Compliance and integrity management

Compliance framework

Integrity management

Integrity and responsibility in our actions is one of the core values on which the AkzoNobel compliance framework is built. This framework helps us to remain successful as a company. We aim for the highest standards of performance and behavior in all our operations. There is also company-wide awareness on compliance.

Our values and Business Principles are reflected in our Code of Conduct. Compliance is embedded in our businesses and there are clear monitoring and reporting lines. We have an open dialog with employees worldwide and keep them updated on the latest standards through training programs and regular meetings on the focus areas.

Organizational structure

A Corporate Compliance Committee monitors the process and makes sure that compliance is embedded and enforced in our business processes. Members include the General Counsel, Secretary to the Executive Committee, and Corporate Directors of Compliance, Internal Audit, Control and HR. The Corporate Compliance Committee reports to the Executive Committee. The Executive Committee compliance reports are presented to the Audit Committee. In 2011, 24 cases were handled at the level of the Corporate Compliance Committee (2010: 23). Of these, five are still under review.

We have set up Compliance Committees in each of our businesses. Compliance is a responsibility of the business unit management team. A Compliance Officer assesses the main risks, improves and monitors compliance and its effectiveness, and trains employees. At the request of the Corporate Compliance function, the Compliance Officers investigate and report on alleged breaches of the Code of Conduct.

Specific compliance areas

Within the compliance framework, specific compliance areas are addressed by specific programs. These include, among others, programs for export control, anti-bribery regulations and competition law. A new Export Control Directive and Manual were issued in 2011, supported by online training modules and face-to-face training. As part of this rollout, a Global Export Control Team was formed and each business has appointed an Export Control Officer. In addition, our Anti-Bribery Directive, Manual and detailed training materials for employees were reviewed and will be brought in line with the UK Anti-Bribery Act, which has been in force since July 2011. A full evaluation of our Competition Law program was performed and led to the conclusion that the program, including training for specifically targeted employees, is mature.

Communication

We are aware that effective communication and training is pivotal to strengthening our compliance framework. Communication on the Code of Conduct starts for new employees from the moment they join AkzoNobel and includes online or classroom training. By the end of 2011, we had invited all online employees to complete the Code of Conduct training module. Completion rates (at 95 percent in 2011) are monitored monthly and form an element of the annual Performance and Development Dialog discussion.

The compliance framework includes a declaration program overseen by the Corporate Compliance Committee. Those employees most exposed to competition law issues completed an annual declaration to confirm adherence to the Competition Law Compliance Manual. In 2011, 14,400 employees signed this declaration. Furthermore, each operational manager confirms adherence to the AkzoNobel standards at business unit level during the annual non-Financial Letter of Representation process (NFL). The outcome of the NFL process, in combination with the internal control self-assessment process, forms the basis for the Statement of the Board of Management in this Report 2011.

Code of Conduct complaints procedure (SpeakUp!)

We introduced a whistle blower procedure in 2009 called SpeakUp!, an internal system which encourages employees to report alleged breaches of the Code of Conduct. An effective internal reporting system serves as the backbone for the Code of Conduct and assists in protecting the company and its employees against economic and reputational harm. An evaluation of the effectiveness of this procedure was undertaken in 2011 and led to recommendations for an improved SpeakUp! procedure. This is due to be introduced in 2012.

In 2011, a total of 245 alleged breaches of the Code of Conduct were reported. Most of the cases related to business integrity and treatment of employees. Company-wide, we had 99 dismissals on grounds related to breaches of the Code of Conduct (2010: 118). Although the issues reported were not material for AkzoNobel, we are conscious of the need to continue to conduct root cause analysis and take appropriate actions. The outcome of the reports and the root cause analysis are put in a broader perspective to determine what lessons can be learned. The results are addressed in the NFL process and in online training programs.