lessons from the recent siemens experience · 1) located in portland, oregon, usa whistleblower...

© Siemens AG 2008. All rights reserved© Siemens AG 2008. All rights reserved.

Lessons from the recent Siemens experience

Dr. Klaus MoosmayerCompliance Operating Officer &Chief Counsel Compliance & Investigations

Paris, January 22nd, 2009

January 2009© Siemens AG 2008. All rights reserved

Linda Thomsen, Director of Enforcement for the U.S. Securities and Exchange Commission

Acting U.S. Assistant Attorney General Matthew Friedrich announces Siemens pleaded guilty to corruption

''Siemens' pattern of bribery was unprecedented in scale and geographic …The scope of the bribery scheme is astonishing, and the tone set at the top at Siemens was a corporate culture in which bribery was tolerated and even rewarded at the highest levels of the company…

(The international cooperation) marks the first time that the U.S. and foreign prosecutors have coordinated their law enforcement efforts as extensively as they have here today to address violations of anti-bribery laws.

When any company circumvents the rules of fair playand honest competition by making improper payments to win business, it will face a strong and united front from law enforcement around the globe.''

''From the 1990s through 2007, Siemens engaged in a systematic and widespread effort to make and to hide hundreds of millions of dollars in bribe payments across the globe… Bribery was nothing less than standard operating procedure for Siemens. Siemens will plead guilty … to one count of failure to maintain internal controls and one-count books and records violation. Three Siemens subsidiaries have pled guilty to conspiring to violate provisions of the FCPA…

Siemens' cooperation (with the SEC / DOJ) has been exceptional. It has faced facts, accepted responsibility, retained experienced counsel to conduct through internal investigations, and has implemented real reforms''

Transcript of Press Conference Announcing Siemens Plead Guilty to FCPA* Violations (Dec 15, 2008)

* Foreign Corrupt Practices Act


Immediate Actions(Nov. 06 – Mar. 07)

Independent investigation & external advisors appointedExternal ombudsman active"Tone from the top": town hall meetings; letters of CEO; etc.Monitor and review of casesUse of business consultants restrictedPayments and bank accounts centralized

Implementation(April 07 – Mar 08)

How to become a "recognized leader" ?

(Apr 08 – Sep 10)

Elimination of material weaknessCompliance tools and simplification of processesCompliance incentive systemNGO cooperation and collective market approachExtend the scope of compliance and creating a culture of integrity….

Definition and creation of a comprehensive compliance program: Prevent – Detect –Respond

Implement effective global compliance organization and processesAnti-corruption training for managers and sensitive functions

The Siemens Case: Crises Management and Realignment

Prevent Detect RespondPrevent Detect Respond

§ Training§ Policies & Procedures§ Program

communication§ Centralization

§ Complianceinvestigations

§ Compliance reviews

§ Compliance controls

§ Consequences for misconduct

§ Global case tracking§ Monitoring effectiveness

§ Integration with personnel processes

§ Compliance helpdesk (incl. Global Ombudsman function) § Compliance helpdesk (incl. Global Ombudsman function)

§ Compliance Organization§ Compliance Organization

§ "Tone from the Top"§ "Tone from the Top"

Continuous improve-

ment

Continuous improve-

ment


Key Leadership Changes

Gerhard Cromme – Chairman of Supervisory Board and Compliance Committee

Chairman of the Government Commission on the Germany Governance CodeChairman of the Supervisory Board of Thyssen-Krupp AGMember of the Supervisory Boards of Allianz SE, Axel Springer AG and Compagnie de Saint-Gobain SA

Peter Y. Solmssen – General CounselFormer Executive Vice President and General Counsel at GE Healthcare based in the UK

Hans Winters – Chief Audit OfficerFormer Partner at PwC, specializing in projects for international compliance and internal controls systemsHas supported international companies in compliance-related matters before U.S. regulatory authorities

Peter Löscher – Chief Executive OfficerFormer President of Global Health at Merck & Co., Inc. in USAFormer President and CEO of GE Healthcare Pro-Sciences in the UK

Andreas Pohlmann –Chief Compliance Officer

Former Executive Vice President and Chief Administrative Officer at Celanese Corp. in USAPreviously responsible for legal matters, corporate governance, compliance and risk management at Celanese AG


Video from Peter Loescher is shown in all training –his authenticity and clarity set 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


What exactly is … Compliance?

Siemens has no tolerance for non-compliant behavior

Compliance is about acting in accordance with the rules that govern the way we behave. These rules can be externally imposed through laws or regulations, or internally defined through policies, procedures and controls.

The internal rules will be governed by the external law, but will also take into account the values of the organization. Living thesevalues also leads to a competitive advantage.

Siemens values: ResponsibleExcellentInnovative

Compliance with what?

Anti-corruption legislationAnti-trust legislationAnti-discrimination legislationEnvironmental legislationLabor lawHuman rights legislationPrivacy law….Business Conduct Guidelines…


Compliance Program Objectives: Prevent – Detect – Respond

Prevent Detect Respond

TrainingPolicies &ProceduresProgramcommunicationCentralization

Compliance investigationsCompliance reviewsCompliance controls

Consequences for misconductGlobal case trackingMonitoring effectiveness

Integration with personnel processes

Compliance helpdesk (incl. Global Ombudsman function)

Compliance Organization

"Tone from the Top"

Conti-nuous

improve-ment


New Global Compliance Organization

Chief Compliance Officer

A. Pohlmann

Corporate UnitsCompliance

Officer

Th.Luethi

SectorCompliance

Officers

Industry: C.AugstenEnergy: G.Brey

Health: W.D.Guhl

ComplianceGlobal Coordinators

AM: I.GarciaASA: F.Schmidt

EU: M.ThunMEAC: T.Mark

CompliancePolicies,

Communication & Training

J.Meran

Compliance Program, Projects

& Reporting

M. Vierengel

ComplianceOperating Officer

K.Moosmayer

DisciplinarySanctions

Y.Hamm-Dueppe

Compliance Helpdesk &Monitoring

J.Neumann

ComplianceInvestigation

R.-D.Buehrer

RegionalCompliance

Officers(RCOs)

Compliance Legal

U.Hommel

Division Officers(DCOs)

Division Compliance

Officers(DCOs)

Member of the Managing BoardGeneral Counsel

P.Solmssen Compliance represented in Managing Board

Strong corporate governanceEmbedded in Business units and

Regions


Headcount FY 07

Global Compliance Organization –Size is Not Everything

Headcount as of Sept 30, 2008

CorporateΣ 70

Sectors &DivisionsΣ 259

RegionsΣ 292

Total: Σ 621

CorporateΣ 14

Sectors &Divisions

Σ 68

RegionsΣ 91

Total: Σ 173


Goals Approach for Goal Accomplishment

4.

5.

2.

1.

3.

Competency Management Target: Best in Class Compliance Organization

Deduction of development measures based on organizational competency status

Competency Management

Deduction of Development Landscape

Development of Master Job

Profiles

Competency Development Measures for

personnel and organizational development

Steering Committee

Business Strategy

1. 2. 3.

Clarification of individual and organizational competency

status

Competency Management

Communication

Information on competency gaps within Compliance Organization

Job Profile transparency and awareness within Compliance Organization

Comprehensive and standardized Job Profiles accepted within Compliance Organization

Career transparency / perspectives / attractiveness within Compliance Organization

Best-in-class compliance organization (people strategy) in line with business strategy


Targeted Anti-Public-Corruption

Policy

Siemens Values and Vision (Sept. 2007)

Business Conduct Guidelines (July 2005; revised version in Q2, 2009)

Anti-Public-Corruption Circular (May 2007)

Amended Business Conduct

Guidelinesand Gift & Hospitality

Policy to be

publishedin Jan '09

Overview of Major Siemens Anti-Corruption Policies & Procedures

Appli-cation

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)

Anti-Corruption Considerationsin M&A Transactions, Joint Ventures and Minority Investments (Aug. 2007)Company Donations (Oct. 2006)Sponsoring (May 2007)Business Partner Policy (DueDiligence) (July 2008)

Fundamental Ethical Standards

and Principles


Enhanced Compliance Training: Overview

Definition of Target Group Type of Training RemainingCurrent Status

Senior ManagementSupervisory Board, Board of ManagementCEOs / CFOs of Divisions, sub-divisions, regional companiesMembers of Group Boards

Employees with signing authorityEmployees in management positionsAll customer-facing and controller functions (e.g., sales, sales commercials)

Manager / staff who interact with govt. officialsPersonnel involved in sales, project managementRegular interactions with government (such as Tax, Customs)Boards of legal entities (if applicable)

New Compliance OfficersFrom Regions, Sectors / Divisions / Business Units

In-person 4h training delivered by Compliance and DPW

~1h Web-based training available in 15 languages

In-person4h-8h training delivered by local COs and PwC experts

4 day Introduction Program

Completed

~1,400 employees Completed

52,200 employees trained in FY 2008

123,000 employees

85 Compliance

officers from Jan -

Sept 08

As hired

~10,000 employees from lower-risk entities


Various Media Are Used to Distribute Compliance Messages

Siemens CommunicatorsIntranet Platform

Siemens Employee Magazine(reports frequently, three articles in ed. 08/2008)Management letter

(to Siemens management)

Corp. Compliance Intranet(to all employees)

Compliance Update(newsletter for glob. Compliance organiz.)

Siemens TV(to all employees)


Compliance Helpdesk Consists of Five Parts

"Tell Us" “Find It"

“Approve It" “Improve It"

"Ask Us"

The Compliance HelpDesk “Tell Us”function provides global, round-the-clock facilities for making statements on compliance-related breaches.

Do you have any questions about compliance? You can ask them at any time via the Compliance HelpDesk“Ask Us.”

With “Improve It” you can help to improve the Compliance program by adding your ideas and suggestions.

Use “Find It” to search for compliance related information, such as FAQs, policies & guidelines or training material.

Compliance Helpdesk&

Monitoring

“Approve It” is the platform for approval requests regarding gifts and hospitality

Now available

Partlyavailable

Pilot started


“Ask Us” Helpdesk: Overview

Innovative web-based tool for employees and compliance officers to ask compliance-related questions. Went live globally on September 16, 2007

Questions are answered by eight full-time Question Managers, who are supported by subject matter experts from throughout the Company

Custom-designed database system serves as a global knowledge base for the compliance organization, ensures clarity and consistency on compliance decisions, and helps identify gaps in policies, guidance or training as a basis for continuous improvement

198

746841

1142 973

Q1 FY 08 1)

Q2 FY 08

Q3 FY 08

Top 5 topicsTreatment of Business Partners & Third PartiesCompliance Implementation & MonitoringBasic Behavioral RequirementsHandling of InformationHandling of Company Property

Q4 FY 07

1)

Overview

1) Reporting started Sept. 2007

Reports

3900 questions (cumulated,

status Sept 15, 2008)

Q4 FY 08

52.5%

27.8%

7.5%5.8%2.8%


“Tell Us”: Whistleblower Hotline

24/7call center

ExternalInternet site

www

1) Located in Portland, Oregon, USA

Whistleblower hotline of the Compliance Helpdesk for employees, managers, customers, suppliers and other third parties to report potentially illegal behavior or potential violations of the Business Conduct Guidelines within the company.

Overview

Complaint intake (anonymous if requested)External vendor1) , multilingual (Website supports 10 languages, the call-center five and additionally 150 languages through live translation service)

60

60

Reports

Major issuesConflict of interestInhumane work conditionCorruptionFalsificationOther misconduct24

73

116

66

496 reports as of Sept. 15, 2008; 279 actionable


Business Partner Compliance Due Diligence Phase

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

Higher

Medium

Lower

Business Unit

Pre-work Due Diligence QuestionnaireFront-end Risk Assessment1 2 3

Entrypoint

BP key data Collection

Integrity Check (Internet Search)

Risk classifiers(A-H)

Doubtfulintegrity

Positiveintegrity

Higher

Medium

Lower

a

b


Limits of Authority (“LoA”) Tool: Project management at Siemens

Total # of projects in LoA Tool

0 782

10.026

26.687

40.058

52.103

0

10.000

20.000

30.000

40.000

50.000

60.000

Nov 5, 2007 Dec 31, 2007 Mar 31, 2008 Jun 30, 2008 Sep 30,2008 Dec 31, 2008

More than 300 entities (AREs) are using the LoA Tool worldwide to asses therisk factors and approve the acquisition of projects and the submission of bids

Over 52,000 offers / projects have been entered in LoA Live System from Nov 5, 2007 until Dec 31, 2008


Implementation Toolkit: Overview of 10 Focus Areas

'Tone from the Top'

Compliance

Case

Monitoring Effectiveness

Organization

10

1

3

2

Tracking

Training & ProgramCommun-

ication

4

Implementation of Policies and Procedures

3rd parties

Tender & Contracts

Gifts & Hospitality

Finance & Accounting

Integration with Personnel Processes9

8

7

6

5


What is expected from you

Tone from the Top

1.2 Communication

Group and Country Management provide an appropriate tone from the top about Siemens Anti-Corruption standards (e.g., Anti-Corruption guide, compliance program, policies and guidelines)

Objective

Topic 1.2

a) Draw up communication strategy and action plan with communication and training events (incl. Helpdesk communication) and integrate into existing communication plan

b) Especially promote Compliance Helpdesk 'Ask us' c) Implement events, retain log of activities and be ready to report to

corporate on request about communication activitiesd) Modify/add communication activities based on impact of communication

(employee survey)e) Send continuously strong messages from Group and Country

Management to all employees (including written communication)f) Communicate relevant messages also to external partners (customers,

suppliers, etc.)

Policies & Standards

Corporate Activities

Examples & Guidance

1.2.1 Compliance at Siemens1.2.2 Siemens Compliance Guide –Anti-Corruption

A global employee perception survey is currently being worked on to monitor effectiveness of communication with randomly selected employeesThe Siemens Compliance Guide – Anti-Corruption will also be widely distributed in different languages starting in October 2007For existing communication material, please contact your local communication expert or [email protected]

Business Conduct Guidelines A.4CF CCO Circular - Compliance Helpdesk: 'Ask us' function


Roll-out of New Compliance Control System (Implementation Kit) to All Siemens Entities Since November 2007

Roll-out prioritization

Source: Compliance Program/ Remediation Task Force1) consolidated and non consolidated

Category 1 Priority

Priority

Hig

hC

ompl

ianc

e ris

kLo

w

Entity category

1297 entities 106 entities

Implementation mandatory by

03/08

Implementation mandatory by

2009

56 High Risk entities

Category 2 & 3 1)


Compliance Operating Officer: Tasks

Compliance Helpdesk and Monitoring

Advise on compliance issuesResponses to "Ask us" questionsReporting on "Tell us" cases

Legal guidance and advice for all compliance-related matters (defense of cases handled outside of Compliance)Conduct high-end compliance trainings

Compliance Legal

1

2

Legal guidance and advice on disciplinary cases and proceedingsLegal recommendations for Corporate Disciplinary Committee

Disciplinary Sanctions

Investigation of compliance cases3Compliance Investigations

4


The Company established the Corporate Disciplinary Committee ("CDC") on August 21, 2007

The purpose of the CDC is to:

Evaluate allegations of misconduct

Select appropriate disciplinary sanction, taking into consideration necessary assessment of local employment law

CDC sets precedents in cases with disciplinary actions that may be taken by regional and sector companies

Corporate Disciplinary Committee: Overview

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

Compliance Operating Officer

Head of the relevant Business Unit where the violation took place

CDC(Corporate Disciplinary Committee)


Siemens Amnesty/Leniency Programs

The Company instituted an amnesty program, which began on October 31,2007 and concluded at the end of February 2008

123 employees came forward to seek amnesty; 80 received amnesty

Debevoise has confirmed that these individuals provided helpfulinformation

After February 2008, the Company created a leniency program for selectindividuals who provide significant information to further the investigation


Standard Agenda

Quarterly Compliance Reviews process

Compliance Program – Status

Prevent

Detect

Respond

Compliance risk management

Deep-dive on up to 3 high risk areas

Mitigation actions

2

1

Region Compliance Reviews

Sector Compliance Reviews

Division Compliance Reviews

Corporate Compliance Review

Agg

rega

tion

of re

sults

/ da

ta

Region

Sector

Division

Corporate

Structure

Management is responsible for Compliance, Compliance Organization owns the process

Bottom-up information gathering


Survey Overview Survey Results

Survey sent to 89,000

employees worldwide

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

Management culture and actions have important impact on employees

Compliance communications understood and well-regarded

Further work needed on training

Further need to fully imbed compliance in day-to-day business

Positive perception of compliance program

Employee Perception Survey: Measuring The Compliance Culture


Compliance: Mandatory Element of Senior Management Compensation Worldwide

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 obeying regulations is not rewarded, but expected


Compliance impacts the FY 2008 annual bonus by approximately 17%

1) If unit not tested, criteria does not apply in this fiscal year Source: CL CO / CD E

Metrics EvaluationAssessment

Compliance-related Incentive System For Senior Management: Compliance Performance Matters

Survey team:

Compliance index and benchmark

Corporate Finance – Audit (CF A)

Re-Testing report

Compliance Legal:

Case tracking and evaluation, Disci-plinary sanctions

Evaluation scheme:

Evaluation of each division/ countryProposal for multipliers prepared in compliance round table

Employee perception

Tone from the top & trainingPolicies implementationCompliance organization and transparency

1Implemen-tation kit 1) –

tested quality on time

Incidence of new serious cases (systematic failure)Adequate sanctions takenOn time reporting

2

Impact / effec-tiveness ofCompliance program

3Compliance perceptionsurvey

0.75 0.9 1.0 1.1 1.25


Compliance – Progress Report FY 20081)

1) Status is Sep. 30, exception: Findings/ Disciplinary Sanctions Sep. 15, 2008 2) Cumulative 3) Embezzlement of company assets, harassment, discrimination, etc. 4) Forfeiture of variable payment elements, transfer to another position, suspension 5) Compliance only one area of responsibility 6) Including Implementation Management

Detect HandelnPrevent

Helpdesk

Compliance Personal weltweit

"Ask us" Helpdesk

Compliance Roadshows in more than 50 countriesCompliance Perception Survey: Overall positive perceptions of Siemens' compliance performance (score in Compliance Performance Index 81%)Anti-corruption compliance remediation program in all large and medium sized entities implemented

Respond Disciplinary Sanctions

Compliance Staff WW

Training 2)

"Tell Us" & Ombudsmann

30%

"Ask us"

30,052,2

14,81,4

81

82,4

Q1

87,0

101,8

Q2

108,0

138,0

Q3

123,0

175,2

Q4

Participation in person training

841746

198

Q4 Q1 Q2

1,142

Q3

1,107

Q4

Total 4,034 requests

2473

116 12537

41

5271

61

Q1

114

Q2

168

Q3

196

Q4

SubstantiatedNot substantiated

Findings

521170865)

FY 06 FY 07

1006)621

FY 08

Participation web-based training

in thousands

Total 539 indications

Target:180.000

909 infringements resulting in disciplinary sanctions

13%

Corruption / Anti-trust

17% Fraud

70%Others3)

8%

26%

Dismissal / Separation

Others4)66%Warning


Siemens needs to go beyond internal programs in order to become a recognized leader in compliance

Become a recognized

leader in transparency

and compliance

Collective ActionExternal

Internal

Siemens Compliance Program

Prevent

Detect

Respond

Share internal policies, experiences, best practices and success stories

Reach out to industry peers via neutral facilitators (such as Transparency International) and initiate joint activities to fight corruption

“Collective Action" can have a key role fostering equal compliance standards for all market playersand thus reducing the risk of corruption.


Siemens Is a Member Of The World Bank Initiative On "Collective Action"

Results of World Bank Institute Initiative Working Group

Published pragmatic guide on how to implement Collective Action

Written 'by business for business'Decision trees and process descriptionsBased on real life experiencesTemplates available

Launched Web-Portal www.fightingcorruption.org(hosted by World Bank)

Providing guide download, country specific information, updated case stories, background info, etc...

Pilot implementation ongoing

Global Advice Network

Supporting partners: InWEnt Capacity Building International, GermanyTransparency International, USA

Advice & Feedback from:BDI, GermanyMicrosoft, USAPacto Etico Comercial, ParaguaySanlam, South AfricaPrince of Wales International Business Leaders Forum, UKThyssenKrupp AG, Germany

§BUSINESS FIGHTING CORRUPTION –A new approach through Collective Action- Implementation toolkit -

Version 0.9

The Collective Action Guide and the comprehensive web portal www.fightingcorruption.orgwas successfully launched on June 19, 2008 in London


Continuous Improvement Process

Goal Improve the Compliance Program continuously and drive the Compliance Organization dynamically

Tasks Collect, assess, drive, implement, monitor and communicateImprovement Ideas regarding effectiveness and efficiency systematically

Continuous Improvement Key Projects

Set-up of new Business Partner PolicySet-up of new “Improve it” toolSet-up Competency Management@ComplianceOrganizationIntroduction of Skip-Level Meetings

Continuous Improvement

Process

1

2

34

5

6Generate /

collect ideas

Assessand align

ideas

Designimplement-

ationplan

Driveimplementation

Monitor

Share know-

ledge &commun-

icate

Siemens achieved best score in the2008 Dow Jones Sustainability Index (ElectronicEquipment industry) regarding categorycode of conduct / compliance


Former German Federal Minister of Finance was appointed as compliance monitor

Basic elements of the Monitor's work plan Dr. Theo Waigel is the first compliance monitor who is not a U.S. national

The Monitor is an independent third partyHe assesses and monitors (a) internal controls and compliance improvements and (b) company's compliance with the terms of the SEC / DOJ judgmentConducts an initial review and prepare an initial report, followed by up to three follow-up reviews and reportsThe initial review shall commence no later than 120 days from the date of the engagementHe shall formulate conclusions based on inspection of relevant documents, on-site observation, meetings with and interviews of relevant employees, analyses, studies and testing of Siemens' compliance programHe shall promptly report improper activities to Siemens' General Counsel and Audit Committee for further action. In case of significant violation of law, he should also report such improper activities to the SECWithin 120 days after receiving the Monitor's report, Siemens shall adopt all recommendation in the reportSiemens shall cooperate fully with the MonitorThe Monitor will stay for a period of four years

Professional career01/2009 Siemens AG, Compliance

Monitor1999 GSK Stockmann & Kollegen

law firm, Munich1989–1999 German Federal Minister of Finance1988–1999 Chairman of the CSU (political party)1982 Chairman of the CSU faction in the German

parliament1980 Chairman of the CDU / CSU parliamentary

faction in the Economics Committee1972–2002 Member of the German Parliament1972 Deutsche Vermoegensberatung AG, member

of the Supervisory Board1970 Bavarian Ministry for Economics and

Transport, personal assistant to the Minister1967 District Court Munich, junior judicial officer for

the District AttorneyEducationStudied law and political science at the Universities of Munich and Wurzburg, Dr. iur.


Compliance: One cornerstone of

High performance cultureGlobal talentsLeadership culture & developmentExpert careers

PortfolioPeople Excellence

CorporateResponsibility

Best-in-class for all businesses and functions through

Innovation leadershipGlobal footprint

OperationalExcellence

ROCE of 14–16%Optimized capital structureCash conversion rate "1–growth rate"> 2x GDP growthBest-in-class margin rangesSG&A reduction of 10%

Performance

Best-in-class in Corporate governance

Compliance

Climate protectionCorporate citizenship

Focus on three Sectors Industry, Energy and HealthcareStringent resource allocationFocus on organic growth and leveraging past acquisitions

Status: Sep 1, 2008 SZ

lessons from the recent siemens experience · 1) located in portland, oregon, usa whistleblower...

Documents