Prohibition of Corruption

The following specifications shall apply in accordance with the provisions on the prohibition of bribery and corruption embodied in the “Code of Conduct of the Diehl-Group”.
Diehl protects and supports all employees who comply with the prohibition of corruption that is embodied in the “Code of Conduct of the Diehl-Group” and stipulated in guidelines as well as work instructions and who accordingly refuse to act unlawfully – even if, as a result, a deal does not materialize or the company suffers any other disadvantage.

(Question 3.5) –> The references refer to the questions of the Defence Companies Anti-Corruption Index (DCI) 2020.

Internal control

The identification and assessment of compliance risks - especially with regard to bribery and corruption risks - form the basis for the establishment of the corresponding compliance organization at Diehl. To identify and monitor compliance risks in the area of anticorruption/bribery, the CCO regularly conducts a compliance risk analysis for the Diehl Group.

(Question 2.1, 2.2)

Furthermore, the Compliance Management System (CMS) is reviewed and evaluated every three years by an external law firm with the aim of continuously improving the CMS. Among other things, this ensures that anti-corruption and bribery measures are adapted to Diehl's specific risks. The results and measures are reported to the Compliance Committee and the Executive Board.

(Question 1.3)

Incentive system

Like all other business activities, Diehl's incentive system is based on the “Code of Conduct of the Diehl-Group”. Diehl employees are obliged not only generally but also contractually to meet the Code of Conduct so that the prohibition of bribery and corruption – also in connection with incentive systems – is firmly laid down in this way as well. Furthermore, the Code of Conduct provisions underline the importance of integrity, fairness and law-abidance so that ethical behavior is also stipulated as an indispensable prerequisite for all Diehl employees in the context of incentive systems.
Thus, incentive systems clearly focus on the way objectives are to be achieved. In accordance with a guideline, the Executive Board has the possibility to reduce or cancel bonuses in case Compliance regulations have been violated. Accordingly, attention is paid in all areas with inherent risks, such as sales, that any financial bonuses paid are always proportionate to the respective employee's salary.

(Question 3.4)

Secure handling of invitations and gifts

Flyer: “How to handle invitations and gifts correctly”

(Question 5.3.1)

Compliance training and communication

Compliance training (attendance-based training and e-learning) is regularly conducted for employees on all hierarchical levels in all countries in which the Diehl Group is operating. If required, attendance-based training is accompanied by local lawyers or interpreters. The e-learning program is available in various corporate languages.
Compliance training is concerned with explaining the “Code of Conduct of the Diehl-Group” with emphasis on corruption prevention/competition law. The employees concerned are required to repeat the Compliance training every 3 years, where they are also informed about reporting channels, including the ombudsman Dr. Rainer Buchert (whistleblowing reporting).
Especially tailored training courses are provided for certain positions with special inherent risks (e.g. sales and purchasing), for medium-level management as well as the Executive Board – for positions with special inherent risks once a year. These training courses with anti-corruption emphasis take place, for instance, during regularly held sales and purchasing meetings as well as in the context of executive staff and Executive Board meetings.
Training courses provided in the context of management events also address Compliance as a managerial task because executives are the decisive link between top management, Compliance organization and day-to-day business. Executives are trained as multipliers to enhance their employees' awareness of corruption-critical situations in daily business.

(Questions 3.1 and 3.2)

Diehl's Corporate Compliance training and communication program is very extensive, also with respect to corruption prohibition. The training documents contain numerous examples, e.g. giving and accepting gifts and other benefits, and refer to the special requirements in the international environment. Compliance processes are explained and communicated to the employees by means of graphics / charts.
The effectiveness of Compliance training is checked, among other things, by means of the participants' feedback. Sensitized by the training content, it is usual practice that, in case of doubt, employees contact Corporate Compliance to inquire about how to correctly deal with invitations and gifts or how to exactly implement the Compliance guidelines. Moreover, Corporate Compliance systematically obtains feedback about training in personal conversations. This feedback is used to continuously improve training and tailor it exactly to the participants' requirements. In addition, the participants and training contents are documented – so that Corporate Compliance can take appropriate measures, if necessary, to further improve the participation quotas.
Besides numerous attendance-based training courses and the e-learning program, there are also publications in company journals, on the Internet and intranet. Here, too, Corporate Compliance asks for feedback in personal conversations to improve the effectiveness of the communication measures.
Moreover, a Compliance App is currently being implemented, making the anti-corruption guidelines and other documents at any time accessible to employees on their mobile end devices. Thus, employees will anywhere be able to obtain flexible support in the App.
Compliance communication on different channels (attendance-based events, printed and digital media, etc.) provides variety for the users, increases Compliance awareness and the effectiveness of the Compliance measures taken.

(Question 3.3)

Protection of whistleblowers

Diehl's Compliance organization is complemented by a neutral, external ombudsman (lawyer) who is obliged to maintain strict confidentiality. The ombudsman's contact details are available on the Internet (www.diehl.com / Group / Company / Compliance). The ombudsman acts as neutral, confidential point of contact for Diehl employees and third parties, such as suppliers, joint venture partners, etc., if they have observed improper business practices in companies of the Diehl group. Thus, Diehl employees and other whistleblowers can report suspected violations of Compliance standards without being required to reveal their identity as whistleblowers because any conversation with the ombudsman is subject to the lawyer's duty of confidentiality. This is why both employees and third parties should make use of the opportunity to exchange information with the ombudsman in case of doubt. He can be reached on all usual communication channels – by phone, e-mail, letter mail or fax. Information from abroad is mostly received by e-mail. Information provided in languages other than German or English is translated and answered at short notice. The contact details of the Corporate Compliance Officer (CCO) are also available on the Internet (www.diehl.com / Group / Company / Compliance). The CCO may also be consulted regarding all Compliance-related issues.
No Diehl employee worldwide and no other whistleblower, whether he/she is an employee of a joint venture or of a supplier etc., will be subject to sanctions or put at a disadvantage in any other way due to the fact that he/she has provided any such information. Diehl employees who violate that principle will be subjected to sanctions.
The fact that whistleblowers have used the ombudsman's reporting channel shows that Diehl employees rely on these assurances.

(Questions 3.6 and 3.7)

Investigation results

Reports on bribery and corruption were received in the past financial year, also through the whistleblowing channel, i.e. our ombudsman Dr. Rainer Buchert. In all cases, investigations were initiated based on the information obtained. The investigation results also led to disciplinary measures, such as dismissals (as of September 2019)

(Question 2.6)

If there are any findings about bribery and corruption incidents within the company, e.g. as a result of internal investigations, they are reported to the Executive Board. It is the responsibility of the Corporate Compliance Officer to check whether criminal offenses must be disclosed to the competent authorities and to ensure such disclosure, when appropriate.

(Question 2.5)

Lobbying

Through its office in Berlin, Diehl is in contact with political and ministerial decision-makers, with partner companies and associations represented there as well as with embassy representatives.

In the past 12 months, Diehl had no politicians under contract.

(Question 4.4)

Through its office in Brussels, Diehl is in contact with decision-makers from the European Community, the European Commission, the European Defence Community and NATO, as well as with partner companies and associations represented there.
As published in the EU Transparency Register, Diehl keeps track of the following and other main EU initiatives, policies and legislative files:
Transposition/monitoring of the Defence Package, Preparatory Action on CSDP-related research, SESAR, European Fund for Strategic Investment, regional policy / Structural Funds, Energy Efficiency Directive, Energy Union, ETS reform, Smart Grids/Smart Metering, resource efficiency, Horizon 2020, FP9
Relevant policy implementation, public relations and communication activities such as projects, events and publications:
Bi-annual reception concerning current political topics (last time in 2015).

List of meetings with the European Commission

Participation in EU structures and platforms
Intergroups (European Parliament): Sky and Space Intergroup
Two full-time equivalent employees are involved in the activities published in the EU Transparency Register.
Annual costs related to activities covered by the Register are estimated at 200,000 to 300,000 euros for financial year 2017. During that financial year, Diehl Stiftung & Co. KG did not receive any funding from EU institutions.
Further (financial) information in the interest of transparency:
Diehl Stiftung & Co. KG is a member of several national associations that are also represented in Brussels, either by themselves or through their European associations (e.g. BDI, BDLI, BDSV, Wirtschaftsvereinigung Metalle). The membership fees for these have not been included in the cost calculation of the Diehl office in Brussels to avoid double counting.
By its registration in the EU Transparency Register, Diehl Stiftung & Co. KG has signed the Transparency Register's code of conduct.

Diehl Defence is a member of the following associations:

BDI – Bundesverband der Deutschen Industrie (Federation of German Industries)
BDLI – Bundesverband der deutschen Luft- und Raumfahrtindustrie (German Aerospace Industries Association)
BDSV – Bundesverband der deutschen Sicherheits- und Verteidigungsindustrie e.V. (Federation of German Security and Defence Industries)
DGLR – Deutsche Gesellschaft für Luft- und Raumfahrt (Germany Society for Aeronautics and Astronautics)
DWT – Deutsche Gesellschaft für Wehrtechnik (German Association for Defence Technology)
FKH – Förderkreis Deutsches Heer e.V. (Association of the German Army)
LR BW – Luft- und Raumfahrt Baden-Württemberg e.V. (Forum Aerospace Baden-Wuerttemberg e.V.)

(Questions 5.2.2 and 5.2.3)

Sales representatives and agents

Based on the Diehl Compliance guidelines, due diligence reviews are conducted for defined business partners, such as sales representatives and agents. Accordingly, a corporate guideline on conclusion of consultancy and representative agreements exists.
The integrity of consultants and representatives is indispensable for such a cooperation because Diehl can also be held responsible for their actions. The above-mentioned Compliance guideline is implemented to ensure that the consultants and representatives engaged meet the same high standards of integrity as Diehl in their business activities and transactions. This guideline provides instructions for the engagement and management of representatives and consultants and is to ensure that all representatives and consultants comply with statutory provisions, further applicable regulations and procedures as well as anti-corruption legislation.

The Diehl Anti-Corruption and Bribery Guidelines apply to commercial agents and intermediaries. Compliance is audited regularly. In the Defence Group, an audit takes place at least once a year. In case of non-compliance, contracts are terminated without notice.

Thus, a regular (i.e., every two years or in the case of major changes of business relations) Compliance due diligence review of all current and potential consultants and representatives is obligatory to prevent illegal business practices, such as fraud, bribery or corruption. The due diligence review is performed, using software and other tools, on the basis of a risk assessment carried out before. It covers all information relevant for corruption prevention, especially the qualifications of the business partner, the relations with Diehl and Diehl employees, special incidents in the past (e.g. insolvency, corruption, punishable offenses, antitrust proceedings etc.), modes of settlement as well as determination and verification of the beneficial owner.

The beneficial owner of sales representatives / agents is identified and verified prior to an engagement as well as every two years and in the case of significant changes of the business relations. Like the entire due diligence review, the beneficial owner is determined and verified on the basis of a risk assessment undertaken before, which means all information provided by the representative / agent is verified, e.g. by excerpts from the commercial register. Moreover, a verification is carried out on the basis of independent sources (e.g. external service providers) in the case of high-risk representatives / agents. If the beneficial owner cannot be determined and verified, Diehl will not enter a business relationship with the representative / agent, or Diehl will terminate an existing relationship.

With regard to the entire Compliance due diligence review, all highest-risk representatives and agents are subjected to an extended Due Diligence Review, which means that an extension of the review to include an on-site review, a review carried out by external service providers or constant monitoring may be necessary, depending on the risk assessment carried out.

If risks have been identified in the course of the due diligence review, that cannot be reduced, Diehl will not enter a business relationship with such partners or terminates the business relationship. Thus, the conclusion or extension of an agreement always depends on the results of the Compliance due diligence review carried out before.

This guideline applies to all national and foreign companies of the Diehl Group with respect to their relations with consultants and representatives and provides, inter alia, that

the remuneration level must correspond to the scope of services provided;
the remuneration must correspond to the commission scale laid down;
the remuneration is in any case subject to the CCO's approval or the approval of an authorized representative appointed by the CCO;
the remuneration is to be transferred to a first-class bank account in the country where the services are provided or to a bank account in Germany;
all services and activities performed by the representative / consultant have to be documented.

In this way it is ensured that the remuneration structure complies with the prohibition of bribery and corruption embodied in the “Code of Conduct of the Diehl-Group”. In any case, the CCO or the authorized representative appointed by him restricts the remuneration so that it is not inappropriately high. Moreover, the remuneration is to be paid only in part payments, based on clearly defined milestones within the agreement.
As a general rule, all consultancy and representative agreements must be made in writing on the basis of the Compliance standard agreements. Among other provisions, these standard agreements contain specific declarations and assurances regarding compliance with all applicable anti-corruption laws and provisions as well as regulations regarding termination without notice for non-compliance.
The term of the agreement shall not exceed two years without prior approval of the CCO or an authorized representative appointed by the CCO. All representative and consultancy agreements shall be administered, executed, renewed and terminated in accordance with this guideline and are available to the CCO.
In addition, all representative and consultancy agreements are subjected to internal audits (Compliance audits) at regular intervals.

(Questions 7.1.1, 7.1.2, 7.1.3, 7.1.4, 7.1.5)

Offset

Special Offset Managers are responsible for the coordination of all offset activities at Diehl. They prepare offset proposals, and check and negotiate offset agreements. Moreover, they cooperate with offset authorities.
As offset agreements may involve risks of corruption, all employees in this area are, of course, trained with regard to corruption prevention and bribery prohibition.

(Question 8.1)

High-risk markets

Diehl identifies countries with high corruption risks, based on the Corruption Perception Index (CPI) by Transparency International and further assessment criteria. If Diehl intends to do business in those countries, such activities are subject to an intensive Compliance review.
If the review result shows that corruption risks cannot be reduced satisfactorily by taking Compliance measures, Diehl will not transact that business. Appropriate measures may, for instance, be on-site visits by the CCO in the course of business partner screening, reviews carried out by external service providers or country-specific trainings at the Diehl locations.

Prohibition of Corruption