The actions of TUI AG´s management and oversight bodies are determined by the principles of good and responsible corporate governance.

The Executive Board and the Supervisory Board comprehensively discussed Corporate Governance issues in financial year 2017. In this chapter, the Executive Board and the Supervisory Board provide their report on Corporate Governance in the Company pursuant to sub-section 3.10 of the German Corporate Governance Code and section 289a of the German Commercial Code (HGB) as well as Disclosure and Transparency Rule (DTR) 7.2 and Listing Rule (LR) 9.8.7R.

1. Declaration of Compliance pursuant to section 161 of the German Stock Corporation Act (AktG)

As a stock corporation company under German law, TUI AG’s Executive Board and Supervisory Board are obliged to submit a declaration of compliance with the German Corporate Governance Code pursuant to section 161 of the German Stock Corporation Act.

www.dcgk.de/en/code.html

In December 2017, the Executive Board and the Supervisory Board jointly submitted the declaration of compliance for 2017 pursuant to section 161 of the German Stock Corporation Act. The declaration was made permanently accessible to the general public on TUI AG’s website in December 2017.

Wording of the declaration of compliance for 2017
In accordance with section 161 of the German Stock Corporation Act, the Executive Board and Supervisory Board of TUI AG hereby declare:

Since the last annual declaration of compliance was submitted in December 2016, the recommendations of the German Corporate Governance Code in the version dated 5 May 2015 have been fully observed. The recommendations of the Code in the version dated 7 February 2017 have been and will be fully observed since its entry into force.

2. Declaration of Compliance pursuant to DTR 7.2 and LR 9.8.7R

At the time of the merger TUI AG had announced it would comply with the UK Corporate Governance Code (the UK Code) to the extent practicable. In many respects, the requirements of the German Code and the UK Code are similar. However, there are certain aspects which are not compatible (in some cases due to the different legal regimes for German and UK companies). Therefore some deviations from best practice in the UK have been necessary.

UK Corporate Governance Statement 2017


Functioning of the Executive and Supervisory Boards

TUI AG is a company under German law. One of the fundamental principles of German stock corporation law is the dual management system involving two bodies, the Executive Board in charge of managing the company and the Supervisory Board in charge of monitoring the company. TUI AG’s Executive Board and Supervisory Board cooperate closely and in a spirit of trust in managing and overseeing the Company, with strict separation between the two bodies in terms of their membership and competences. Both bodies are obliged to ensure the continued existence of the Company and sustainable creation of added value in harmony with the principles of the social market economy.

TUI AG’s Executive Board comprised six members as at the closing date 30 September 2017. The Executive Board is responsible for managing the Company’s business operations in the interests of the Company. The allocation of functions and responsibilities to individual Board members is presented in a separate section.

In accordance with the law and the Articles of Association, the Supervisory Board had 20 members at the balance sheet date, i. e. 30 September 2017. The Supervisory Board advises and oversees the Executive Board in the management of the Company. It is involved in strategic and planning decisions and all decisions of fundamental importance to the Company. When the Executive Board takes decisions on major transactions, such as the annual budget, major acquisitions or divestments, it is required by its terms of reference to seek the approval of the Supervisory Board. The Chairman of the Supervisory Board coordinates the work in the Supervisory Board, chairs its meetings and represents the concerns of the body externally. The Supervisory Board and the Audit Committee have adopted terms of reference for their own work. In the run-up to the Supervisory Board meetings, the representatives of shareholders and employees meet separately.

The Executive Board provides the Supervisory Board at regular meetings and in writing with comprehensive, up-to-date information about the strategy, the budget, business performance and the situation of the Group, including risk management and compliance. The Executive Board works on the basis of terms of reference issued by the Supervisory Board.

TUI AG has taken out a D&O insurance policy with an appropriate deductible for all members of the Executive Board and Supervisory Board. The deductible amounts to 10 % of the loss up to the amount of one and a half times the fixed annual compensation.

Composition of the Supervisory Board
As at the balance sheet date, 30 September 2017, the Supervisory Board of TUI AG comprised 20 members. The composition of the Supervisory Board in financial year 2017 ensured that its members as a group had the knowledge, ability and expert experience required to properly complete their tasks. The goals set by the Supervisory Board itself for its compos­ition include in particular comprehensive industry knowledge, at least five independent shareholder representatives, at least five members with international experience, and diversity (see also the diversity concepts for the Supervisory Board and the Executive Board from page 110 of this report).

Twelve members of the Supervisory Board had considerable international experience. Due to the different professional experiences of its members, the composition of the Supervisory Board overall reflects a great diversity of relevant experience, ability and industry knowhow. None of the shareholder representatives on the Supervisory Board had any commercial or personal relationship with the Company, its Executive Board or third parties that might cause a material clash of interests. Seven shareholder representatives are independent (including the Chairman of the Supervisory Board, who can be included in the count according to the German Corporate Governance Code).

In accordance with the recommendations of the German Corporate Governance Code, the original shareholder representatives were individually elected for five-year terms of office during elections to the Supervisory Board at the relevant General Meetings (October 2014, February 2016). Only Prof. Klaus Mangold and Sir Michael Hodgkinson were older than 68 years when they were elected as members of the Supervisory Board. In both cases, the Supervisory Board deemed it appropriate to deviate from the regular age limit in order for the Company to benefit from Prof. Klaus Mangold’s and Sir Michael Hodgkinson’s extensive experience in order to complete the integration process and in order to ensure continuity. With Peter Long, a former member of the Executive Board has been a Supervisory Board member since the Annual General Meeting 2016 held on 9 February 2016.

Committees of the Supervisory Board and their ­composition
At 30 September 2017, the balance sheet date, the Supervisory Board had established four committees from among its members to support its work: the Presiding Committee, the Audit Committee, the Nomination Committee and the Strategy Committee. In addition, the Integration Committee existed until December 2016.

A Mediation Committee was furthermore established in accordance with section 27 (3) of the German Co-Determination Act.

The Presiding Committee and Audit Committee have eight members each, with an equal number of shareholder representatives (including the respective chairpersons of the committees) and employee representatives. The Presiding Committee prepares, in particular, the appointment of Executive Board members, including the terms and conditions of service contracts and remuneration proposals. The Audit Committee’s task is to support the Supervisory Board in exercising its oversight function. The Chairman of the Audit Committee is an independent financial expert and has particular knowledge and experience in the application of accounting principles and internal control methods from his own professional practice.

The Nomination Committee consists exclusively of shareholder representa­tives, in keeping with the recommendation in the German Corporate Governance Code. The task of its four members is to suggest suitable candidates for the Supervisory Board to propose to the Annual General Meeting.

The Integration Committee was set up following the merger for two years. Its responsibilities were to advise and supervise the Executive Board during the integration process following the completion of the merger. The Integration Committee drafted recommendations for resolutions for the Supervisory Board, but had no authority to make decisions on behalf of the Supervisory Board. It consisted of five shareholder representatives and one employee representative. As planned, the Integration Committee had its last meeting in December 2016.

The Strategy Committee began its work after the Annual General Meeting 2016. Its task is to comprehensively advise and oversee the Executive Board in developing and implementing the corporate strategy. It prepares the annual strategy offsite meeting for the Supervisory Board, but does not have a mandate to take any decisions on behalf of the Supervisory Board. It comprises five shareholder representatives and one employee representative.


Conflicts of interest
Executive and Supervisory Board members have a duty to act in TUI AG’s best interests. In the completed financial year 2017, there were no conflicts of interest requiring disclosure to the Supervisory Board. None of the Executive Board or Supervisory Board members has a board role or a consultancy contract with one of TUI’s competitors.

Specifications pursuant to sections 76 (4), 111 (5) of the German Stock Corporation Act 
At least 30 % of the Supervisory Board members were women and at least 30 % were men at the balance sheet date. The Supervisory Board was therefore compliant with section 96 (2) sentence 1 of the German Stock Corporation Act. Neither the shareholder nor the employee representatives on the Supervisory Board objected to overall compliance in accordance with section 96 (2) sentence 2 of the German Stock Corporation Act.

The Supervisory Board resolved, in keeping with section 111 (5) of the German Stock Corporation Act, that until 31 October 2020 one woman is required to be a member of the Executive Board. This goal was achieved in the reporting period with Dr Elke Eller’s membership in the Executive Board.

In turn, the Executive Board resolved, in keeping with section 76 (4) of the German Stock Corporation Act, that women should account for 20 % of executives at the level immediately below the Executive Board and 30 % at the level below this. Both targets were to be achieved by 30 June 2017. For this reason, TUI AG has implemented various measures over the past two years aimed at increasing the proportion of women on a long-term and sustainable basis. This includes, among other things, the promotion of women in talent programmes and specifically addressing them in the recruitment process. As a result of these measures, the proportion of women at TUI AG increased from 13 % to 19 % at the first management level below the Executive Board and from 20 % to 24 % at the second management level below the Executive Board as of 30 June 2017. At these levels, however, staff turnover is very low. As a result, the proportion of women could only be increased slowly. Despite all the measures taken, the suitability and qualification of candidates for filling vacant positions are still of primary importance. In accordance with section 76 (4) of the German Stock Corporation Act (AktG), the Executive Board confirmed the target figures for the proportion of women of 20 % at the first management level below the Executive Board and 30 % at the second management level below the Executive Board, and decided that both targets should be achieved by 30 September 2020.

Shareholders and Annual General Meeting
TUI AG shareholders exercise their co-determination and monitoring rights at the Annual General Meeting, which takes place at least once a year. The AGM takes decisions on all statutory matters, and these are binding on all shareholders and the Company. For voting on resolutions, each share confers one vote.

All shareholders registering in due time are entitled to participate in the Annual General Meeting. Shareholders who are not able to attend the AGM in person are entitled to have their voting rights exercised by a bank, a shareholder association, one of the representatives provided by TUI AG and acting on the shareholders’ behalf in accordance with their instructions, or some other proxy of their own choosing. Shareholders also have the opportunity of authorising the representative provided by TUI AG via the web in the run-up to the AGM. Shareholders can, moreover, register for electronic dispatch of the AGM documents.

The invitation to the AGM and the reports and information required for voting are published in accordance with the provisions of the German Stock Corporation Act and provided in German and English on TUI AG’s website. During the AGM, the presentations by the chairman of the Supervisory Board and the Executive Board members can be followed live over the Internet.

Risk management
Good corporate governance entails the responsible handling of commercial risks. The Executive Board of TUI AG and the management of the TUI Group have comprehensive general and company-specific reporting and monitoring systems available to identify, assess and manage these risks. These systems are continually developed, adjusted to match changes in overall conditions and reviewed by the auditors. The Executive Board regularly informs the Supervisory Board about existing risks and changes to these risks. The Audit Committee deals in particular with monitoring the accounting process, including reporting, the effectiveness of the internal control and risk management systems and the internal auditing system, compliance and audit of the annual financial statements.

More detailed information about risk management in the TUI Group is presented in the Risk Report. It also contains the report on the accounting-related internal control and risk management system required in accordance with the German Commercial Code (sections 289 (5), 315 (2) no. 5 HGB).

Transparency
TUI provides immediate, regular and up-to-date information about the Group’s economic situation and new developments to capital market participants and the interested public. The Annual Report and the Interim Reports are published within the applicable timeframes. The Company publishes press releases and ad hoc announcements, if required, on topical events and any new developments. Moreover, the company website at www.tuigroup.com provides comprehensive information on TUI Group and the TUI share.

The scheduled dates for the principal regular events and publications – such as the AGM, Annual Report and Interim Reports – are set out in a financial calendar. The calendar is published well in advance and made permanently accessible to the public on TUI AG’s website.

Directors’ dealings
The Company was informed by Alexey Mordashov (via Sungrebe Ltd. and Unifirm Ltd.), Peter Long and David Burling of notifiable purchase and sale transactions of TUI AG shares or related financial instruments by directors (directors’ dealings or managers’ transactions) concerning financial year 2017. Details are provided on the Company’s website.

Purchase and sales transactions by members of the boards were governed by the TUI Share Dealing Code, adopted by the Executive Board, alongside corresponding statutory provisions. The TUI Share Dealing Code stipulates above all an obligation to receive a permission for transactions with TUI AG’s financial instruments.

Accounting and auditing
TUI AG prepares its consolidated financial statements and consolidated interim financial statements in accordance with the provisions of the International Financial Reporting Standards (IFRS) as applicable in the European Union. The statutory annual financial statements of TUI AG, which form the basis for the dividend payment, are prepared in accordance with the German Commercial Code (HGB). The consolidated financial statements are prepared by the Executive Board, audited by the auditors and approved by the Supervisory Board. The interim report is discussed between the Audit Committee and the Executive Board prior to publication. The consolidated financial statements and the financial statements of TUI AG were audited by Deloitte GmbH Wirtschafts­prüfungsgesellschaft, Hannover, the auditors elected by the 2017 Annual General Meeting. The audit was based on German auditing rules, taking account of the generally accepted auditing standards issued by the German Auditors’ Institute as well as the International Standards on Auditing. It also covered the risk detection system and the compliance with reporting requirements on corporate governance pursuant to section 161 of the German Stock Corporation Act and Listing Rule 9.8.10.

The condensed consolidated interim financial statement and management report as at 31 March 2017 was reviewed by the auditors.

In add­ition, a contractual agreement was concluded with the auditors to the effect that the auditors will immediately inform the Supervisory Board of any grounds for disqualification or partiality as well as of all findings and events of importance arising during the performance of the audit. There were no grounds to provide such information in the framework of the audit of financial year 2017.

Diversity concepts for the composition of the Executive Board and Supervisory Boards

Diversity concept for the composition of the Executive Board
The diversity concept for the composition of the Executive Board takes into account the following diversity aspects:

  1. (a) Age

    As a rule, the employment contracts of members of the Executive Board end once the standard retirement age for statutory retirement insurance has been reached (currently 67).

  2. (b) Gender
    The Executive Board should include one woman.
  3. (c) Educational / professional background

    The necessity for a variety of educational and professional backgrounds already arises from the obligation to manage the company in accordance with the law, the company’s articles of association and its terms of reference. In addition, the Executive Board as a whole, through its individual members, should possess the following essential background qualities:

  • management experience, some of which ideally has been acquired abroad, and intercultural competence for successful management and motivation of global teams
  • in-depth practical experience in stakeholder dialogue (i.e. with managers and employees, including their representative bodies, with shareholders and the public)
  • experience in IT management and an understanding of digitalisation of vertically integrated value chains
  • profound experience in value-driven, KPI-based strategy development and implementation and corporate governance
  • profound knowledge of the intricacies and requirements of the capital market (shareholder management)
  • knowledge of accounting and financial management (controlling, financing)
  • in-depth understanding of and experience with change management.

 

Goals of the diversity concept for the composition of the Executive Board
The standard retirement age on the one hand enables incumbent members of the Executive Board to contribute their professional and life experience for the good of the company for as long a time as possible. On the other hand, adherence to the standard retirement age is intended to promote regular rejuvenation of the board.

Inclusion of both genders in Executive Board work is on the one hand an expression of the conviction of the Supervisory Board that mixed-gender teams lead to the same or better outcomes as teams with representation from only one gender. But it is also the logical continuation of the gender diversity measures implemented by the Executive Board within the wider company, which aim to increase the proportion of women in leadership roles. These measures are only to be applied and implemented in a credible manner if the Executive Board does not consist solely of male members (‘proof of concept’).

A variety of professional and educational backgrounds is necessary on the one hand to properly address the tasks and obligations of the law, the company’s articles of association and its terms of reference. In addition, it is the view of the Supervisory Board that they are a guarantee of ensuring diverse perspectives on the challenges and associated approaches to overcoming them that are faced in the day-to-day work of the company. International management experience is of particular importance. Without such skill and experience with integrating, leading and motivating global teams, it is impossible to take into consideration the different cultural backgrounds of managerial staff and the workforce as a whole.

Method of implementation of the diversity concept for the composition of the Executive Board
A key aspect of applying the diversity concept to the composition of the Executive Board is inclusion of the Supervisory Board within the cor­porate organisation, as is prescribed by law, the company’s articles of association and its terms of reference. This ensures the Supervisory Board is familiar with the strategic, economic and actual situation of the company.

In its role as overseer of the management of the Executive Board, the Supervisory Board of TUI AG makes decisions on the allocation of business responsibilities within the Executive Board, appointments to the Executive Board and thus also workforce and succession planning within the Executive Board. As part of that workforce and succession planning, the Presiding Committee or the Supervisory Board itself regularly meets with the Executive Board or its members to discuss suitable internal succession candidates for Executive Board positions (emergency, medium-term and long-term scenarios). As part of these Supervisory Board and Committee meetings, or in preparation for them, members of the Supervisory Board have the opportunity to meet up with so-called high potentials within the Group in a professional and personal setting. The Presiding Committee and Supervisory Board make their own deliberations about these matters and also discuss them in the absence of the Executive Board. This includes evaluation and possible inclusion of external candidates for Executive Board positions in the selection process. In all of these deliberations, the above-mentioned diversity aspects of Executive Board appointments play a part in the decision-making of the Supervisory Board. The Supervisory Board also asks the Executive Board to report twice a year on current progress and implementation of family-friendly concepts (e. g. flexible work times and locations via, for instance, video- conferencing, part-time options, cultural change) and concrete measures for promotion of women (e. g. at least one woman on the final shortlist for any new or replacement appointments to roles within the senior leadership team).

Results achieved in financial year 2017
With effect from 1 January 2017, Mr Frank Rosenberger was appointed (deputy) member of the Executive Board. The Supervisory Board resolved on 12 May 2017 a three-year extension of the appointment of Mr Sebastian Ebel. In addition, the appointments of Dr Elke Eller and Mr David Burling were extended for a further three years each by the respective Supervisory Board resolutions and the signing of the corresponding contracts in December 2017 (see overview of the Executive Board on page 102). It is the view of the Supervisory Board that Mr Rosenberger, Mr Ebel, Mr Burling and Dr Eller, by virtue of their diverse professional histories and individual backgrounds, will contribute to the diversity of the Executive Board. For anyone interested in further information, the CVs of these and all other members of the Executive Board are available on the company website, as well as further details communicated about the appointment decisions of the Supervisory Board.

Diversity concept for the composition of the Supervisory Board
The diversity concept for the composition of the Supervisory Board takes into account the following diversity aspects: The terms of reference of the Supervisory Board of TUI AG stipulate a standard age limit of 68 for elections to the Supervisory Board. Furthermore, the Supervisory Board has determined a standard limit for membership of the Supervisory Board in accordance with the recommendation in point 5.4.1.(3) of the German Corporate Governance Code. As well as the statutory gender quota (section 96(2)(1) of the German Stock Corporation Act, (AktG) the Supervisory Board has set itself further goals in relation to its composition. These include e. g. the kind of international character and sector experience that diverse educational and professional backgrounds provide. Application of the law about the codetermination rights of employees also contributes greatly to ensuring diverse educational and professional backgrounds within the Supervisory Board of TUI AG.

Goals of the diversity concept for the composition of the Supervisory Board
The Supervisory Board is convinced that the diversity of its own composition sends an important signal both inside and outside the company. The age limit and standard membership term have the goal on the one hand of finding and retaining suitable candidates. Members of the board must possess sufficient professional experience and personal suitability for the position and have the necessary time available to perform the role. After familiarisation with the business model and the peculiarities of a vertically integrated company, the Supervisory Board considers the stability of board composition in the sense of continuity of corporate development to be equally important. On the other hand, the Supervisory Board should be looking at new approaches and new ideas on a regular basis, in order to further the continual development of the company and the business model. The Supervisory Board considers the age limit and standard membership term to be worthwhile instruments for achieving both goals.

Other goals in relation to composition (including international character and sector experience) reflect the demands placed on the advisory and oversight body and its role within a globally active Group of companies operating in a challenging competitive environment. Multicultural and international experience of corporate integration is equally as import­ant for this as knowledge of the value drivers and success levers of the sector. In all of this, the effect and cultural features of the so-called stakeholder approach of a social market economy must be taken into account, which is also ensured on the Supervisory Board by the codetermination of employee representatives.

Method of implementation of the diversity concept for the Supervisory Board
Implementation of the goals pursued by the diversity concept is assured by the anchoring of its key components in law and in the company’s terms of reference as well as the requirement for a Declaration of ­Compliance in accordance with section 161 of the German Stock Corpor­ation Act (AktG) on Corporate Governance within the company. As far as the shareholder side of the Supervisory Board is concerned, the Nomination Committee ensures that the binding and voluntary targets for the composition of the Supervisory Board are met. As part of regularly conducted efficiency audits, the Supervisory Board also undertakes a self-evaluation process, which includes aspects of its composition.

Results achieved in financial year 2017
In the current financial year, no changes have been made to the diversity concept or the composition of the Supervisory Board. In accordance with the recommendation in point 5.4.1 (2) of the German Corporate Governance Code (version dated 7 February 2017) the Supervisory Board in its resolution of 14 September 2017 issued a competency profile for the composition of the board as a whole.

From the point of view of the Supervisory Board, there is currently no further need for action in relation to diversity. On the shareholder side, both genders are equally represented, (50:50), and in terms of the board as whole, the proportion of women of 35 % is in excess of the statutory quota. With six different nationalities represented on the ­Supervisory Board, its composition can be described as international. The diversity of professional and educational backgrounds of the individual members of the board is also evident from the yearly updated CVs of Supervisory Board members published on the corporate website.


Anti-corruption and anti-bribery / Compliance

TUI Group’s Compliance Management System is a fundamental compon­ent in our commitment to entrepreneurial, environmental and socially responsible operations and management. It is underlined by our membership in the UN Global Compact and therefore forms an indispensable part of TUI Group’s corporate culture and our corporate governance activities.

The strategic goal of TUI Group’s Compliance Management System is to prevent misconduct and avoid liability risks for the Company, its legal representatives, executives and employees and protect the reputation of the Company.

Compliance Management System
TUI Group’s Compliance Management System is based on a risk management approach and is built around three pillars: prevention, discovery and response, which, in turn, comprise a large number of internal measures and processes.

TUI Group’s Compliance Management System focuses on the legal sub-areas anti-corruption, competition and anti-trust law, data protection, export controls and anti-money laundering. It defines the related pilot and standard operation of the Compliance Management System and the documentation of the roles, responsibilities and processes in these areas.

The Compliance Management System applies to TUI AG and all German and foreign companies in which TUI AG directly or indirectly holds an interest of more than 50 % as well as other stakes directly or indirectly controlled by TUI AG (so-called ’managed Group companies’). Implementation of the Compliance Management System is recommended for investments not controlled by TUI AG (so-called ’non-managed Group companies’).

In financial year 2016, TUI Group’s Compliance Management System was subjected to a design audit by a leading auditing firm in accordance with auditing standard PS 980 published by the German Institute of Auditors. The audit confirmed that TUI Group’s Compliance Management System has been designed to meet the requirements of that certification standard. In the run-up to the audit, the Group-wide Compliance Management System had been readjusted and compliance processes had been harmonised across the Group.

Compliance structure
TUI Group’s Compliance structure supports those responsible in the task of communicating the values and rules and anchoring them in the Group. It ensures that Compliance requirements are implemented throughout the Group in different countries and cultures. TUI Group’s decentralised Compliance structure includes Head Compliance Officers whose role is to implement and support the requirements of Group Legal Compliance. Under the aegis of the Chief Legal Compliance Officer, Group Legal Compliance work with the decentralised Compliance Officers to perform the following tasks at different management levels:

  • Raising awareness of Compliance and the technical issues allocated to Legal Compliance
  • Achieving the goals of the Code of Conduct and the Compliance Rules
  • Providing training
  • Advising managers and employees
  • Securing the necessary exchange of information
  • Monitoring national and international legislative initiatives
  • Providing regular quarterly reports to the Board and annual reports to the Audit Committee of the Supervisory Board

In addition, the Group has a Compliance Committee headed by the CFO and consisting of the HR Director, the Heads of Group External Affairs and Communications, Chief Legal Compliance Officer, Group Audit and representatives of the Group Works Council and the TUI Europe Forum. The committee meets on a regular basis as well as ad hoc in order to monitor implementation of the Compliance Management System and obtain reports about key indicators in this area.

Compliance Culture
The Compliance culture forms the basis for an appropriate, effective Compliance Management System. It reflects management’s fundamental attitude and conduct and the role of the supervisory body. It is expressed in our corporate value ’Trusted’, appealing to our employees’ personal responsibility and their honesty and sincerity in handling customers, stakeholders and employees.

Code of Conduct / Suppliers’ Code of Conduct
The Code of Conduct, drawn up for the entire TUI Group, is a further embodiment of our Compliance culture and enshrines guiding principles for everyone to follow, from the Board members, executives and senior management to every Group employee. It defines minimum standards aimed at assisting our employees in their everyday work and providing orientation in conflict situations. TUI’s Code of Conduct covers anti-­corruption, avoiding conflicts of interest and handling invitations and gifts appropriately.

The Suppliers’ Code of Conduct forms the counterpart to TUI’s Code of Conduct. It details our ethical, social and legal expectations of our business partners.

Moreover, business partners are required by contract to observe all national and international anti-corruption laws applicable to the supplier relationship. This places our business relationship with our partners on a solid legal and social basis.

Compliance Rules
In addition, the principles set out in the Code of Conduct are detailed in various policies and rules reflecting the legal requirements. This is supported by our Group-wide policy management, developing the standards for Group-wide policies and coordinating incorporation of the relevant internal stakeholder groups, e. g. other departments or the works council. This approach is designed to provide TUI Group with a set of policies which are as complete and comprehensible as possible without seeking overregulation. TUI Group’s Compliance Rules offer guidance on appropriate conduct regarding gifts and invitations, data protection and compliance with trade sanctions. All groups of employees have thus been acquainted with policies of relevance to their everyday work.

Compliance risk analysis
In the financial year under review, the Compliance Programme focused on various issues including anti-corruption measures, protecting free and fair competition, data protection and the handling of trade sanctions including anti-money laundering. A software is used, above all for the above topics, to facilitate risk identification based on self-disclosure by TUI Group companies, with risks evaluated according to likelihood of occurrence and potential damage (including reputational damage). The results of the self-assessment are discussed with the companies affected and are included in a Group-wide risk evaluation process. The results of the compliance risk identification process are used to derive corres­ponding risk-minimising measures, which are included in the annual plan of Group Legal Compliance and agreed with the relevant bodies. Monitoring of the implementation of the measures is automated.

Risk analysis and prevention also includes the annual survey among 1,570 legal representatives and executives of TUI Group to identify potential clashes of interests. In the framework of the survey, they have to provide information on any interests held in TUI Group competitors or key business partners as well as other issues of relevance to Compliance. The survey carried out in the financial year under review was completed by 98.3 % of the respondents. No indications were found suggesting that there were any conflicts of interests.

Preparations for the EU General Data Protection
Regulation (GDPR)

In the run-up to the EU GDPR, data protection, which was already a key priority for TUI Group, was intensified further in the financial year under review. Many measures were initiated, e. g. the structured coordination of all data protection specialist functions within the Company and the appointment of Data Protection Officers in nearly all relevant TUI Group companies (data protection governance).

Compliance training
Compliance training is a key element of TUI’s Compliance Management System, with its focus on preventing misconduct, and a crucial component of TUI Group’s Compliance culture. It is carried out according to a graded concept: managers and staff at TUI have all benefited from face-to-face teaching and online programmes. This enables all our executives and employees to acquaint themselves with Compliance and the underlying corporate values, regardless of their position in the company hierarchy and their geographical location. In the completed financial year, the online training programme was extended to include a refresher course on TUI’s Code of Conduct, which has since been rolled out in the Group companies. In addition, TUI companies and sectors offered training schemes with their own specific focus, e. g. anti-corruption or appropriate handling of gifts and invitations, to raise awareness of the challenges they might face.

Whistleblower system
In agreement with various stakeholder groups TUI offers its managers and employees a Group-wide whistleblower system to enable serious infringements of the corporate values anchored in TUI’s Code of Conduct to be reported anonymously and without reprisals. This whistleblowing system is currently available to staff in 47 countries. All reports are followed up in the interests of all stakeholders and the Company. Our top priority is to ensure confidentiality and handle information discreetly. Any incidents resulting from the use of the whistleblower system are reviewed by Group Legal Compliance in conjunction with Group Audit. Infringements are fully investigated in the interests of all our staff and the Company itself.

In the completed financial year, a total of 57 reports were received through the SpeakUp Line. Apart from the SpeakUp Line, employees also used the opportuity to directly report infringements to their line managers or the Compliance contact in charge. A further 33 reports were received through these channels. They were followed up whenever there were any indications suggesting potential infringements of internal policies or the law. Out of the 90 reports submitted in total, 49 cases initially involved a suspected Compliance infringement, causing further investigations which in 16 cases resulted in disciplinary measures all the way to termin­ations of employment contracts.

In the financial year under review, there were no infringements of a severe nature that would have given rise to a publication of such infringement.

Business partner review (due diligence processes)
The risk analysis carried out by Compliance shows that there is a risk of active and passive corruption because we operate in countries with a high corruption index. Moreover, the risk of TUI business partners being subject to trade sanctions or similar sanctions lists cannot be ruled out.

TUI Group therefore carries out software-based screenings of selected business partners at regular intervals. The process involves checking the names of the business partners against international sanctions, terrorist and wanted persons lists. In the event of a match, we launch a range of measures, in extreme cases terminating the business relationship.

In financial year 2017, we used this process to check around 26,500 business partners against Compliance criteria. The screening software initially flagged 1,258 of these business partners as potential ’hits’ as their names were identical with or similar to names included in sanctions lists. These potential ’hits’ were then further investigated. Ultimately, the business organisation cooperating with the corresponding business associates was informed in two cases, and in one case the business relationship was terminated.