Objectives, Measures and Indicators

Corporate Governance 102-18, 102-19, 102-24

Corporate governance, which means acting in accordance with the principles of responsible management with the aim of increasing the value of the business on a sustainable basis, is an essential requirement for Vonovia, and embraces all areas of the business.

The Code of Conduct provides the ethical and legal framework within which we act and want to stay on successful course for the company. The focus is on dealing fairly with each other but also in particular on dealing fairly with our tenants, suppliers, customers and investors. The Code of Conduct specifies how we assume our ethical and legal responsibility as a company and is the expression of our company values.

Vonovia’s Management Board is solely responsible for managing business operations. The Management Board provides the Supervisory Board with regular information on business developments, the strategy and potential opportunities and risks. As the supervisory body, the Supervisory Board monitors the management of the company’s business and supports the Management Board with decisions of fundamental importance.

Vonovia’s Supervisory Board was newly appointed in the reporting year. For the first time, the skills profile for selection now also includes the category sustainability. www.vonovia.de We established the unit “Management Board and Supervisory Board office” in the same year.

The Supervisory Board sets up an Executive and Nomination Committee, an Audit Committee and a Finance Committee from among its members. Further committees are formed as required. The Audit Committee is specifically responsible for monitoring:

• the accounting process,
• the effectiveness of the internal control system, the risk management system and the internal audit system,
• the audit of financial statements, and
• compliance (if not assigned to another committee).

Since the act to strengthen the non-financial reporting aspects of companies in their management and Group management reports (CSR Directive Implementation Act) came into force in 2017, the Audit Committee has been responsible for monitoring Vonovia’s sustainability reporting and in particular the Non-financial Declaration. 102-22

After a year, the Supervisory Board will now evaluate the quality of its work in its new composition. The newly elected Supervisory Board is currently focusing on identifying the potential need for adjustments in corporate governance at Vonovia due to possible changes in legal corporate governance framework conditions (ARUG II and GCGC).

Promoting diversity in Vonovia’s management bodies remains a goal. Diversity criteria are applied when filling positions on both the Supervisory Board and the Management Board, and qualified women are included in the selection process. Gender should be irrelevant when it comes to filling positions. Vonovia’s Supervisory Board should consist of at least 30% women and 30% men. The Supervisory Board has also decided that the share of women on the Management Board should be at least 20% by December 31, 2021. The target ratios were met in the reporting period. We also intend to have a share of 30% women in the first two management levels below the Management Board by the end of 2021. At the moment, the share of women in management positions in the first management level remains at 17.6%. At 33.9%, the targeted proportion of women at the second level of management below the Management Board has already been met.

You can find out more about our corporate governance in the annual report (see AR 2018, chapter Corporate Governance Report and AR 2018, chapter Non-financial Declaration).

Compliance and Anti-corruption

Through the corresponding monitoring of our compliance rules, we protect the integrity of employees, customers and business partners, and shield our company from negative consequences. We have established rules and Group guidelines internally – for example, to protect the capital market, ensure data protection, secure information, manage risks, fight corruption and set out guidelines on how to deal with donations and sponsorship – based on the relevant statutory requirements, the articles of association and the rules of procedure for the Supervisory Board and the Management Board. Our compliance principles are also detailed in our Code of Conduct which is binding for all employees under the Group works council agreement.

The Vonovia Compliance Committee, which is responsible for refining the compliance management system and adapting it to fulfil current requirements, meets several times a year. The members of this committee are the compliance officer, compliance managers, the ombudsperson, and representatives from the internal audit, risk management and HR management departments and the works council.

Members’ tasks:

• Compliance officer: Central point of contact for compliance matters and potential cases, identification of compliance risks, derivation of measures for preventing and discovering risks.
• Compliance managers and specialists: Supporting the compliance officer from within the departments.
• External ombudsperson: Recording information regarding potential compliance cases – also anonymous, confidential contact for all employees and business partners.

Compliance Information and Training

Vonovia’s Supervisory Board regularly receives comprehensive information about compliance issues and corruption along with existing guidelines and processes. The compliance report, which is forwarded to the Audit Committee, provides information about potential breaches, measures and training relating to corruption. 205-2

Our employees receive regular training on compliance issues. For instance, the procurement department, for which the issue is particularly relevant, receives special training on corruption and criminal law pertaining to corruption. A particular focal point in 2018 was the implementation of the EU General Data Protection Regulation. We conducted comprehensive training on this topic.

In the 2018 fiscal year, there were isolated suspected cases of corruption, which we have since investigated diligently. None of the cases were confirmed. 205-3

There were several immaterial compliance violations or suspected cases in 2018. This clearly shows that the system we have put in place is proving effective. Cases were reported and addressed and corresponding consequences ensued. 419-1

Compliance-Management-System

Dealing with Antitrust Proceedings

One area in which antitrust law is of particular importance is company acquisitions. We inform the German Federal Cartel Office as soon as possible of any potential acquisitions and begin the integration of acquired companies or portfolios only following approval. There were no violations of competition law guidelines in 2018. 206-1

Adherence to Environmental, Labor and Social Standards in the Supply Chain

Vonovia’s procurement processes primarily consist of construction services, construction material and material costs (indirect materials and services). We want long-term relationships with our business partners and are therefore setting up a structured supplier management system. The foundation of this system is the Business Partner Code and the general terms and conditions of purchasing along with individual contractual provisions. www.vonovia.de/ihre-services Our Business Partner Code for subcontractors and suppliers sets out clear expectations regarding integrity, legal compliance and ethical conduct. One important aspect from our perspective is that our suppliers and subcontractors not only accept our Business Partner Code as binding, but also put the principles set out in the Code into practice on a daily basis at Vonovia’s construction sites. Among other things, the Code stipulates that illicit employment must be ruled out, that the legal minimum wage must be paid and that valid German regulations on occupational safety and human rights, and applicable environmental laws must be observed. In addition, we also ensure that demolition materials and rubble are disposed of in a professional and environmentally friendly manner and minimize the risk of hazardous or poisonous materials being used by processing the procurement of the majority of construction materials centrally through Vonovia. In order to protect our employees and tenants alike, we ensure material safety using the systematic TÜV Rhineland Toxic Materials Management System (TOGs^®), in which all information is recorded, documented and evaluated centrally. This provides us with an ideal basis within the VTS for conducting risk assessments and developing operating and handling instructions.

By signing the code, our business partners – and their subcontractors – commit to acting in an economically and legally compliant manner and to adhering to our corruption prevention guidelines. Vonovia does not tolerate corruption under any circumstances. Violations of these rules may result in the business relationship being restricted or even completely terminated. 102-16, 205-2, 414-1

We promote transparency and security within the company by observing the compliance rules, Group procurement guidelines and our Code of Conduct. We currently do not conduct any systematic checks on site, but we do monitor risks using active documentation management as part of our supplier management system. Construction managers in Germany also maintain direct contact with subcontractors and have a clear picture of the people working on construction sites. Compliance with the Business Partner Code can thus be largely verified within the scope of this working relationship. In addition, our procurement department holds annual reviews with key subcontractors. No violations by suppliers or service provides against labor standards, human rights or corruption regulations were discovered by central purchasing in the reporting period. 414-2

A uniform supplier assessment system is currently being developed. The goal is for key suppliers to be evaluated by procurement as well as the Group’s departments in order to achieve transparency and to obtain a systematic overview of the performance and development of suppliers. The aim is to develop a performance indicator as part of the supplier assessment system.

As Vonovia operates within a strictly regulated and controlled legal framework within the European Union, possible challenges relating to human rights are not considered to be material. There is therefore no explicit performance indicator for this group of issues. The procurement department, however, acts as a watchdog in this regard by selecting suppliers accordingly in order to ensure the protection of fundamental rights and adherence to the law. In the future, Vonovia will also be making a voluntary commitment to the Federal Government’s national action plan and will be taking corresponding action.