On July 31, 2014, the Board of Directors adopted a new code of conduct (hereinafter the Code of Conduct), which forms an integral part of the internal control system and sets out the principles of business ethics to which CNH Industrial adheres and which directors, employees, consultants, and partners are required to observe. The new Code of Conduct was adopted to better meet the needs of CNH Industrial’s new structure.
The main changes to the previous Code of Conduct are summarized below:
- a message from the CEO was added at the beginning of the document to underline top management’s commitment to the Code of Conduct
- structure and language were simplified, and length reduced, to enhance clarity and readability
- new chapters were added (e.g., Training) question and answer sections were added, related to the specific sections of the Code, providing practical examples.
Furthermore, new global Corporate policies related to the Code of Conduct were implemented in 2014. These include:
- Conflict of Interest Policy
- Insider Trading Policy
- Anti-Corruption Policy
- International Trade Compliance Policy
- Competition Policy
- Compliance Helpline Policy
- Health and Safety Policy
- Human Rights Policy
- Environmental Policy
- Community Investment Policy
- Corporate Communications Policy
- Use of Company Property Policy
- U.S. Lobbying Activities and Other Contacts with U.S. Government Officials
- Political Action Committee Activity and Other Political Contribution
The Code of Conduct is available in the Corporate Governance section of the Company’s website.
The Code of Conduct is one of the pillars of the CNH Industrial Corporate Governance System, which regulates decision-making processes and the approach used by the Company and its employees when conducting business for or on behalf of the Company and in interacting with stakeholders. The Code encompasses the values that the Company recognizes, adheres to, and fosters, in the belief that diligence, integrity, and fairness are important drivers of social and economic development.
The Code of Conduct addresses the ethical aspects of economic, social, and environmental issues, underscoring the importance of dialogue with stakeholders. Explicit reference is made to the UN’s Declaration on Human Rights, the relevant International Labour Organization (ILO) Conventions, and the OECD Guidelines for Multinational Companies. In addition to the Code of Conduct, CNH Industrial has established Corporate policies and internal and business processes that supplement the Code.
The Company encourages its employees to actively engage in the detection and prevention of misconduct, through the reporting of any illegal activity or activities that violate the Company’s Code of Conduct or policies. Reporting potential violations allows the Company to investigate matters and take corrective actions, reducing the risk or damage that could otherwise impact the employee in question, co-workers, the Company, or the communities in which it operates.
APPLICATION AND MONITORING
Available in 16 languages (Chinese, Czech, Danish, Dutch, English, French, German, Hindi, Italian, Polish, European Portuguese, Latin American Portuguese, Russian, European Spanish, Latin American Spanish, and Turkish), the contents of the Code of Conduct will be circulated to all employees in 2015. The Code of Conduct can be viewed and downloaded via the Company’s website and Intranet, and hard copies are available from the Human Resources Department. The Code of Conduct applies to the members of the CNH Industrial Board of Directors, to all employees of CNH Industrial, and to all other individuals or companies that act in the name or on behalf of CNH Industrial.
The principles and values of good Corporate Governance established in the Code of Conduct are conveyed, through periodic training and other communication channels, to all employees irrespective of their level or role, with Human Resources providing any clarifications required. Specifically, CNH Industrial is implementing an internal communication campaign for the first quarter of 2015, to inform and educate employees on the new Code of Conduct.
The campaign involves communication via email and Corporate Intranet for salaried employees, and via bulletins at sites and plants. Training on the Code of Conduct is expected to be provided to all employees during 2015.
The Company also advocates the Code as a best practice standard in business ethics among the partners, suppliers, consultants, agents, dealers, and other parties with whom it has long-term relationships. Indeed, Company contracts worldwide include specific clauses relating to the recognition of, and adherence to, the fundamental principles of the Code of Conduct and related policies, as well as compliance with local regulations, particularly those related to bribery, money laundering, terrorism, and other Corporate criminal liabilities.
In January 2015, the Company implemented a new global Compliance Helpline1, that is available in 14 languages and in every country where the Company operates.
The Compliance Helpline is a comprehensive and confidential reporting tool to assist CNH Industrial employees, clients, suppliers, and other third parties, to work together to address questions and concerns regarding the Company’s principles outlined in the Code of Conduct or other Corporate policies (including alleged fraud, abuse, or other misconduct in the workplace), or concerning applicable laws. An independent third party vendor was selected to operate the Compliance Helpline on the Company’s behalf.
Through the Compliance Helpline, submitters can ask questions or report potential violations of the Code of Conduct, Company policies, or applicable laws, either anonymously (where permitted by applicable law) or by providing contact information that will be held in the strictest of confidence. Retaliation of any type against a person who, in good faith, brings forward a concern will not be tolerated. Reports submitted through the Compliance Helpline are managed with the assistance of a case management system.
Compliance Risk Assessment Project
In the first half of 2014, the Company performed an updated compliance risk assessment. The assessment process involved, among others, Legal and Compliance personnel, the Regional Compliance and Ethics Committees, Internal Audit, Human Resources and representatives of the various business functions. The matrix developed for the compliance risk assessment takes three main areas into account:
- identification of the compliance risks based on the nature of CNH Industrial’s business
- the Company’s processes, procedures, policies and other existing means of managing the applicable
- risks identified risk likelihood.
In July 2014, the compliance risk assessment was consolidated and approved by the Company’s Global Compliance and Ethics Committee and illustrated by means of a global matrix, presenting data for evaluating what training or other initiatives would be most effective to prevent or mitigate the various risks.
During 2014, the Compliance and Training function conducted targeted training on critical issues as a result of the compliance risk assessments, including antitrust training in EMEA and anti-corruption training in APAC.
VIOLATIONS OF THE CODE OF CONDUCT
Violations of the Code of Conduct are essentially determined through:
- checks that are part of standard operating procedures
- periodic internal audits carried out for each legal entity
- reports received through the Compliance Helpline.
Violations of the Code of Conduct are identified by the Internal Audit function, in collaboration with the Legal and Compliance and Human Resources departments, through standard procedures and specific compliance audits related to, among others, business ethics, anti-bribery and corruption, and health and safety.
For all substantiated Code of Conduct violations, corrective actions and disciplinary measures are commensurate with the severity of the case and comply with local legislation. Regardless of whether criminal charges are brought by prosecuting authorities, these violations are communicated to the relevant Corporate functions.
Material cases of fraud at any level within the organization, and all substantiated violations of the Code of Conduct by top managers, are submitted to internal control and to the Board of Directors of CNH Industrial.
During 2014, there were 135 breaches of the Code of Conduct that resulted in dismissal. Detail regarding these matters is provided in the table below by type of violation.
DISMISSALS FOR BREACHES OF THE CODE OF CONDUCT
|Misconduct (i.e., insubordination, violence)||32|
|Misuse of Company assets||32|
|Providing false or misleading information||26|
|Violation of alcohol or drug policy||17|
|Adulteration of travel expenses / violation of travel policy||5|
|Violation of safety policy||4|
|Violation of environmental policy||-|
In 2014, the Company conducted and disclosed the results of 28 compliance audits: 4 regarding business ethics issues, 18 environmental and occupational health and safety issues, and 6 specific issues related to bribery, money laundering, and other aspects included in the Code of Conduct. The audits revealed substantial compliance with the main standards, and did not draw attention to any Code of Conduct violations.
Whistleblowing Activities During 2014, 106 reports of alleged violations were received under the Company’s former whistleblowing procedures. Of these, 43 were confirmed as actual Code of Conduct violations, resulting in disciplinary actions; seven led to the implementation of measures to strengthen the internal control system; and 37 were unsubstantiated. Investigations are still underway for the remaining 17 cases.
|Of which on|
|Closed||No action||Disciplinary measures||Procedural measures|
CNH Industrial’s global anti-corruption policy is implemented through a regional model that takes account of the specific corruption risk factors of each operating Region. The Corruption Perception Index published by Transparency International is generally used as a guide by the Company’s Compliance personnel and the Regional Compliance and Ethics Committees in assessing and categorizing the specific risks and prevalence of corruption in each Region, and the type of controls needed. In addition, the Company periodically assesses factors such as the risks associated with its businesses, the likelihood of a violation, its potential consequences, and the effectiveness of applicable internal controls. The Company also provides corruption prevention training, using both online and in-person scenario-based classroom training. In 2014, 1,278 people were involved in training courses, of which 571 in EMEA, 294 in NAFTA, 1 in LATAM, and 412 in APAC; 5% of participants were managers, 64% were professionals, 30% were salaried, and 1% were hourly employees. Company employees are encouraged to report compliance issues (including corruption) by any of multiple means e.g., by reporting to managers or via the Corporate Compliance Helpline.
CNH Industrial regularly engages in benchmarking with competitors to assess its approach and verify the continued adoption of best practices in preventing and detecting corruption.
CNH Industrial’s internal audit program verifies, among others things, corruption prevention processes and controls. The results are submitted to both the Company’s Audit Committee and management, so as to implement any required changes identified for strengthening controls. The Company also investigates and tracks all corruption allegations to evaluate the need for additional controls and training, and surveys all employees annually, reminding them of their obligation to report compliance issues. Senior employees are required to formally declare themselves unaware of any violations of the Code of Conduct.
The Company’s Legal and Compliance Department created a Global Anti-Corruption Practice Team composed of internal legal advisors for each Region, with representatives for each Company segment. The Team meets regularly to provide updates on new developments in corruption prevention, regulations and enforcement, and to share best practices across the Company’s segments. Additionally, it develops training materials, provides classroom training, and develops and distributes legal alerts and other information to all applicable Company employees.
The Global Practice Team assesses various aspects of the Company’s compliance and ethics program, identifying opportunities for, and assisting in, program development and improvement.
CNH INDUSTRIAL CAPITAL EMEA ANTI-MONEY LAUNDERING (AML) FRAMEWORK
In connection with the integration of the pre-existing CNH Capital and Iveco Capital organizations, and to enhance AML practices in light of external developments related to risks and regulations, the AML framework was upgraded to monitor and analyze business relationships according to know-your-customer principles, through a proportional approach that takes into account the type of business being conducted and locally applicable regulations. The revised framework relies on the use of an automated screening tool for customer assessment, which is performed according to relevant lists (Sanctions, Black List, Politically Exposed Person, and Crimes) both at contract inception and throughout the relationship.
The CNH Industrial Capital team also supports the implementation of AML standards at parent company level to ensure that every business counterpart is reputable, qualified, and involved in a legitimate business (see also page 225).
HUMAN AND LABOR RIGHTS MANAGEMENT
CNH Industrial is committed to the creation of long-term sustainable value for all its stakeholders, and is firmly convinced that respect for fundamental human rights is a pre-requisite for achieving this.
Respect for human rights is one of the Company’s most significant material issues.
CNH Industrial operates in 190 countries, has over 69 thousand employees, and approximately six thousand suppliers, with 95% of procurement spending in favor of local suppliers. The Company’s global presence requires the adoption of generally accepted principles in each geographic area where CNH Industrial operates.
CNH Industrial is therefore committed to respecting fundamental human rights and basic working conditions in all its operations, as stated in the Code of Conduct and in the Human Rights Policy that supplements it.
The materiality analysis reflects that, among international standards, human rights are considered as fundamental evaluation criteria. Additionally, they are at the center of current global discussions on post-2015 Sustainable Development Goals. In 2014, stakeholder engagement revealed greater relevance for this aspect compared to the previous year. The operating Regions that emerged as more receptive to Human and Labor Rights were NAFTA, followed by LATAM, and then EMEA and APAC.
In NAFTA, the perceived relevance of this aspect is linked to the maturity of the Region’s economies. In LATAM, the analysis revealed that the main problems regarding Human and Labor Rights arise from the considerable fragmentation of trade unions and their limited bargaining power since, apart from salaries and benefits, they do not sufficiently tackle the issues relevant to employees. In EMEA, Human and Labor Rights are treated as an indisputable right, with stakeholders preferring to prioritize other issues. In APAC, the aspect’s relevance, although still high, is lower than in the other Regions and is focused specifically on the rationalization and proper management of employee workloads to promote wellbeing and work-life balance.
Approach to Human Rights
The commitment to safeguarding Human Rights is stated in the Code of Conduct, with implementation guidelines provided in the CNH Industrial Human Rights Policy.
Code of Conduct principles are consistent with the spirit and intent of the United Nations Universal Declaration of Human Rights, the OECD Guidelines for Multinational Companies, and the relevant Declaration on Fundamental Principles and Rights at Work of the International Labour Organization (ILO). See also page 56.
CNH Industrial’s commitment to verifying respect for human rights along the supply chain is another key aspect, with supplier assessment on environmental and human rights emerging as particularly relevant in the materiality analysis.
In its Code of Conduct, CNH Industrial is committed to selected suppliers, while also considering their social and environmental performance and the values outlined in the Code.
The head of each department is responsible for respect for human rights.
Human Rights Assessment
When drawing up the materiality matrix in 2013, the relevant functions carried out an assessment (see also page 19) to identify the key impacts of CNH Industrial’s business and operations on human rights. In 2014, the assessment was further developed through stakeholder engagement, where the theme of Human and Labor Rights was among the 25 aspects brought to stakeholders’ attention.
An impact assessment of the Company’s operations on child labor and freedom of association was carried out by the Industrial Relations function, covering the entire scope of the Company through each Region’s Human Resources function. The most recent one was conducted in 2013; a further assessment will be conducted in the event of any relevant operational changes.
In 2014, CNH Industrial’s Internal Audit function oversaw the pilot project launched in 2013 to monitor respect for human rights within the Company, involving the Human Resources function. In 2013, the scope included Italy, Spain, Belgium, France, and Germany, with a coverage of about thirty thousand employees, representing 42% of the total CNH Industrial workforce. In 2014, the assessment was integrated into standard procedures and extended to the APAC Region, where a survey was carried out in India involving more than 90% of CNH Industrial India’s workforce. The main aspects covered in the questionnaire were child labor, non-discrimination, freedom of association, and employment and working conditions. The assessments complied with the requirements of Art. 17 and Art. 18 of the Guiding Principles on Business and Human Rights, 20111 (the Ruggie Framework).
The following emerged as important factors:
- child labor
- freedom of association and collective bargaining
- occupational health and safety.
CNH Industrial does not accept discrimination against employees in any form on the basis of: race, gender, sexual orientation, social or personal status, health, physical condition, disability, age, nationality, religion, or personal beliefs. The Company recruits employees on the basis of their experience, qualities and skills and is committed to providing equal opportunities to all employees, both on the job and in their career advancement. The head of each department shall ensure that in every aspect of the employment relationship, such as recruitment, training, compensation, promotion, transfer, or termination, employees are treated according to their abilities to meet job requirements and all decisions are free from any form of discrimination.
In 2014, no cases of discrimination were revealed through standard operational checks (see also page 58).
For further information on how CNH Industrial manages diversity and equal opportunities, see also page 69.
For the approach to this aspect in the management of the supply chain, see also page 152.
As stated in the Code of Conduct, CNH Industrial does not employ any form of forced, mandatory, or child labor and does not employ anyone younger than the legal working age established by the legislation of the jurisdiction in which the work is carried out and, in any case, employs no one younger than fifteen, unless an exception is expressly provided by international conventions and by local legislation.
CNH Industrial is also committed to not establishing or maintaining working relationships with suppliers that employ child or forced labor, as defined above, (see also page 152).
To the Company’s knowledge, there is no use of child or forced labor at the plants of its suppliers.
Freedom of Association and Collective Bargaining
According to the Code of Conduct, CNH Industrial recognizes and respects the right of its employees to be represented by trade unions or other representatives established in accordance with local applicable legislation. When engaging in negotiations with such representatives, CNH Industrial seeks a constructive approach and relationship.
For further information on freedom of association and collective bargaining, see also page 77.
For the approach to this aspect in the management of the supply chain, see also page 152.
Occupational Health and Safety
CNH Industrial recognizes health and safety in the workplace as a fundamental right of employees and a key element of the Company’s sustainability efforts. All Company choices must respect the health and safety of employees in the workplace. CNH Industrial has adopted and continues to improve an effective occupational health and safety policy which implements preventive measures, both at the individual and collective level, to minimize the potential for injury in the workplace.
CNH Industrial also seeks to ensure industry-leading working conditions, in accordance with principles of hygiene, industrial ergonomics, and individual organizational and operational processes. CNH Industrial believes in and actively promotes a culture of accident prevention and risk awareness among workers, in particular through the provision of training and information. All employees are required to be personally responsible and to take all preventive measures established by the Company for the protection of health and safety and communicated through specific directives, instructions, information, and training (see also CNH Industrial’s Health and Safety Policy).
For further information on occupational health and safety, see also page 90.
For the approach to this aspect in the management of the supply chain, see also page 152.
Another aspect related to respect for Human Rights is the importance CNH Industrial places on the aspect of natural resources extracted in conflict zones. Specifically, CNH industrial has defined a policy intended to promote responsible sourcing of conflict minerals in the Democratic Republic of Congo and surrounding region. CNH Industrial’s Conflict Minerals Policy was adopted in 2013 and is posted on the Corporate website. CNH Industrial is committed to making all reasonable efforts to establish, and to require each supplier to disclose, whether such conflict minerals (i.e., tin, tantalum, tungsten, or gold) are used or contained in products purchased by the Company. If such minerals are contained in the products purchased from suppliers, they must identify their sources and eliminate the procurement, as soon as commercially practicable, of products containing tin, tungsten, tantalum, or gold obtained from sources that fund or support inhumane treatment in the Democratic Republic of Congo or the surrounding region.
For further information on conflict minerals, see also page 157.
Significant Final Rulings
In this section, the Company reports final court judgments or final arbitration awards that had an adverse material effect on the Company (referred to as significant final rulings).
In 2014, no significant final rulings were issued against the Company for violations of laws in the following areas: environment, rights of local communities, marketing and advertising, privacy, anti-competitive behavior and antitrust, intellectual property, contractual liability, product responsibility, product and service information and labelling, and labor and social security.
Starting January 2011, Iveco and certain of its competitors have been subject to an ongoing investigation conducted by the European Commission into certain business practices of leading manufacturers of medium and heavy trucks and commercial vehicles in the European Union in relation to possible anti-competitive behavior. The investigation is still pending. For further information see Note 30 “Guarantees granted, commitments and other contingent liabilities” to the Consolidated Financial Statements at December 31, 2014 in the Annual Report.
Labor and social security disputes culminating in a final court judgment in 2014 involved a total payment corresponding to 0.09% of labor costs for the year. The level of litigation was proportionately higher in Brazil, where such judgments, mainly relating to the interpretation of particularly controversial legislation, accounted for 95% of the total, corresponding to approximately 93% of the Company’s total payout. However, in the specific context of Brazil, these judgments were not exceptional in nature or in number. Moreover, none of the final judgments against the Company related to discrimination at work.