Our Compliance Management System

Value-based compliance is an indispensable part of our daily business activities at Daimler. For us, compliance means acting in accordance with laws and regulations. Our objective here is to ensure that all of our employees worldwide are always able to carry out their work in a manner that is in compliance with applicable laws, regulations, agreements with workers’ representative bodies, voluntary commitments, and our values, as set out in binding form in our Integrity Code.

Our compliance activities focus on complying with anti-corruption regulations, the maintenance and promotion of fair competition, the compliance of our products with technical and regulatory stipulations, respect for and the protection of human rights, adherence to data protection laws, compliance with sanctions, and the prevention of money laundering.

Our Compliance Management System (CMS) consists of basic principles and measures for the promotion of compliant behavior throughout the Group. The CMS is based on national and international standards and is applied on a global scale at Daimler AG and all Group companies. The CMS consists of seven elements that build on one another.

Compliance values and objectives

The objective of our CMS is, on the foundation of our culture of integrity, to promote compliance with applicable laws and policies within the company and on the part of its employees and to prevent inappropriate behavior. 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 in an appropriate manner.

Further information on integrity at Daimler: »Compliance«

Daimler AR2019 E.07 Daimler Comliance Management Systemt

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 organizations are structured divisionally, 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 Group companies implement our compliance program.

Involvement of company management

Our divisional and regional compliance manager report to the Chief Compliance Officer. This guarantees the compliance managers’ independence from the business divisions. The Chief Compliance Officer, the Vice President & 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 Vice President & 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.

Compliance risks

We systematically pursue the goal of minimizing compliance risks, and we analyze and assess the compliance risks of our Group companies every year. These analyses are based on centrally compiled information on the Group companies 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 risk analyses, focus on the following aspects:

The whistleblower system BPO

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, Japan, and South Africa. Reports can be submitted anonymously if local laws permit this. In Germany, whistleblower reports can also be submitted to an external neutral intermediary in addition to the BPO.

The information provided to the BPO whistleblower system 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. High-risk rule violations include, for example, offenses relating to corruption, breaches of antitrust law, and violations of Anti-Money Laundering regulations, as well as serious violations of binding technical provisions. Employees who wish to report violations that pose minor risks can approach their supervisor, their Human Resources department, the Group Security Office or their local employee representation.

A globally valid corporate policy defines BPO procedures and the responsibilities of the various departments and individuals in the organization. This 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. It also defines a standard for evaluating incidents of misconduct and making decisions about their consequences.

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 and stage dialog events at selected locations as well.

In 2019, 59 new BPO cases were opened. A total of 44 cases in which 72 individuals were involved were closed “with merit.” In these cases, the initial suspicion was confirmed. Seven of these cases were in the category “Corruption”, while five related to “Technical compliance” and five concerned “Reputational damage.” Accusations of inappropriate behavior of employees toward third parties were confirmed in 13 cases. Four cases were categorized as “Damage exceeding 100,000 euros.” The remaining cases fell into other categories. With regard to those cases that are closed “with merit,” appropriate response measures are decided in line with the principles of proportionality and fairness. Personnel measures taken in the reporting year 2019 included the issuing of warnings and final warnings, as well as separation agreements and 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 2019, we made full use 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 that 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 in this area. On the basis of these standards and our Integrity Code, we make available to each of our suppliers and sales partners a specific Compliance Awareness Module developed with their activities in mind. This module also 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.

Further information on expectations regarding our business partners. (See daimler.com/sustainability/human-rights/our-business-relationships.html)

Communication and training

We offer extensive compliance training courses that are based on our Integrity Code. We conduct a training needs analysis at regular intervals, adjust and/or expand the training program, and subsequently carry out an evaluation.

All employees at Group companies can also 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 subjects such as antitrust law, data protection, technical compliance, benefits in kind for employees, and function-specific topics in areas such as procurement and sales. Our training activities in 2019 focused on, among other things, web-based courses on technical compliance and antitrust law, expert seminars lasting for several days on the topic of data compliance, webinar series on preventing money laundering, and new web-based modules for suppliers and business partners.

Office employees are required to complete those modules relevant to their role and function. We assign the associated modules 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 a trainer guideline and explanatory videos that can be used in a target group-specific manner and in accordance with the risks associated with the participants’ jobs. In 2019 a total of approximately 117,600 employees from diverse levels of the hierarchy participated in classroom-based and web-based training programs.

We also offer our employees in the compliance and legal organizations courses that address legal changes and changes to compliance regulations; these courses are taught by experts in the respective fields. In addition, new employees at our integrity, compliance, and legal organizations receive a comprehensive introduction in the course of an onboarding program.

We also offer information and qualification measures to individuals who perform supervisory and management functions, including new members of the Supervisory Board of Daimler AG. Among other things, the onboarding program for new Supervisory Board members provides information about the antitrust compliance program and technical compliance management. In 2019, new members of the supervisory boards of Group companies were also provided with information on various issues relating to compliance, data protection, and integrity. In addition, these new supervisory board members participated in a “Know Your Responsibilities” onboarding program to make them more aware of compliance-related topics (for example anti-corruption policies) and the aspects of integrity at the Group companies.

New members of executive bodies of Group companies are given a compact overview of key aspects of corporate governance via the Corporate Governance Navigator, which is a module that provides information on their tasks and responsibilities, contact partners, and points of contact that deal with central issues addressed by the Integrity and Legal Affairs division and adjacent units. The module thus supports such executives in their new role.

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 is available to all employees with a company-owned device. Among other things, the app enables mobile access to practical information on subjects such as corruption prevention, antitrust law, technical integrity, and data protection, with additional topics being added as required.

Within the framework of our training program, we also offer our business partners special modules on integrity and compliance (including corruption prevention). These 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 the content is complete. In addition, we analyze the knowledge gained through independent internal and external assessments.

We use these activities as a basis for defining any required improvement measures, which are implemented by the responsible Group companies and then monitored on a regular basis. The relevant management bodies continuously receive reports on these monitoring activities.

Main topics for compliance management

Eliminating corruption, preventing antitrust violations, ensuring product compliance with technical regulations and regulatory provisions, combating money laundering and the financing of terrorism, ensuring compliance with sanctions, and observing data protection legislation - we implemented our Compliance Management System (CMS) in order to address exactly these issues, which are extremely important to us. Our Group-wide approach to respecting and upholding human rights is also based on our CMS.

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