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Integrity is one of the mainstays of the Schaeffler Group’s manner of conducting business. Under the Schaeffler Code of Conduct, the Board of Managing Directors and all employees are required to comply with all applicable local, national, and international laws and regulations, wherever the Schaeffler Group does business. A compliance organization covering the entire Schaeffler Group provides them with support in doing so.
The Schaeffler Group’s Board of Managing Directors emphatically supports the underlying compliance management system (CMS) and the necessity of consistently complying with legal requirements and internal regulations.
The CMS is based on the three pillars of prevention, detection, and reaction and is part of the second line of defense within the Schaeffler Group’s governance structure. The CMS in its current state is the result of a comprehensive revision initiated by the Board of Managing Directors as part of the “Compliance Fit & Proper” program, a component of the “ONE Schaeffler” program. Following the successful completion of a review of the underlying conceptual design in accordance with the Principles for the Proper Performance of Reasonable Assurance Engagements Relating to Compliance Management Systems IDW AsS 980 by an independent audit firm, the next step is a planned review of the implementation of the CMS by an independent audit firm.
The CMS comprises, in particular, managing and monitoring the activities necessary to prevent, or detect early on, violations of law in the area of corruption, money-laundering, competition and antitrust law, and economic criminal activity. It also serves to actively manage risk and protect the company and its employees. The CMS consists of seven core components: Compliance culture, compliance objectives, vulnerability analysis, compliance program, compliance organization, communication, and monitoring and improvement.
The compliance organization derives its arrangements for preventing violations of antitrust and competition legislation, corruption, economic crime, and money-laundering from a regular groupwide risk analysis using a risk based approach. The risk analysis provides information on the current situation with respect to risks arising from operations and on the effectiveness of the preventive arrangements in place. The analysis is primarily based on interviews with management and employees of all divisions and regions with the objective of obtaining estimates of the probability of occurrence and the size of the potential loss of pertinent risk scenarios from the interviewee that are as close to the business processes as possible. These estimates are supplemented with sector and expert knowledge, experience with actual compliance violations, results of controls and audits, as well as by using operations-, market-, and country-specific risk criteria ranging from publicly available risk indicators, such as the Corruption Perception Index compiled by Transparency International, to issues regarding the location-specific design of Sales and Distribution.
The Schaeffler Group’s Group Chief Compliance Officer heads up the compliance organization and reports directly to the Chief Executive Officer. The Group Chief Compliance Officer also has a reporting line to the Chairman of the Supervisory Board and reports to the chairman of the audit committee on a regular basis. The compliance department provides the Group Chief Compliance Officer with the support of a network of experienced compliance specialists spanning all of the Schaeffler Group’s Europe, Americas, Greater China, and Asia/Pacific regions. He also utilizes a centralized team of experts located at the corporate head office in Herzogenaurach which was expanded in 2016 and consists of the “Advisory”, “Risk Analysis & Solutions”, and “Forensics & Investigations” departments. The responsibilities of this team of experts include defining and monitoring appropriate groupwide compliance standards and activities, consulting on compliance, and improving processes and controls. The team is also responsible for independently investigating alleged violations and following up on the necessary consequences. It analyzes the causes of misconduct, derives suggestions for remedial measures, and follows up on their implementation. Violations of laws and regulations or of internal rules on compliance with these are not tolerated and result in disciplinary action.
Measures designed to prevent compliance violations include the Schaeffler Group’s Code of Conduct, guidelines on behaviour in compliance with antitrust and competition legislation, fighting corruption, and protecting confidential information, web-based and classroom training sessions, and a compliance helpdesk available for consultation on specific compliance issues. Training sessions are continually refined and updated and adapted to the employees’ areas of responsibility. For instance, case studies in the Risk Awareness training session are customized to the relevant business units in order to make the presentation of potential risks as specific and clear as possible. In addition, the company has also put in place arrangements for detecting possible compliance violations; these arrangements include audits and controls as well as a whistleblowing system which can be used to report violations on an anonymous basis. All such reports received are reviewed independently. Reprisals against employees reporting concerns about misconduct within the company in good faith are prohibited.
The Schaeffler Group has further expanded its arrangements and measures for complying with legal requirements and internal rules in 2016. A new code of conduct applicable to all employees worldwide was introduced. In addition to requirements relating to general conduct, the principles and practices described also cover conduct vis-à-vis business partners and third parties, dealing with sensitive information, employees and co-workers, and requirements regarding the environment, health, and safety. In accordance with the corporate values, bribery or any form of corruption are not tolerated. All Schaeffler Group employees are expressly prohibited from engaging in bribery or corruption in any way. The same applies to conduct violating competition or anti-trust laws. The Schaeffler Group stays away from any transactions that cannot be effected or continued without unacceptable conduct.
The company continued the implementation of a register of contacts with competitors as well as a groupwide business partner due diligence process. This underlines the standard the Schaeffler Group expects of its business partners with respect to acting with integrity and abiding by rules. In 2016, the compliance training program included training on risk awareness, the Schaeffler Code of Conduct, and security of information including classified information. New training measures were introduced to protect against cybercrime and CEO fraud.
The company maintains a groupwide insider list in order to comply with capital markets regulations. The members of the Board of Managing Directors and the Supervisory Board as well as employees were informed of their obligations under capital markets laws and the consequences of the listing. In addition, there is an insider committee whose activities include maintaining the insider list, deciding on how to deal with potential insider information, and ensuring compliance with the requirements of capital markets laws.
For further detail on significant compliance-related risks see “Report on opportunities and risks” .