The Siemens Compliance System Seminario internacional - 24/08/2016 Escándalos Empresariales en Primera Persona: Volver a ponerse de pie Unrestricted Siemens AG 2016 siemens.com
The Past The Siemens Compliance System
The disaster struck November 2006 headlines Possible scenarios Debarment from public tenders Penalties up to 10 billion Long-term damage to reputation and business Break-up of the company Page 3
The success story What we did More than 5,000 consulting agreements evaluated 40 million bank account statements, 100 million documents and 127 million transactions reviewed One in five employees pitched in at some point What we achieved Conclusion of legal proceedings in Germany and US in record time (less than two years) First Compliance Monitor who is not a U.S. citizen First ever reduction of fines because of outstanding cooperation Internal control mechanisms 'set a new standard' Two Years Later: Out of the line of fire and a new company Page 4
Substantial Change was necessary... 'Wink & nod' culture Unclear decision-making processes Inadequate internal control mechanisms Complex company structures Culture of hiding problems Determination to cling to myths Page 5
Rapid reaction and implementation of our Compliance System, plus further development Immediate actions Implementation Support sustainable business 2006-2007 2008 2009 Exchange of Leadership Team Tone from the top Independent investigation Centralization of bank accounts Settlement with authorities in Germany and in the U.S. Compliance program Compliance organization Compliance training Compliance tools Settlement with World Bank Continuous improvement Values & integrity Collective Action Active development of Compliance System/ external recognition 2010-2012 2013- Present First funding round Integrity Initiative End of monitorship (Dec. 15, 2012); full implementation of all recommendations Start Integrity Dialog Second funding round Integrity Initiative Dow Jones Sustainability Index: highest rating in the category Compliance for 5th time in a row External Compliance review and certification by law firm Gibson Dunn (2015) Page 6
Siemens Today The Siemens Compliance System
The lived ownership culture of our company makes the difference The lived ownership culture of our company makes the difference. People rightly associate Siemens with reliability, fairness and integrity. Joe Kaeser, President and CEO of Siemens AG Page 8
Our Compliance System Management responsibility is the focus We continuously develop the Compliance System further in order to adapt it to changing requirements according to our global business. Effective preventive measures such as risk management, policies & procedures, training & communication enable systematic misconduct to be avoided Explicit consequences and clear reactions support the prevention of misconduct, for example to punish wrongdoing and to eliminate deficiencies Management responsibility Effective Compliance work requires complete clarification: whistle-blowing channels Tell us and ombudsman, as well as professional and fair investigations Page 9
The Siemens Compliance Organization Clear roles & responsibilities Direct connection to the CEO Roles of Compliance Officers President and CEO Joe Kaeser General Counsel Andreas C. Hoffmann Situation 1) Chief Compliance Officer Klaus Moosmayer Company-wide Compliance organization in Headquarters, Divisions and Regions Main tasks Anti-Corruption The prevention of the abuse of entrusted power for private gain Antitrust The preservation of market competition Data Privacy The protection of personal data Anti-Money Laundering The protection of Siemens from being abused for laundering money or financing terrorism 1 Direct reporting line to Board of Management and Supervisory Board re compliance risks and measures. Page 10
Our employees in dialog on Compliance with their line manager Integrity dialog in team meetings Objectives to maintain awareness of Compliance to provide a practical demonstration of management responsibility Managers discuss Compliance-related topics with their teams Contents: Risk-based selection of topics with central and local relevance Supported by Compliance Officer Global rollout during Fiscal Year 2013 Repeated on annual basis Page 11
Compliance Training Three Corridors Onboarding Introduce the Siemens Compliance System Set expectations for integrity and compliance Initial policy/tool/process training (function specific) Overview of Siemens Compliance history Examples New Employee Basic IPT Siemens Compliance WBT Data Privacy WBT Life-Long Learning Advanced and Refresher Training Courses Builds on concepts presented in onboarding training Focus on real world application (e.g. identifying risk, tools & processes, etc.) Examples Modules (advanced tutorials, refreshers, etc.) Topic specific WBT (e.g. AML) Embed compliance aspects into leadership courses Ownership Culture Reinforce a Culture of Integrity Mixture of communication and informal training Frequent involvement of top and mid level management Significantly reduced administration and tracking Examples Integrity Dialogs Short videos (e.g. scribble, management interviews) Page 12
Compliance Communications Key Messages & Platforms Integrity is the basis of sustainable business Compliance enables responsible behavior of the company Compliance stands for integrity Compliance supports profitable growth Intranet Internal & External news updates Policies, processes, tools & links Posters, flyers & downloads Hot Topics & Newsletters Articles aligned to policies & law Short, simple reads Posters & Flyers Best factory worker communication channel Important method for sharing Tell Us hotline details Compliance Week Communicate a Tone from the Top Highlight Siemens Values Reinforce compliance messaging Meetings & Townhalls Excellent platform for showcasing case studies Educate business on policies & processes Reinforce tone from the top Siemens Social Network Engages younger workers Enables global discussion of compliance topics Page 13
Business partner-related Compliance risks uniform risk-assessment of all relationships The Compliance Due Diligence process for Business Partners All business partners with an intermediary function between Siemens and the customer must undergo a risk assessment (uniform across the company and supported by a tool). Based on certain risk indicators such as, for example, the risk of corruption in the country of deployment a risk class (higher, medium or lower risk) is defined for the business relationship, which subsequently determines further procedure (Due Diligence, requirement for approval and mandatory contract clauses). Lifecycle management: daily learning and adaption if needed continuous development of risk management. Page 14
Business Partners uniform risk-assessment of all relationships The Compliance Due Diligence process for Business Partners All business partners with an intermediary function between Siemens and the customer must undergo a risk assessment (uniform across the company and supported by a tool) Based on certain risk indicators such as, for example, the risk of corruption in the country of deployment a risk class (higher, medium or lower risk) is defined for the business relationship Management is responsible for ongoing business partner monitoring throughout the course of the relationship. Documentation of monitoring is required for highest risk business partners Business partner contracts include mandatory compliance provisions, including audit rights Siemens regularly audits business partners (~400 since 2012) Page 15
Compliance in Project Sales and Project Execution Project Sales Compliance risks in the project sales phase are covered by the Limits of Authority (LoA)1) process. Project Execution Compliance risks in project execution Subcontractors Inappropriate payments to subcontractors Scrap/ excess/ surplus Material Scrap/ excess/ surplus material is misused for inappropriate purposes Customer decisions (e.g. change orders, acceptance, licenses permits) Inappropriate payments Identification and mitigation of Compliance risks In projects that indicate possible compliance risks, the Project Manager has to regularly identify and mitigate such risks in the project execution according to a specified Red Flag systematic and actively involves the respective Compliance Officer in the preparation of the acceptance of the project. 1 *: The LoA process is the internal approval procedure for external projects of Siemens. Page 16
Collective Action is building alliances against corruption in order to support fair market conditions Background Collective Action enables corruption to be fought collectively Goals Create fair and equal market conditions for all market players Eliminate the temptations of corruption Content/ Priorities Global implementation of legal and regulatory frameworks such as the UN Convention against Corruption (UNCAC) or the OECD Anti-Bribery convention Increase cooperation and encourage partnerships between public and private sector, and other stakeholders Increase transparency in government procurement Position of Siemens Promote, extend and implement regional and long-term based initiatives Drive the Siemens Integrity Initiative* with a total funding of more than US$ 100 million. Actively engage in international anti-corruption initiatives such as G20/B20, OECD/BIAC and World Economic Forum Foster global knowledge sharing about anti-corruption and Collective Action *: The initiative is based on the settlements with the World Bank and the European Investment Bank and supports organizations and projects that fight corruption and fraud through Collective Action, education and training. Page 17
Siemens Integrity Initiative covers all major growth regions and high-risk countries 12.0M 8.4M CEE (6 Projects, 7.0M) 2.4M 4.6M Russia (1 Project and 1 Sub-Project, 2.4M) 0.9M 1.5M Global Projects (9 Projects, 20.4M) Americas (5 Projects and 3 Sub-Projects, 7.6M) 1.2M 6.4M 2.4M 0.6M South Europe (3 Projects, 3.0M) Africa (8 Projects and 5.2M 7.0M Middle East 4.4M (9 Projects and 1 Sub- Project, 11.4M) 1.4M 1.7M 4.0M India (2 Projects and 1.5M 3 Sub-Projects, 3.1M) 2.9M 0.9M South Korea 0.8M (2 Projects, 1.7M) China (3 Projects and 1 Sub-Project, 4.4M) 3.0M Asia-Pacific (3 Projects, 3.0M) 3 Sub-Projects, 9.2M) Page 18 Region / Country of implementation (number of project proposals) First Funding Round Bubble size = Approximate Second Funding Round value of funding
We must stay vigilant and determinedly pursue all cases that arise Compliance investigation process Compliance case Allegation received Mandating Research and planning Compliance investigation Assessment carried out by examining or evaluating the allegation before mandating an investigation Investigation Preparation of the investigation report Disciplinary measures and remediation Stipulated standards The presumption of innocence applies, employee rights are safeguarded Works Council co-determination rights are protected Data privacy is observed Page 19
Compliance indicators Compliance Indicators 1 Fiscal year 2015 2014 Compliance cases reports 568 653 Disciplinary sanctions 208 195 therein warnings 116 114 therein dismissals 79 50 Therein others 2 13 31 1 Continuing and discontinued operations. 2 Includes loss of variable and voluntary compensation elements, transfer and suspension. Source: Siemens Sustainability Information 2015 Page 20
and continue with the constant development of the Compliance System Compliance has top priority Compliance System to support sustainable growth and create a competitive advantage Risk-based further development of the Compliance System, in order to maintain high standards High rating and recognition of our Compliance System in the annual assessments for the Dow Jones Sustainability Index: highest rating in the Compliance category for the 5 th time in a row Page 21
Further Information Business Conduct Guidelines Code of Conduct Compliance Internet Compliance System Brochure Siemens Integrity Initiative Sustainability Information 2015 Page 22