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Ethics and compliance

Our Business Principles govern all our actions, both internally (employees) and externally (shareholders, customers, suppliers and society).

Telefónica prioritises ethical behaviour in all of its operations. Therefore, our Business Principles define the standards and guidelines that we hope our employees, suppliers and partners apply to their daily work.  

BUSINESS PRINCIPLES

In May 2014 the Office of Business Principles launched an obligatory online training activity on Business Principles. By December 2014, over 59,000 professionals had passed the course. This figure represents 48.22% of the workforce.

The Business Principles have been regularly distributed among Group employees. On-site training activities were also developed to elaborate on some of the principles and contribute to their implementation according to the requirements of each area or department.

Business Principles Channel

All employees have the option of, anonymously or personally, asking questions, seeking advice and raising issues related to the Business Principles and associated regulations with the Governance bodies. On the Business Principles Channel, available through the Intranet, communications are received and processed in line with the principles of respect, confidentiality and comprehensiveness.

In 2014, a total of 72 communications were registered through this Channel. Of these, 55 ended with the inquiry being closed and 20 were proven to be justified. None were related to corruption or discrimination cases. Among the measures taken as a result of this communication path, there have been four disciplinary dismissals and one warning.

INTEGRITY AND TRANSPARENCY

At Telefónica, we are governed by a commitment to a 'zero tolerance' approach to corruption and fraud. Accordingly, we developed our framework for action based on:

  • Regulations. Our principle of integrity sets guidelines on the matters of conflicts of interests, gifts and invitations, political neutrality and the ban on making donations to political parties and other organisations whose activity is clearly linked to political activity.

Telefónica is a registered lobbyist in the voluntary register of the European Union, reporting lobbying expenses during 2014 of 2 million euros and 5.029 million in subsidies received.

  • Organisational elements. Telefónica relies on a series of specific committees and units that help guarantee the appropriate level of control and transparency:
  • Committees that report to the Board of Directors: 
    • Audit and Control Committee.
    • Institutional Affairs Committee.
  • Specific Organisational units:  
    • Internal audit units in all countries where the Group has significant interests. Inspection unit specialised in fraud prevention work and investigating complaints.
    • Payment intervention unit in the most important companies.
    • Global management and local units for sustainability.
    • Corporate risk management unit that centralises and reports the risk information received in local risk management areas, implemented in the main Group operators.
    • Business Principles Offices in all countries, composed of those in charge of the departments of the Secretary General, Auditing, Human Resources and Sustainability.

 

  • Risk management. Telefónica constantly monitors the biggest risks that could affect the main companies in the Group. For this, the Company has a Corporate Model of Risk Management based on COSO (Committee of Sponsoring Organisations, of the Treadway Commission), which allows an assessment of both the impact and the probability of the occurrence of various risks.

The most significant risks and uncertainties facing the Company, which could affect its business, financial situation, reputation, corporate image and brand, and its income are included in the Financial Report.

  • Monitoring activity in 2014. In executing its 2014 annual work plan, the Internal Audit team produced 739 reports within the Group:

     

    • 27% were financial audits or audits of information systems, essentially devoted to the revision of the existence and efficiency of controls governing the financial processes that support information on the Group's main accounts. Most of these annual reviews are obligatory for the Telefónica Group, due to the requirements of the Sarbanes-Oxley Act, which governs companies that, like Telefónica, are listed on the New York Stock Exchange, and also based on the regulations set by the Spanish Stock Market. It should be noted that the Group has released a certificate without significant weaknesses.
    • 12% were projects aimed at the prevention of fraud, investigating complaints and reviewing individuals' actions.  
    • Another 13% analysed, wholly or in part, processes related to costs and investment (procurement, payments to third parties, employee payments, storage logistics and management, investment processes and the management of assets, discounts and refunds to clients).  
    • 6% of the reports sought to verify the proper compliance of other legal obligations (in relation to labour, data protection, fiscal matters, etc.). 

 

The result of these investigations enabled numerous instances of misuse and misappropriation of Company assets to be detected, which has led to the dismissal of 44 employees. None of the cases involved the Group's senior management. In general, the Board's response to these cases has been prompt and appropriate, which facilitates the maintenance of a good overall environment of internal control.