Entrepreneurs and investors can agree to minimum standards of business or ethical practices and define them in the investment documents. These may be custom statements based on local law or they can be adapted from third-party standards, such as the International Finance Corporation (IFC). The parties can also agree on general principles at the term sheet stage and require that the board adopt more detailed policies within some period of time after closing. The policies included with these sample terms are examples only and are not intended to be prescriptive.
Sample language based on International Finance Corporation standards
The Company shall comply with applicable local and national laws and as a minimum shall not employ or make use of forced labor of any kind; not employ or make use of harmful child labor; shall pay wages which meet or exceed industry or legal national minima; shall treat employees fairly in terms of recruitment, promotion, terms and conditions of work and representation, irrespective of gender, race, color, disability, political opinion, sexual orientation, age, religion, social or ethnic origin, or HIV status; shall allow consultative workplace structures and associations which provide employees with an opportunity to present their views to management; shall ensure that employees relocated to remote operations for extended periods of time have access to adequate housing and basic services; shall assess the health and safety risks arising from work activities; shall work over time to apply the relevant International Finance Corporation (IFC) policies and guidelines on health and safety, if these are more stringent than local legislation, with appropriate targets and timetable for improvements; shall consider the potential for positive environmental impacts from business activities and take appropriate action to mitigate environmental risks, ameliorate environmental damage, and enhance positive effects; shall work over time to apply the relevant IFC policies and guidelines, if these are more stringent than local legislation, with appropriate targets and timetable for improvements when activities are assessed to present significant environmental risks; shall comply with all applicable laws and promote international best practices, including those laws and international best practice standards intended to prevent extortion, bribery and financial crime; shall uphold high standards of business integrity and honesty; shall properly record, report and review financial and tax information; use effective systems of internal control and risk management covering all significant issues, including environmental, social and ethical issues.
Sample language for board to adopt policies after closing
Within [X days or X months] after the Closing, the Board (which vote shall include the Preferred Director) shall adopt policies relating to each of the following rules:
Environmental and Social Responsibility. The Company shall endeavor to conduct all aspects of its business in an environmentally and socially responsible manner, including the promotion of peaceful conflict resolution, fair and humane working conditions, equitable treatment of its employees, implementation of sustainable business processes, waste minimization and recycling, and philanthropy as described below. The officers and directors will use their discretion and business judgment to determine how best to implement this policy consistent with their fiduciary duties.
Corporate Giving. The Company shall endeavor at all times to have in place a program encouraging robust corporate philanthropy at a level established by the officers and directors using their discretion and business judgment to determine how best to implement this policy consistent with their fiduciary duties.
Fair Wages. The Company shall pay its eligible employees based in the United States of America and its non-US based employees in a fair and just manner as determined by the officers and directors in their business judgment consistent with their fiduciary duties.
Equal Benefits for Employees. Domestic Partners (whether same sex or opposite sex) of the Company’s eligible employees shall be eligible to receive benefits under the Company’s employee benefit policies and programs to the same extent spouses of the Company’s eligible employees are eligible to receive benefits under such policies and programs, subject to the eligibility requirements and benefits policies adopted by the Company.
Compensation. The Company shall not provide cash compensation to any officer of the Company (excluding signing bonuses, performance bonuses, stock and option grants and other benefits), in excess of a ratio to the compensation paid to the lowest paid full-time employee of the Company based in the United States of America, such ratio to be set at a level determined by the board in their business judgment consistent with their fiduciary duties.
No Third Party Beneficiary Status. The adoption of these Rules of Corporate Responsibility does not confer third party beneficiary status on any party or give any party rights hereunder.
Sample language extending standards of practice to partners
The Company shall enter into and maintain business relationships only with suppliers and contractors who comply with the policies described in the preceding paragraph.