Third party code of conduct

Our expectations with regard to the corporate citizenship practices of our suppliers are set out in our Third Party Code of Conduct, which is distributed to all potential and existing business partners. As well as demonstrating a shared commitment to our corporate citizenship values, third parties are expected to adhere to all national and other applicable laws and regulations governing Health, Safety and Environment (HSE) and labor practices and establish management systems designed to implement these requirements. In addition, they must provide for compliance assurance and continual improvement.

In 2007, of a total of 220 000 suppliers worldwide, around 20 000 companies whose annual turnover with Novartis is in excess of
USD 100 000 were made aware of our third party corporate citizenship principles. Of these, 400 signed a voluntary undertaking to comply with the standards of business conduct formulated by Novartis.

The principles defined for Third Party Management reflect - and should help to propagate - the principles enshrined in the UN Global Compact, as follows:

• Remuneration: Third parties are required to pay their employees fair wages, which should not in any circumstances be less than the legal minimum wage in the country of employment.
• Working hours: Third parties are required to comply with local laws and regulations on working hours. Working hours should not be excessive by local standards and should allow for adequate time for rest and leisure. Overtime is to be voluntary and paid in accordance with local laws and regulations.
• Forced labor: Third parties are required to exclude forced labor and to ensure that the overall terms of employment are voluntary.
• Child labor: Third parties are required to exclude child labor. Local minimum working age laws and regulations are to be complied with. Third parties should strive to improve the situation within their sphere of influence by awareness building, training and regular performance assessments. Programs to abolish child labor in a manner consistent with the basic interests of the child should be supported.
• Freedom of association: Third parties are required to respect the right of each employee to join a trade union or an employee association. They are to give trade unions a fair chance to compete for the unionization of employees and should be comfortable with collective bargaining agreements, individual arrangements or a mixture of both. Suppliers are not expected by Novartis to be unionized.
• Discrimination: Third parties are required to prohibit discrimination based on race, color, age, sex, sexual orientation, ethnicity, religion, disability, union membership, or political views. They are to protect all employees against harassment in the workplace, including sexual harassment.
• Security: Third parties are required to establish procedures applicable to corporate security personnel, to protect employees and associated persons from excessive use of force and inappropriate invasions of their privacy. Local custom and government practice are not considered to justify deviations from universally accepted standards of human rights.
• Health, safety and environmental protection: Third parties are required to provide a safe workplace for their employees to prevent accidents and injury to health. At a minimum, third parties are to comply with all applicable local health, safety and environmental protection laws and regulations.