Our Compliance Management System

Our Compliance Management System (CMS) consists of basic principles and measures intended to promote rule-based behavior throughout the company. The CMS is based on national and international standards and applies on a global scale at all Daimler AG units and majority holdings. The CMS consists of seven elements that build on one another. (See graphic E.07)

Daimler AR2018 E.07 Daimler Comliance Management Systemt

Our compliance values and goals

Our Compliance Management System (CMS) is designed to help Daimler and its employees avoid inappropriate or illegal behavior, and our culture of integrity serves as the foundation for this approach. The measures needed for this are defined by our compliance and legal organizations in a process that also takes the company’s business requirements into account. (See Integrity, compliance and legal responsibility)

Our compliance organization

Our compliance and legal organizations have set themselves the goal of ensuring Group-wide conformance with laws and regulations. Our compliance organization is structured in a divisional and regional manner, while our legal organization is structured regionally and along the value chain. These structures enable us to provide optimal support and advice to our divisions. A contact person is made available to each function, division and region. In addition, a global network of local contact persons makes sure that our standards are met throughout the Group and also helps local management at Daimler facilities and sales companies implement our compliance program.

Compliance risks

We systematically pursue the goal of minimizing compliance risks, and we analyze and assess the compliance risks of all our business units every year. These analyses are based on centrally compiled information on all business units and take specific additional details into account as needed. The results of the analyses form the basis of our risk control.

Compliance program

Our compliance program comprises principles and measures designed to reduce compliance risks and prevent violations of regulations and laws. The individual measures, which are based on the knowledge gained through our systematic compliance analyses, focus on the following aspects:

The whistleblower system BPO (Business Practices Office) enables Daimler employees and external whistleblowers to report misconduct anywhere in the world. The BPO is available around the clock to receive information that is sent by e-mail or normal mail, or by filling out a special form. An external toll-free hotline is also available in Brazil, the United States and South Africa. Reports can be submitted anonymously if local laws permit this. In Germany, reports to the BPO can also be submitted via a neutral intermediary, who in this case is an independent external attorney. The information provided to the BPO enables us to learn about potential risks and specific violations that pose a high risk to the company and its employees, and this in turn allows us to prevent damage to the company and its reputation. A globally valid corporate policy aims to ensure a fair and transparent approach that takes into account the principle of proportionality for the affected parties, while also giving protection to whistleblowers. In an effort to increase trust in our whistleblower system and make it even better known within the Group, we have established a continuous communication process that includes the periodic provision of information to employees about the type and number of reported violations. We also supply information materials such as country-specific information cards. In addition, we have produced an instructional video in ten languages and we repeatedly stage informational and dialog events at our locations as well.

The BPO process was developed further during the year under review. A risk-based initial assessment and standardized processes enable more rapid identification and effective processing of high-risk reports submitted to the BPO. The case categories used by the BPO have been updated and new categories have been added in order to incorporate the latest social and legal developments into the BPO process. In the year under review, 89 new BPO cases were opened. A total of 101 cases were closed, 60 of them “with merit,” which means the initial suspicion was confirmed. Of these latter cases, five were categorized as “corruption” and seven as “theft, breach of trust and enrichment offenses of a significant magnitude or value.” Seven cases fell under the category “damage exceeding €100,000.” One case was in the category “physical injury.”

With regard to those cases that are closed “with merit,” appropriate response measures are decided in line with the principles of proportionality and fairness. Fairness, which is the key principle in the overall process, applies to both whistleblowers and affected parties. In other words, affected parties are not judged in advance and the assumption of innocence applies until it has been proven that a violation has occurred. Whistleblowers who contact the BPO are also protected. They do not need to worry that their report might result in negative consequences for themselves.

Personnel measures taken in 2018 included the issuing of verbal and written warnings and final warnings, as well as separation agreements and ordinary and extraordinary terminations.

Compliance on the part of our business partners

We also require our business partners to adhere to clear compliance requirements because we regard our business partners’ integrity and behavior in conformity with regulations as a precondition for trusting cooperation. In the selection of our direct business partners, we therefore ensure that they comply with the law and observe ethical principles. In financial year 2018, we completed the implementation of our globally standardized process for the effective and efficient examination of all new and existing business partners (Business Partner Due Diligence Process). Our continuous monitoring here is designed to ensure we can identify possible integrity violations by our business partners. We also reserve the right to terminate cooperation with, or terminate the selection process for, any business partner who fails to comply with our standards. In addition, we work with our procurement units to continuously improve our processes for selecting and cooperating with suppliers; our global Daimler Supplier Sustainability Standards apply here. On the basis of these standards and our Integrity Code, a specific Supplier Compliance Awareness Module was developed. This module is distributed to our suppliers. It contains provisions similar to those that can be found in the general Compliance Awareness Module for sales partners, which was introduced in 2016 and is designed to increase their awareness of compliance requirements. See also daimler.com/sus/obr

Communication and training

Our extensive training courses are based on our Integrity Code. The training program is planned on the basis of an annual planning cycle that includes everything from a needs analysis to the evaluation of the entire training process. Among other things, the program covers the topics of integrity, compliance (including corruption prevention and technical compliance), data protection and antitrust law. Depending on the risk and the target group, we use classroom training or digital learning techniques such as web-based training courses.

Every employee who works at a majority-owned Daimler-controlled company can participate in a web-based and target-group oriented training program consisting of several modules — a basic module, a module specifically for managers, and expert modules on antitrust law, data protection, technical compliance, non-cash rewards for employees and function-specific topics such as procurement and sales. This program is being continuously expanded in line with the requirements of specific target groups.

Office employees are required to complete modules relevant to their role and function. The associated modules are assigned to them automatically or in a centralized process. These training modules are assigned when an employee is hired, promoted or transferred to a position that involves an increased risk. This approach ensures that personnel changes are properly addressed. In general, the program must be repeated approximately every three years. Factory employees can complete the web-based training program voluntarily.

The web-based training courses are supplemented by classroom training sessions that are conducted by central or local trainers. We provide our internal trainer network with modular training documents and materials for methodical implementation, such as trainer guideline and explanatory videos that can be used in a target group-specific manner in accordance with the risks associated with the participants’ jobs. In 2018, a total of approximately 220,000 employees from various levels of the hierarchy participated in classroom and web-based training programs.

We also offer our employees in the compliance and legal organizations target group-specific qualification measures. In addition, all new employees at these organizations receive a comprehensive introduction in an onboarding program.

All of these training measures contribute to the permanent establishment of ethical and compliant behavior at the company and also help our employees deal with specific issues that can occur at work. The same is true of the Daimler app for integrity, compliance and legal affairs. The app can be downloaded and used by all employees with an iOS company-owned device. Among other things, the app enables mobile access to information on corruption prevention and antitrust law, and additional topics will be added in the coming financial year.

Information and qualification measures are also offered to individuals who perform supervisory and management functions. Within the framework of the onboarding program for new members of the Supervisory Board of Daimler AG, such members were provided with information about the antitrust compliance program and technical compliance management during the year under review. In addition, the Group’s Chief Compliance Officer reported to the Audit Committee of the Supervisory Board on the status of the compliance management system. In 2018, new members of the supervisory boards of Daimler holdings were provided with information on various issues relating to compliance, data protection and integrity. They also participated in a “Know Your Responsibilities” onboarding program to make them more aware of compliance-related topics (for example anti-corruption policies) and the importance of integrity at their companies. New members of executive bodies at companies in which Daimler is the majority shareholder are given a compact overview of key aspects of corporate governance via the Corporate Governance Navigator, which is a target group-focused module that supports them in their new role by providing information on their tasks and responsibilities, contact partners and units that deal with central issues addressed by the Integrity and Legal Affairs division and adjacent units.

In addition to our internal training measures, our training program also includes special courses on integrity and compliance (including corruption prevention) that are offered to our business partners in line with their specific risks. The courses are offered as web-based training or classroom training sessions. Daimler informs its business partners about the courses and invites them to participate.

Monitoring and improvements

Every year, we review the adequacy and effectiveness of our Compliance Management System and adapt it to global developments, changed risks and new legal requirements. We also monitor important core processes during the year on the basis of key performance indicators (KPIs) that include process duration and quality. To determine these indicators, we check, among other things, whether formal requirements are met and all information is complete. In addition, we analyze the knowledge gained through independent internal and external assessments and participate in selected benchmark studies.

These activities are used to define any required improvement measures, which are implemented by the responsible units and departments and then monitored on a regular basis. The relevant management bodies continuously receive reports on these monitoring activities.

Involvement of company management

Our divisional and regional compliance managers report to the Chief Compliance Officer. This guarantees the compliance managers’ independence from the business divisions. The Chief Compliance Officer, the Group General Counsel and the Vice President Legal Product & Technical Compliance report directly to the Member of the Board of Management for Integrity and Legal Affairs and to the Audit Committee of the Supervisory Board. They also report regularly to the Board of Management of Daimler AG on matters such as the status of the Compliance Management System and its further development, the status of the whistleblower system and, if necessary, on other topics. In addition, the Group General Counsel regularly reports to the Antitrust Steering Committee and the Group Risk Management Committee, to which the Chief Compliance Officer and the Vice President Legal Product & Technical Compliance also report.

Important non-financial reporting topics

Eliminating corruption, preventing cartel arrangements, ensuring compliance with technical regulations, preventing money laundering and the financing of terrorism, and complying with sanctions — we introduced our Compliance Management System (CMS) in order to address exactly these issues, which are extremely important to us. The Data Compliance Management System that we are currently setting up is also based on the Daimler CMS, as is our Group-wide approach to respecting and upholding human rights.

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