Helplines are accessible by both phone and email to answer queries relating to ethics issues, as well as to act as a confidential reporting line for concerns and allegations. These helplines are available via toll-free numbers in over thirty countries where Smiths has businesses, staffed by individuals who speak the local language. All issues are addressed promptly and referred, as required, to relevant functions to enable proper investigation. If appropriate and possible, a report back is given to the caller.

Information about the Ethics Helplines and other aspects of Code compliance are available to employees on the Smiths intranet. For employees who do not have access to Smiths Group electronic communication tools, posters are on display at Smiths sites, plus all employees are provided with a hard copy of the Code.

In 2008 Smiths was awarded membership of the FTSE4Good Index which recognises companies that meet globally recognised corporate responsibility standards. Whilst we are not complacent about the ongoing work required, we were pleased to receive this external recognition of our corporate responsibility initiatives and business ethics programme.