The Siemens Compliance Program: A Change Management Process
Society of Corporate Compliance & Ethics 8th Annual Compliance & Ethics Institute
Deanna Slocum Corporate Compliance Officer Siemens Corporation
© Siemens AG 2008. All rights reserved.
The Independent Investigation
Staffing Scope Accounting Analysis Reporting to US Authorities
© Siemens AG 2008. All rights reserved
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2008 Resolution of US and German Proceedings US Proceedings Department of Justice Siemens AG pled guilty to violations of the internal controls and books and records provisions of the FCPA. Three Siemens foreign subsidiaries pled guilty to individual counts of conspiracy to violate the FCPA. Aggregate fine $450 million Securities and Exchange Commission Siemens AG disgorgement of profits $350 million. Compliance Monitor for Four Year Term Dr. Theo Waigel, Former German Federal Minister of Finance
German Proceedings Siemens AG fine €395 million Previously paid fine €201 million. © Siemens AG 2008. All rights reserved
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Compliance Efforts that Began in November 2006
Immediate Response
Selection of external experts to conduct independent investigation
Implementation Of Enhanced Program
Defined and created a comprehensive compliance program: Prevent – Detect – Respond Prevent
Appointment of ombudsman in Germany "Tone from the top": town hall meetings; letters of CEO; etc.
Detect
Respond
§ "Tone from the Top" § Compliance Organization § Training § Policies & Procedures § Program communication § Centralization
§ Compliance investigations Continuou s improve ment
§ Compliance reviews
§ Consequences for misconduct § Global case tracking § Monitoring effectiveness
§ Compliance controls
§ Compliance helpdesk (incl. Global Ombudsman function) § Integration with personnel processes
Use of business consultants restricted
Expanded global compliance organization and processes
Payments and bank accounts centralized
Conducted anti-corruption training for managers and sensitive functions
Efforts to become a "recognized leader"
Elimination of material weakness in financial controls Compliance tools and simplification of processes Compliance in employee incentive system Collective action efforts with third parties Extend the scope of compliance and create a culture of integrity © Siemens AG 2008. All rights reserved
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Key Leadership Changes Gerhard Cromme – Chairman of Supervisory Board and Compliance Committee Chairman of the Government Commission on the Germany Governance Code Chairman of the Supervisory Board of Thyssen-Krupp AG Member of the Supervisory Boards of Allianz SE, Axel Springer AG and Compagnie de Saint-Gobain SA
Peter Löscher – Chief Executive Officer
Peter Y. Solmssen – General Counsel
Former President of Global Health at Merck & Co., Inc. in USA
Former Executive Vice President and General Counsel at GE Healthcare based in the UK
Former President and CEO of GE Healthcare Pro-Sciences in the UK
Hans Winters – Chief Audit Officer
Andreas Pohlmann – Chief Compliance Officer
Former Partner at PwC, specializing in projects for international compliance and internal controls systems Has supported international companies in compliance-related matters before U.S. regulatory authorities
Former Executive Vice President and Chief Administrative Officer at Celanese Corp. in USA Previously responsible for legal matters, corporate governance, compliance and risk management at Celanese AG © Siemens AG 2008. All rights reserved
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Corporate Restructuring: Three Sectors
Three Sectors
Energy Businesses from Power Generation Power Transmission & Distribution Industry Businesses from Automation & Drives Industrial Services & Solutions Transportation Systems Building Technologies Osram Healthcare Businesses from Medical Solutions
Crossfunctional Siemens IT Solutions and Services Siemens Financial Services
Sectors
Key Benefits
Clear Accountability Reduction in Complexity Synergies
© Siemens AG 2008. All rights reserved
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Expanded Global Compliance Organization Member of the Managing Board General Counsel P.Solmssen
Compliance represented in Managing Board Strong corporate governance Embedded in Business units and Regions
Chief Compliance Officer
A. Pohlmann
Corporate Units Compliance Officer
Th.Luethi
Sector Compliance Officers
Compliance Global Coordinators
Industry: C.Augsten Energy: G.Brey Health: W.D.Guhl
AM: I.Garcia ASA: F.Schmidt EU: M.Thun MEAC: T.Mark
Division Division Officers Compliance (DCOs) Officers (DCOs)
Regional Compliance Officers (RCOs)
Compliance Policies, Communication & Training
Compliance Program, Projects & Reporting
Compliance Operating Officer
J.Meran
M. Vierengel
K.Moosmayer
Compliance Helpdesk & Monitoring
Compliance Legal
Compliance Investigation
Disciplinary Sanctions
J.Neumann
U.Hommel
R.-D.Buehrer
Y.Hamm-Dueppe
© Siemens AG 2008. All rights reserved
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Expanded US Compliance Organization
Andreas Pohlmann CCO E. Robert Lupone Sr. Vice President General Counsel & Secretary
George Nolen President & CEO Joel Kirsch Vice President & Chief Compliance Officer, Associate General Counsel
Ginny Murphy Counsel, Compliance Laura Goodman Executive Assistant
Ann Florkowski Compliance Professional
Compliance Officers Fred Kile (SWT)
Dave Dickerson (Energy)
Doug Doty (SBT)
Dan Garen (Healthcare)
Barbara Greenberg (SIS/STS)
Steve Shoop (SFS/ SSL/ SRE/ SCR/ SO)
Deanna Slocum (PLM)
David Taft (SEA)
Bob Jordan (OSRAM)
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Key Elements of Compliance Program: Prevent – Detect – Respond
Prevent
Detect
Respond
"Tone from the Top" Compliance Organization Training Policies & Procedures Program communication
Continuous improvement
Compliance investigations
Consequences for misconduct
Compliance reviews
Global case tracking
Compliance controls
Centralization
Monitoring effectiveness
Compliance helpdesk Integration with personnel processes © Siemens AG 2008. All rights reserved
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Implementation of Anti-Corruption Toolkit
1
'Tone from the Top'
2
Compliance Organization
3
Case Tracking
Implementation of Policies and Procedures 5
3rd parties
6
Tender & Contracts
7
Gifts & Hospitality
8
Finance & Accounting
9
Integration with Personnel Processes
4
Training & Program Communication
10 Monitoring Effectiveness
© Siemens AG 2008. All rights reserved
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Anti-Corruption Toolkit Controls
Prevent Anti-Corruption Toolkit Controls require that we Communicate commitment to compliance from highest levels of management – both internally and externally Maintain a Compliance Review Board to centralize information and provide direction Maintain compliance infrastructure through appropriate staffing selection, training, assessment of competencies and adequate budget? Continuously Assess Compliance Risks Communicate and train on policies and expectations Conduct due diligence in advance of engaging with Business Partners, conducting a merger or acquisition or entering a joint venture
© Siemens AG 2008. All rights reserved
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Peter Loescher, CEO, clearly established the tone from the top
"Only Clean Business is Siemens business. Everywhere – everybody – every time!" "Compliance as part of Corporate Responsibility is 1st priority!“ Source: P. Löscher; Compliance Officer Conference October 2007
© Siemens AG 2008. All rights reserved
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Compliance Communications Distributed through Variety of Media Siemens Employee Magazine
Compliance Update
Management letter
(newsletter for glob. Compliance organiz.)
(to Siemens management)
(reports frequently, three articles in ed. 08/2008)
Corp. Compliance Intranet Siemens TV
(to all employees)
(to all employees)
Siemens Communicators Intranet Platform © Siemens AG 2008. All rights reserved
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Enhancement of Policies & Procedures
Application to Specific Risks
Business Consultant Moratorium (Feb. 2007) Additional Business Consultant Guidance (May 2007) Guidelines for Retention of Intermediaries (Aug. 2007) Gifts and Hospitality (Aug. 2007, March 2008)
Targeted AntiPublic-Corruption Policy Fundamental Ethical Standards and Principles
Anti-Corruption Considerations in M&A Transactions, Joint Ventures and Minority Investments (Aug. 2007) Company Donations (Oct. 2006) Sponsoring (May 2007) Business Partner Policy (Due Diligence) (July 2008)
Anti-Public-Corruption Circular (May 2007)
Siemens Values and Vision (Sept. 2007) Business Conduct Guidelines (July 2005; revised in January 2009)
© Siemens AG 2008. All rights reserved
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Enhanced Compliance Training Target Groups
Type of Training
Senior Management Supervisory Board, Board of Management CEOs / CFOs of Divisions, sub-divisions, regional companies Members of Group Boards
In-person 4h training delivered by Compliance and Outside Counsel
Manager / staff who interact with govt. officials Personnel involved in sales, project management Regular interactions with government (such as Tax, Customs) Boards of legal entities (if applicable)
In-person 4h-8h training delivered by local COs and In House Counsel
52,200 employees trained in FY 2008
Employees with signing authority Employees in management positions All customer-facing and controller functions (e.g., sales, sales commercials)
~1h Web-based training available in 15 languages
123,000 employees
4 day Introduction Program
85 Compliance officers from Jan Sept 08
New Compliance Officers From Regions, Sectors / Divisions / Business Units
~10,000 employees from lowerrisk entities
As hired
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Business Partner Review and Approval Process
During the Due Diligence phase, the first 3 steps are performed by the Business Unit. The fourth step (Approval Process) is conducted by management and the Compliance Organization
Business Unit 1
Pre-work
2
Front-end Risk Assessment
a Integrity Check (Internet Search) Entry point
BP key data Collection
3
Due Diligence Questionnaire
Positive integrity Lower
Doubtful integrity Higher
Medium
b Risk classifiers (A-H)
Medium
Lower
Higher
© Siemens AG 2008. All rights reserved
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Anti-Corruption Toolkit Controls
Detect Anti-Corruption Toolkit Controls require that we – Facilitate reports of, and investigate, allegations of non-compliance Monitor bank accounts Open accounts with appropriate approvals Compare internal and external transaction records Sample payments and confirm appropriate approvals for payments to Business Partners and potentially high risk entities and payments for gifts, hospitality, sponsorship and donations Sample changes to Master Data and confirm appropriate approvals
© Siemens AG 2008. All rights reserved
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Compliance Helpdesk
"Ask Us" Partly available
"Tell Us"
“Find It" Do you have any questions about compliance? You can ask them at any time via the Compliance HelpDesk “Ask Us.”
The Compliance HelpDesk “Tell Us” function provides global, round-theclock intake for allegations of actual or potential non-compliance.
Pilot started
“Approve It"
“Approve It” is the platform for approval requests regarding gifts and hospitality
Use “Find It” to search for compliance related information, such as FAQs, policies & guidelines or training material.
Compliance Helpdesk & Monitoring “Improve It"
Now available
With “Improve It” you can help to improve the Compliance program by adding your ideas and suggestions.
© Siemens AG 2008. All rights reserved
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Anti-Corruption Toolkit Controls Respond Anti-Corruption Toolkit Controls require that we – Impose appropriate penalties for substantiated non-compliance Integrate compliance and Human Resources files and objectives Reward management support for compliance initiatives Conduct background checks prior to appointing senior leaders
© Siemens AG 2008. All rights reserved
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Role of Siemens AG Corporate Disciplinary Committee
Corporate Disciplinary Committee ("CDC") was established in 2007 CDC Responsibilities are to: Evaluate allegations of misconduct Determine appropriate disciplinary sanction, consistent with local labor laws
CDC (Corporate Disciplinary Committee) General Counsel, Member of the Management Board of Siemens AG Labor Director, Member of the Management Board of Siemens AG
Chief Compliance Officer
Head of Corporate Human Resources
CDC actions establish precedent for sectors and regional companies
Compliance Operating Officer
Head of the relevant Business Unit where the violation took place © Siemens AG 2008. All rights reserved
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Compliance Element of Senior Management Compensation
Objectives: Establish compliance as a central managerial responsibility and anchor of corporate culture Provide senior managers with further incentive to take active part in implementing and living compliance program Communicate message that compliance is not rewarded, but expected
© Siemens AG 2008. All rights reserved
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Monitoring Our Progress – Employee Survey
Survey Overview
Survey Results
Evaluate effectiveness of tone from the top Company-wide feedback on compliance perception and identification of ‘cultural’ key drivers of compliance performance Measure effectiveness of compliance activities Uncover best practices and problem areas
Positive perception of compliance program
Survey sent to 89,000 employees worldwide
Compliance communications understood and well-regarded Further work needed on training Management culture and actions have important impact on employees Further need to fully imbed compliance in day-to-day business
© Siemens AG 2008. All rights reserved
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© Siemens AG 2008. All rights reserved
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Siemens Will Go Beyond Internal Programs and become a Recognized Leader in Compliance Externally
Collective Action will play a critical role in establishing high compliance standards for all market players and reducing the risk of corruption.
Collective Action External Internal Siemens Compliance Program
Prevent
Detect
Respond
Share internal policies, experiences, best practices and success stories
Become a recognized leader in transparency and compliance
Reach out to industry peers via neutral facilitators (such as Transparency International) and initiate joint activities to fight corruption
© Siemens AG 2008. All rights reserved
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Siemens AG Compliance Objectives for 2009
Create a culture of integrity Move towards a value based culture Act as change agents (“tone from the middle”) Make compliance become a competitive advantage Look beyond Siemens Benchmark with the best Participate in Collective Action Projects. Show our commitment Support the Compliance Monitor Become more efficient Improve and simplify policies and control processes to minimize business disruption while continuing to accomplish compliance objectives
© Siemens AG 2008. All rights reserved
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