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The use of third parties can make a valuable contribution for any organisation. But agents pose a unique corruption threat as they may be authorised to act on behalf of the company, often with a high level of discretion and minimal oversight.
Third Parties
Joint Ventures
thyssenkrupp has a formal procedure to conduct risk-based anti-bribery and corruption due diligence when entering into and operating in joint ventures. We have conducted a Group wide joint venture analysis with the goal of establishing a process for reviewing the joint ventures thyssenkrupp participates in for Compliance risks. The analysis is updated periodically. The analysis has the purpose to provide an assessment of specific anticorruption and antitrust risks for thyssenkrupp participations in joint ventures caused by the fact that the respective businesses are operated in this specific form. The Compliance assessment covers questions like Compliance programme, organization, antitrust and anticorruption rules, Compliance trainings and auditing within the joint venture as well as ownership structure and background checks of our partners. According to our internal approval procedure, Legal & Compliance have to be involved at a very early stage, if new joint ventures are to be concluded in order to mitigate potential anti-bribery and corruption but also antitrust risks from the start.
With our mission statement, we are clearly committed to values and to the fact that Compliance is a must. These values naturally also apply to partnerships of any kind with third parties.
With the mandatory involvement of Compliance at a very early stage in the process of setting up a joint venture, we make sure that anti-bribery and corruption policies and procedures are implemented in the respective joint venture. This includes clear clauses in the respective agreements but even more a continuous monitoring of the joint venture activities as a shareholder.
Joint ventures in which thyssenkrupp holds a majority are incorporated into the thyssenkrupp Compliance program, so that the same rules and scrutiny apply as in wholly owned subsidiaries. In joint ventures where we do not exercise sole or majority control, thyssenkrupp takes a very active role as a shareholder and always insists on the implementation of an effective compliance program including clear rules on the prevention of bribery and corruption. We also take active steps through our compliance function to support the management of a joint venture in establishing a comprehensive compliance program, e.g. by providing model policies, model processes, information material etc. thyssenkrupp will further work with the joint venture partners in the interest of establishing a good compliance culture within the joint venture. Audit and termination rights will be included in contracts where deemed necessary after initial due diligence has taken place.
Joint ventures in which thyssenkrupp holds a majority are incorporated in the thyssenkrupp compliance program, so that the same rules and scrutiny apply as in wholly owned subsidiaries. If thyssenkrupp becomes a shareholder of a joint venture in which we do not exercise sole or majority control, we take a very active role as a shareholder and will always insist on the implementation of an effective compliance programme including clear rules on the prevention of bribery and corruption. thyssenkrupp will further work with the joint venture partners in the interest of establishing a good Compliance culture within the joint venture. thyssenkrupp exercises its scrutiny over such non-majority joint ventures by exercising its shareholder’s rights such as information rights as well as by taking appropriate positions in the joint venture’s supervisory board or similar bodies.
Agents and Intermediaries
thyssenkrupp Group Companies in different ways engage external companies and individuals to be represented or supported in relation to commercial counterparties and public authorities.
Internationally high standards are reflected in the Group Regulation Corruption Prevention (section 3.9) with respect to the use of consultants and intermediaries. The Group Regulation Compliance in Dealings with Business Partners further concretizes these standards for the Business Partners in scope, which explicitly applies to sales intermediaries (sales agents), sponsors (national agents) and offset service providers.
The aim of the Group Regulations Corruption Prevention as well as Compliance in Dealings with Business Partners is moreover to avoid as far as possible an indication (appearance of wrongdoing) regarding corruption through the use of business partners.
Already since the introduction of the thyssenkrupp Compliance programme, dealings with sales agents have played a key role in our Compliance advisory practice, risk assessments and other elements of our programme. On the one hand, the business model in itself is legally permissible and customary in many areas. On the other hand, numerous Compliance risks are connected with the engagement of sales agents, which was exemplified over the last years by a series of significant industry-wide cases.
Therefore, an identity and Compliance check of Business Partners, including a corresponding Due Diligence check, by means of our Business Partner Compliance Tool (BPCT) is obligatory in case of new engagements as well as the extension or amendment of existing contracts. The BPCT streamlines and improves processes with respect to integrity checks of Business Partners by a workflow based IT application.
Important related documents and links:
Group Regulation Compliance in dealings with Business Partners
The use of business partners, also in sales-related areas, can in specific constellations be in the legitimate business interest of the particular Group Company when complying with the respective legal requirements. We are aware that such a business model may include abstract Compliance risks in some occasions, especially in the field of corruption. In particular, the risk exists that a business partner may pass on a part of the compensation to decision makers.
Therefore, according to our Group Regulation Compliance in Dealings with Business Partners, in each case the business wants to engage a business partner, the intended Business Partner engagement is subject to an identitiy and compliance check, including a corresponding Due Diligence check through our workflow based IT application, the Business Partner Compliance Tool (BPCT). The BPCT is a web-based tool, which is used Group wide within thyssenkrupp This includes the mandatory request for exclusive background information form the potential business partner as well as the use of external Compliance databases.. Before a binding agreement is concluded and before the business partner begins to work for thyssenkrupp, the competent department, e.g. sales, must establish that the use of the Business Partner, the intended contractual form and the type and scope of the intended transaction are in each case permissible under the applicable laws and thyssenkrupp regulations, in particular the rules on on anti-corruption and antitrust law. In case of doubt, the Group Function Legal & Compliance must be consulted.
In case of transactions with special risks and specifically in the defence sector, further due diligence measures may need to be taken in alignment with Group Function Legal & Compliance, e.g. an interview with the Business Partner or obtaining additional external information, e.g. from external law firms, accounting firms etc.
Important related documents and links:
Annex 4 of Group Regulation Compliance in dealings with Business Partners
The engagement of business partners is only permissible after an identity and compliance check, including a corresponding Due Diligence check through our workflow based IT application, the Business Partner Compliance Tool (BPCT), has been conducted. This process involves the respective Compliance Officer who may recommend in his Compliance statement adequate mitigating measures and procedures.
Within the scope of our due diligence assessment, inter alia, the following topics are examined:
- the business partner’s principal shareholders (>10%), partners, or beneficial owners,
- possible links of the business partner to (former) government advisors and / or (former) public officials,
- possible involvement of the Business Partner, its management and key employees in dishonest and/or criminal practice.
If the Due Diligence indicates irregularities and red flags we take all reasonable measures to clarify the ultimate beneficial ownership.
If we are not convinced that such measures can adequately reduce the risk of working with the Business Partner or the ownership still raises concerns, we do not engage him.
Important related documents and links:
Group Regulation Compliance in dealings with Business Partners
Yes, the basic principles laid out in our Group Regulation on Corruption Prevention are applicable vis-à-vis all sales agents and sales intermediaries.
All agents and intermediaries have to accept the thyssenkrupp Supplier Code of Conduct in the current binding version before or alongside the conclusion of the contract.
The following contract clauses are obligatory and have to be included into the contract with the Business Partner:
1. Non-Assignment-Clause
“Without the explicit prior written consent of thyssenkrupp the Business Partner shall not assign any of its rights under this Agreement, including but not limited to its claim for payment of the compensation/commission, to any third party.”
2. Anti-Corruption-Clause
“The Business Partner shall note and shall procure that in connection to this agreement neither the Business Partner itself, nor its employees or agents shall offer, give or agree to give to any person or accept or agree to accept from any person (whether for itself or on behalf of another person and either directly or indirectly) any gift or payment, consideration or benefit of any kind, which constitutes an illegal or corrupt practice under the laws involved, including so-called facilitation payments to public officials (“Anti-Corruption Obligation”). The Business Partner shall disclose in writing to thyssenkrupp the details of any breach of the Anti-Corruption Obligation. This shall be an ongoing obligation. The Business Partner shall
a) at all times maintain strict compliance with the Anti-Corruption Obligation;
b) monitor its employees and agents to ensure their compliance with the Anti-Corruption Obligation;
c) make clear, in all its dealings on behalf of thyssenkrupp, that it is acting in accordance with the Anti-Corruption Obligation.”
3. Antitrust-Clause
The Business Partner in its assignment for thyssenkrupp shall at any time observe all applicable antitrust and competition laws. Under no circumstances may the Business Partner make arrangements which have as their objective or effect the prevention, restriction or distortion of competition. In particular, the Business Partner shall neither agree upon a restraint of competition with competitors of the group companies of the thyssenkrupp group (“competitors of thyssenkrupp”) nor in any other way induce a concerted market behavior between thyssenkrupp and its competitors.
The Business Partner shall treat all competitively sensitive information disclosed to him confidential. In particular, the Business Partner shall neither disclose any competitively sensitive information entrusted to him by thyssenkrupp to competitors of thyssenkrupp nor disclose competitively sensitive information entrusted to him by competitors of thyssenkrupp to thyssenkrupp.
The Business Partner is required to conduct a conflict check and disclose if engaged by a competitor of thyssenkrupp or if such an engagement is envisaged/requested.
The Business Partner is obliged to address all questions of doubt whether or not a third party is a thyssenkrupp competitor and all questions of doubt whether or not an information is competitively sensitive or not to thyssenkrupp on its own initiative.
Depending on the risk exposure the conditional or unconditional Audit Clause shall be used.
4.a. Audit-Clause (no conditions)
“The Business Partner shall at any time upon request by thyssenkrupp provide to a person occupationally sworn to secrecy (legal / tax advisor, auditor) to be designated by thyssenkrupp all information regarding his provision of services to thyssenkrupp and shall in particular grant access to all documents and records which thyssenkrupp may require in relation to such services.
The person to be designated by thyssenkrupp shall be entitled to disclose any and all documents and information to thyssenkrupp which in the sole discretion of thyssenkrupp might be relevant with respect to the auditing of the operations of the Business Partner.”
4.b. Audit-Clause (with conditions)
“If the business/transaction/project should at any time be subject to any official investigation or pre-investigation (including, but not limited to, tax, criminal or administrative investigations), the Business Partner shall provide or shall upon request by thyssenkrupp provide to a person occupationally sworn to secrecy (legal / tax advisor, auditor) to be designated by thyssenkrupp all relevant information and shall in particular grant access to all documents and records which thyssenkrupp may require in relation to such investigation.
The person to be designated by thyssenkrupp shall be entitled to disclose any and all documents and information to thyssenkrupp which in the sole discretion of thyssenkrupp might be relevant in the official investigation or pre-investigation.”
Under risk aspects, the inclusion of the following contract clauses into the agreement with the Business Partner is strongly recommended:
5. Tax-Clause
“If the business/transaction/project should at any time be subject to any official investigation or pre-investigation (including, but not limited to, tax, criminal or administrative investigations), the Business Partner shall upon request by thyssenkrupp provide a written declaration to thyssenkrupp stating whether, to which extent, when, to which tax authority and under which file number the Business Partner has accounted for the compensation received for a project or projects/business/transaction.
Upon request by thyssenkrupp the Business Partner shall further provide a written declaration by the competent tax authority, alternatively by a financial auditor, confirming that the compensation received has been properly accounted for in the Business Partner’s tax declaration.
6. Obligation to use a Standard Reporting Form Template, unless a comparable documentation level is ensured by standard communication.
Our incentive schemes for agents are designed in such a way that they promote behaviour that is aligned with our anti-bribery and corruption policy. The Group Regulation Corruption Prevention states that “when concluding commission agreements, it must be ensured that commissions are only paid for legally permissible activities and are not used for illicit payments. Commissions and compensations paid to a consultant, intermediary or any other person engaged by or on behalf of thyssenkrupp must be proportionate and reasonable in relation to the activities carried out.”
The Group Regulation Compliance in dealings with Business Partners states clearly, how the remuneration for sales agents is to be designed to make sure that the remuneration is appropriate.
Our Group Regulation Compliance in dealings with Business Partners states that the compensation paid to the business partner must not be inappropriately high. In agreeing the compensation, the following criteria must be observed:
fixed compensation for services not directly in connection with the award of an order (e.g. for distribution intermediaries market and competition analyses, office, travel and staff organization, etc.) and to this extent not compensated with the commission; depending on the individual case the fixed compensation may also be agreed in the form of compensation on the basis of an hourly or daily rate and/or as a retainer from the total compensation;
in case the compensation includes a performance-related component, this is possible only for services in connection with the award of an order (e.g. order winning and arrangement activities, participation in or support with contract negotiations and in executing the order, etc.), where applicable taking into account the fixed compensation;
agreement of an absolute top limit for the commission claim, in particular in respect of high-value orders.
Criteria for the appropriateness of compensation are cumulative:
Compensation customary in the particular market;
appropriate relationship between the effort required of the Business Partner and the compensation amount. Any additional services performed by the Business Partner (e.g. with respect to sales intermediaries) with regard to executing the order, i.e. project management, claims and warranty management, change order management, building site coordination, etc.) may be taken into consideration as far as they are actually called for and performed;
appropriate relationship between the commission amount and the net order value. It must be borne in mind here that as the order value increases the appropriate commission amount normally decreases in percentage terms. Subsequent changes of the main contract and change orders, which influence the net order value have to be represented accordingly;
appropriate relation between commission rate and thyssenkrupp margin.
With regard to contractual details, we expect our business partners to exercise the discretion that is customary in the market, especially when it comes to sensitive technical or economic data.
In the same way, we respect the need for discretion of our business partners and therefore publish the existence of business relationships only in mutual agreement.
If there are signs of infringements by third parties such as sales agents, we investigate every single case thoroughly. In case of proven violations of our policies or even legal violations, action is taken to remedy the violation immediately, such as individual reaction against suppliers (e.g. termination of contract, reorganization, increased Compliance efforts, phase out), request for damage compensation or filing a complaint to public authorities.
thyssenkrupp reports high level results from official investigations as part of our Annual Reporting.
Important related documents and links: