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© Siemens AG 2008. All rights reserved.
The Siemens Compliance Program: A Change Management Process
Society of Corporate Compliance & Ethics 8th Annual Compliance & Ethics Institute
Deanna SlocumCorporate Compliance OfficerSiemens Corporation
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© Siemens AG 2008. All rights reserved
The Independent Investigation
�Staffing
�Scope
�Accounting Analysis
�Reporting to US Authorities
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© Siemens AG 2008. All rights reserved
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.
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© Siemens AG 2008. All rights reserved
Immediate Response
� Selection of external experts to conduct independent investigation
� Appointment of ombudsman in Germany
� "Tone from the top": town hall meetings; letters of CEO; etc.
� Use of business consultants restricted
� Payments and bank accounts centralized
ImplementationOf Enhanced Program
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
� Defined and created a comprehensive compliance program: Prevent – Detect –Respond
� Expanded global compliance organization and processes
� Conducted anti-corruption training for managers and sensitive functions
Compliance Efforts that Began in November 2006
Prevent Detect RespondPrevent Detect Respond
§ Training
§ Policies & Procedures
§ Programcommunication
§ 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"
Continuou s improve-
ment
Continuou s improve-
ment
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© Siemens AG 2008. All rights reserved
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 Y. Solmssen – General Counsel
� Former Executive Vice President and General Counsel at GE Healthcare based in the UK
Hans Winters – Chief Audit 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
Peter Löscher – Chief Executive Officer
� Former President of Global Health at Merck & Co., Inc. in USA
� Former 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 USA
� Previously responsible for legal matters, corporate governance, compliance and risk management at Celanese AG
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© Siemens AG 2008. All rights reserved
Corporate Restructuring: Three Sectors
Key Benefits
Industry
Businesses from� Automation & Drives� Industrial Services & Solutions� Transportation Systems� Building Technologies� Osram
Healthcare
Businesses from� Medical Solutions
Sectors
Sie
mens IT
Solu
tions a
nd S
erv
ice
sS
iem
ens F
inancia
l S
erv
ices
Cross-functional
Three Sectors
� Clear Accountability
� Reduction in Complexity
� Synergies
Energy
Businesses from� Power Generation� Power Transmission & Distribution
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© Siemens AG 2008. All rights reserved
Expanded Global Compliance Organization
Chief
Compliance Officer
A. Pohlmann
Corporate Units
Compliance
Officer
Th.Luethi
Sector
Compliance
Officers
Industry: C.AugstenEnergy: G.Brey
Health: W.D.Guhl
Compliance
Global Coordinators
AM: I.GarciaASA: F.Schmidt
EU: M.ThunMEAC: T.Mark
Compliance
Policies,
Communication
& Training
J.Meran
Compliance
Program, Projects
& Reporting
M. Vierengel
Compliance
Operating Officer
K.Moosmayer
Disciplinary
Sanctions
Y.Hamm-Dueppe
Compliance
Helpdesk &
Monitoring
J.Neumann
Compliance
Investigation
R.-D.Buehrer
Regional
Compliance
Officers
(RCOs)
Compliance Legal
U.Hommel
Division Officers
(DCOs)
Division
Compliance
Officers
(DCOs)
Member of the
Managing Board
General Counsel
P.Solmssen� Compliance represented in
Managing Board
� Strong corporate governance
� Embedded in Business units and Regions
Joel KirschVice President &
Chief Compliance Officer,Associate General Counsel
Fred Kile
(SWT)Doug Doty
(SBT)
Dan Garen
(Healthcare)
BarbaraGreenberg(SIS/STS)
Steve Shoop(SFS/ SSL/
SRE/ SCR/
SO)
David Taft
(SEA)
DeannaSlocum(PLM)
Dave Dickerson
(Energy)
Compliance Officers
Laura GoodmanExecutiveAssistant
Ann Florkowski
ComplianceProfessional
Bob Jordan
(OSRAM)
Ginny MurphyCounsel,
Compliance
Expanded US Compliance Organization
George NolenPresident & CEO
E. Robert LuponeSr. Vice PresidentGeneral Counsel &
Secretary
Andreas PohlmannCCO
George NolenPresident & CEO
E. Robert LuponeSr. Vice PresidentGeneral Counsel &
Secretary
Andreas PohlmannCCO
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© Siemens AG 2008. All rights reserved
Key Elements of Compliance Program:
Prevent – Detect – Respond
Prevent Detect Respond
� Training
� Policies &Procedures
� Programcommunication
� Centralization
� Compliance investigations
� Compliance reviews
� Compliance controls
� Consequences for misconduct
� Global case tracking
� Monitoring effectiveness
� Integration with personnel processes
� Compliance helpdesk
� Compliance Organization
� "Tone from the Top"
Conti-nuous
improve-ment
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© Siemens AG 2008. All rights reserved
Implementation of Anti-Corruption Toolkit
'Tone from the Top'
Compliance
Case
Monitoring Effectiveness
Organization
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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
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6
5
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© Siemens AG 2008. All rights reserved
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
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© Siemens AG 2008. All rights reserved
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
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© Siemens AG 2008. All rights reserved
Compliance Communications Distributed through
Variety of Media
Siemens Communicators
Intranet 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)
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Targeted Anti-Public-Corruption
Policy
� Siemens Values and Vision (Sept. 2007)
� Business Conduct Guidelines (July 2005; revised in January 2009)
� Anti-Public-Corruption Circular (May 2007)
Enhancement of 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 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)
Fundamental Ethical Standards
and Principles
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© Siemens AG 2008. All rights reserved
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
Employees with signing authority
� Employees in management positions
� All customer-facing and controller functions (e.g., sales, sales commercials)
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)
New Compliance Officers
� From Regions, Sectors / Divisions / Business Units
In-person 4h training delivered by Compliance and Outside Counsel
~1h Web-based training available in 15 languages
In-person4h-8h training delivered by local COs and In House Counsel
4 day Introduction Program
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
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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
Higher
Medium
Lower
Business Unit
Pre-workDue Diligence Questionnaire
Front-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
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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
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© Siemens AG 2008. All rights reserved
Compliance Helpdesk
"Tell Us" “Find It"
“Approve It" “Improve It"
"Ask Us"
The Compliance HelpDesk “Tell Us”function provides global, round-the-clock intake for allegations of actual or potential non-compliance.
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
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© Siemens AG 2008. All rights reserved
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
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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 actions establish precedent for sectors and regional companies
Role of Siemens AG 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
Compliance Operating Officer
Head of the relevant Business Unit where the violation took place
CDC(Corporate Disciplinary Committee)
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© Siemens AG 2008. All rights reserved
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
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© Siemens AG 2008. All rights reserved
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
Monitoring Our Progress – Employee Survey
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© Siemens AG 2008. All rights reserved
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© Siemens AG 2008. All rights reserved
Siemens Will Go Beyond Internal Programs and become a Recognized Leader in Compliance Externally
Become a recognized
leader in transparency
and compliance
Collective Action
External
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 will play a critical role in establishing high compliance standards for all market players and reducing the risk of corruption.
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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