Gütersloh, 03/04/2015

Adoption of New Compliance Guidelines

In its meeting on December 19, 2014, the Bertelsmann Executive Board approved a revised version of the BeTrade Guideline as well as new Guideline for Handling Suspected Compliance Violations. Christina Möller and Carsten Tams of the Bertelsmann Ethics & Compliance department explain what led to the changes in the guidelines.

BENET: What is the purpose of the Guideline for Handling Suspected Compliance Violations? What is it intended to achieve?

Carsten Tams: The guideline outlines the procedures and responsibilities for handling reports of compliance violations as well as the principles for taking remedial measures in response to substantiated compliance violations. We have applied these principles for a long time in handling reports of compliance violations. This policy makes them transparent. The policy also helps to make sure that measures taken in response to compliance violations are consistent, fair and appropriate across the corporation. Secondly, the guideline expands existing reporting requirements. While, in the past, such requirements applied only to certain issues – such as fraudulent acts or violations of antitrust law – they now apply to all significant violations of laws, corporate guidelines and contractual obligations, whatever the legal area. As a result, topics such as data protection and discrimination are now covered as well.

BENET: Does the reporting requirement apply to all compliance violations?

Carsten Tams: No, it applies only to significant violations. A compliance violation is significant if it might cause material damage to a Bertelsmann Group company. The revised guideline outlines the criteria for determining significance. In certain legal areas, violations are always significant. Such areas include corruption, antitrust law and foreign trade law. Violations are also deemed to be significant if they cause substantial damage to the reputation of a Bertelsmann Group company. This is generally the case when, for example, reports of a compliance violation appear in the media. To be clear: We do not intend that every minor incident should be reported. Instead, we want to prevent a situation where a harmful compliance violation occurs and we at the corporate level don't hear about it or hear about it too late. The reporting of such incidents enables the company to maintain a more complete, Group-wide overview of any risks to the organization. This enables the company to take necessary preventive measures.

BENET: Is there a threshold amount above which a violation is considered to be significant?

Carsten Tams: After considerable deliberation, we decided against setting a quantitative limit. Practically speaking, it wouldn't be of much help. One can only speculate about the cost that may result from a specific compliance violation. We therefore decided to rely on qualitative criteria.

BENET: To whom does the reporting requirement apply? And to whom should reports be addressed?

Christina Möller: The reporting requirement applies to all executives as well as to employees who, by virtue of their position, bear special responsibility for ensuring compliance. This includes members of the Compliance, Legal or Audit departments, but also responsible personnel in other functions, such as Finance or Human Resources. Of course, the Bertelsmann Ethics & Compliance department is an appropriate contact point. However, employees may also contact other departments at the Bertelsmann Corporate Center that deal with the issue in question. If it is a matter of embezzlement, for example, reports can be addressed either to the Ethics & Compliance department or to the Audit department.

BENET: What should employees do if they are uncertain as to whether an incident is subject to the reporting requirement?

Christina Möller: As a rule, employees should speak with their supervisor or an appropriate on-site department. Obviously it is important to make sure that the contact is not personally involved in the violation at hand. Certain issues may be better addressed outside of the local working environment. Employees always have the option of contacting us directly at the Ethics & Compliance department. The external ombudspersons appointed by Bertelsmann may also be contacted in such cases. Ombudspersons maintain confidentiality with regard to communications with the whistleblower. They do not disclose confidential communications, including the identity of the inquirer, unless given permission to do so by the inquirer.

BENET: What is the purpose of the BeTrade Guideline? Why has it been revised?

Christina Möller: The purpose of the BeTrade Guideline is to protect the company and its employees against liability for violations of foreign trade law, i.e. violations of sanction lists and embargoes. Given the current global situation, with issues such as international terrorism and sanctions against Russia, the challenge of complying with foreign trade law is becoming increasingly complex for globally active companies. Violations can lead to substantial fines and even imprisonment, and are increasingly being prosecuted by domestic and foreign authorities. As a result, liability risks for both executives and employees have grown substantially in recent years. Accordingly, we have adapted the guideline to reflect increasingly stringent legal requirements. A particular concern was to choose a risk-oriented and flexible approach designed to ensure that the BeTrade guideline can be implemented throughout the organization.

BENET: What does "risk-oriented" mean?

Christina Möller: Risk-oriented means that each Group company is expected to assess its own individual risk under foreign trade law and take corresponding measures to minimize that risk. Group companies that are exposed to greater risk because of the nature of their business activities, their business partners and/or their geographic exposure need to take different preventive measures. A company that conducts only minimal foreign trade may decide that less stringent measures are sufficient.

BENET: What preventive measures is every Group company required to take? Which measures depend on the level of risk?

Christina Möller: The guideline stipulates that all Group companies must appoint a member of management to serve as a "BeTrade Officer," whose name is to be communicated to the Ethics & Compliance department. Similarly, all Group companies are required to carry out and document a risk assessment related to foreign trade law. The risk assessment is the foundation for determining what follow-up measures are necessary. If a relevant risk exists, the BeTrade Officer is to appoint a "BeTrade Manager" and deputy to provide operational support. Based on the assessed risk, the Group company must establish an appropriate process management system to minimize the risks of violations of sanction lists and embargoes. This can be done in a flexible manner. For example, companies are, in principle, required to use the IT tool provided by Bertelsmann when screening sanction lists; however, if this is not possible or reasonable in a given case, they may choose an alternative. This flexible approach is intended to allow all Group companies to maintain compliance with the law without imposing a disproportionate burden on their business operations.

BENET: How should the BeTrade guideline be implemented?

Christina Möller: The Ethics & Compliance department will advise and support the Group companies in their efforts to meet the BeTrade requirements. As soon as we have been informed of the names of the BeTrade Officers, we will invite these colleagues to participate in webinars explaining how the guidelines are to be implemented at the local level. In addition, further information and a variety of materials on the topic of "BeTrade compliance" will soon be available on our website.