Rolls-Royce Holdings plc – Annual report – 31 December 2019
ETHICS AND COMPLIANCE
Maintaining high standards of ethics and compliance are fundamental to our continued success. We work hard to create a working environment where everyone at Rolls-Royce and everyone we work with can be at their best.
We are committed to maintaining the highest ethical standards and have a suite of global policies and processes in place to avoid any potential complicity in misconduct.
Our Code of Conduct (Our Code) and associated policies set out the values and behaviours we expect everyone to demonstrate. They also provide guidance on how to apply these principles in our daily decisions. In 2019, 99% of managers certified their commitment to adhere to the principles set out in Our Code (2018: 99%). We flow these principles to our suppliers through our Supplier Code of Conduct. All suppliers are contractually required to adhere to this, or a mutually agreed alternative.
We encourage speaking up in the event of a question or concern and provide a variety of channels through which to do so. For example, we now have 150 employees trained as local ethics advisors who can act as first point of call. During the year, we have focused on supporting our leadership population in how to listen to someone raising a concern and how to follow up.
We have a zero tolerance approach to misconduct of any kind and will take disciplinary action, up to and including dismissal, in the event of a breach of Our Code. In 2019, 85 employees (2018: 59) left the business for reasons related to breaches of Our Code.
Anti-bribery and corruption
Our Code and associated policies clearly set out our commitment not to tolerate bribery or corruption of any form. In 2019, our ongoing anti-corruption programme focused particularly on managing conflicts of interest and confidential information. This has targeted training for higher-risk teams and individuals.
In addition, we have continued to strengthen our anti-bribery due diligence approach. The level of due diligence activity carried out is dependent on the level of risk that a particular third party provides and may include in-person interviews and site visits, as well as external due diligence reports from specialist corporate intelligence providers. We also conduct extensive due diligence into potential joint ventures as well as supporting existing joint ventures in their ethics and compliance programmes.
Human rights and anti-slavery
Our commitment to protecting and preserving the human rights of our employees, and those whom may be impacted by our business operations or supply chain, is embedded within Our Code, our Human Rights policy and our Supplier Code of Conduct.
Our approach to identifying and assessing modern slavery risk is embedded within our broader risk management approach. Due diligence is embedded within our operating systems and processes, including recruitment and procurement processes.
More information on our approach can be found in our anti-slavery and human trafficking statement, available at http://www.rolls-royce.com.
For more information on our ethics approach see the Safety, Ethics & Sustainability Committee Report, pages 105 to 110.
SAFETY, ETHICS & SUSTAINABILITY (extract)
Ethics and compliance
The Committee’s focus in the year has been on overseeing the Group’s ethics and compliance work plans. More details can be found in the Ethics and Compliance report on page 49. This included obligations to the prosecutors with whom the Company agreed DPAs in January 2017 and ensuring that recommendations put forward by Lord Gold (the Company’s independent compliance adviser) had been implemented. Lord Gold attended the meeting in February to feed back on how he had been overseeing and supporting this work, as well as to report on key activities and areas of focus. He reported that, on recent site visits, he had been able to see how the ethics and compliance programme was working in practice, the right behaviours and attitudes were becoming embedded in the organisation and considerable improvement was evident amongst the teams. Focus remained on ensuring the right level of resource was in place to continue to drive the programme moving forward. In July, Lord Gold presented his draft report to the Committee which was later submitted to the SFO in line with the August deadline. The report noted the exemplary progress made in improving the Company’s approach to ethics and anti-bribery and corruption compliance.
At an ethics deep dive session in April, the three-year ethics and compliance workplan from 2019 to 2021 was presented to the Committee. We noted the progress made in enhancing the ethics and compliance teams in each of the businesses and their improved accountability for ethics and compliance as a result.
At each of our meetings during the year, we received an update from the General Counsel on the Group’s continuing dialogue and co-operation with prosecutors, regulators and government agencies. We also received regular reports and briefings from the head of ethics and compliance.
The Committee reviews the operation of the speak up procedures at each meeting; this includes statistics, types of cases raised, and the average completion time. In 2018, we observed that bullying and harassment were prevalent themes and in March this year, the Group-wide anti-bullying and harassment campaign was launched as part of the wider care initiative in respect of our people, with the aim of creating an environment where everyone can be at their best. This included mandatory scenario-based training for all employees and leaders, as well as specific training for our people team and trade union employee representatives, as well as regular updates to the Executive Team and ELG. In July, the Committee also undertook a light version of this training so that we could get a better understanding of the impact and benefit it would have on employees. Focus has also been given to the speed at which a resolution is reached once a bullying and harassment case has been raised and, on average, the time taken to close an investigation is 25 days.
Following on from the roll-out in 2018 of Our Code and simplified Group policies, revised mandatory training requirements were launched in 2019 with a completion deadline of the end of October. New modules covering conflicts of interest and binding corporate rules were added to the anti-bullying and harassment and simplified product safety training.
A refresher on Zero Harm life-saving rules was also included as was an annual requirement for all managers globally to certify to Our Code.
Our Code, which sets out the principles that underpin our values and the way we do business, was developed as a mobile-enabled app and launched at the beginning of the year. It allows our employees and suppliers to access it from wherever they are in the world and it has received positive feedback both internally and externally.
We received a report from the head of ethics and compliance who carried out an independent review of the speak up cases which had been received on the proposed changes to the UK defined benefit pension scheme. The Committee received the report and noted the conclusions, which would be shared with elected representatives of the affected employees and all decision makers. While the report found that there had clearly been some room for improvement, particularly in the way the changes had been communicated, the majority of the concerns raised via the speak up channels were not founded.
We also monitored our ongoing compliance with the General Data Privacy Regulations and the application for the EU regime of Data Privacy Binding Corporate Rules.