Joint Membership Meeting
Compliance or Corruption—Is There a Choice?

23 October 2009 - Compliance officers of Siemens, the engineering conglomerate based in Germany, spoke before a group of Filipino and foreign executives about their experience in addressing and combating the culture of corruption that had plagued Siemens and placed it in the middle of a major bribery scandal. The German executives were the guests of honor at a joint luncheon meeting of the Makati Business Club, the European Chamber of Commerce, and other leading foreign chambers of commerce held on 23 October 2009 at the Mandarin Oriental Hotel.

Dr. Andreas Pohlmann, the chief compliance officer of Siemens AG, and Frank Schmidt, Siemens' global compliance coordinator for Asia-Pacific, shared their insights on how Siemens has moved forward since the bribery scandal blew up in 2006. They recounted that the company had to pay one billion Euros in fines, reportedly the “largest fine for bribery in modern corporate history,” after it pleaded guilty in 2008 to violating provisions of the United States' Foreign Corrupt Practices Act. (Siemens is listed in the New York Stock Exchange.) The US Department of Justice meted the fine and further recommended that Siemens take on an external advisory group to help it become compliant and corruption-free.

In the assessment of Pohlmann, who assumed his position in Siemens in 2007, the impact on the company of the scandal and the remedial actions imposed was more costly than the financial value of the fines paid. Siemens had to face the enormous task of repairing the damage to the company's reputation and the complex task of analyzing how best to rectify the situation. It had to go over 40 million bank statements, 100 million documents, and over 120 million transactions in over two years.

Rebuilding Program
As a direct outcome of the corruption and bribery scandal, Siemens embarked on a rebuilding program anchored on compliance. This meant a major organizational overhaul that did not spare top company officials. In 2007, a new CEO and president, Peter Löscher, was brought in from outside the Siemens network and he became a crucial cog in putting the company's compliance program onstream.

The Siemens program relies on a strong top-to-bottom approach in correcting corporate misdeed. The key is instilling in the entire organization that compliance is part of the Siemens culture and that Siemens should conduct business cleanly and transparently everywhere and at all times. A dedicated team of 600 compliance officers, from an original 50 officers, has been put in place to help all Siemens employees.

Two years since the implementation of its anti-corruption program, Siemens' efforts have been nothing short of commendable. According to the two Siemens executives, compliance to the program has became the way of life of its 430,000 employees in over 190 global units. The internal changes that Siemens had to undergo were crucial. With Löscher initiating and the leading the way in the anti-corruption program, the effort cascaded down to Siemens' front lines.

The company focused on aligning all its employees with the global anti-corruption effort. As many as 210,000 Siemens employees worldwide received training on compliance standards, 80,000 of them in the classroom and 130,000 through Web-based modules.

Setting Limits
An essential part of the training was setting and communicating the limits for employees' dealings with customers and business partners. In their work, Siemens employees need only remember four points to find out whether they are dealing in a “fully corruption-free nature,” namely, dealing only with the best interest of the company in mind; adhering to Siemens' core values of innovation, excellence, and responsibility; legal and ethical practice of business; and employee accountability for the resulting action or deal.

Siemens ensures adherence at all levels of the organization. Aside from frontline employee alignment, Siemens furthers the alignment of individual units by making program compliance a key concern of senior management. Compliance key performance indicators have also been introduced to back up the efforts, maximizing the use of a short-term incentive program to keep global units in check. Quarterly KPI reports keep top management abreast of compliance issues. For the long term, Siemens is making program compliance a vital part of the evaluation of the management team. This will guarantee more than just compliance but also a clear drive to achieve cultural change.

Compliance help desks have been set up for those who may need guidance and those wishing to report wrongdoing anonymously. Furthermore, Siemens is making it a point to partner with other entities in anti-corruption efforts, such as with business competitors (which should redound to a more level business playing field for everyone) and organizations like Transparency International.

Vigilance
The key to Siemens' success is rooted not only in their processes and systems but also in the organization's rejuvenated vigilance against corruption. Siemens believes that putting up the anti-corruption program and securing support from it employees, business partners, competitors, and other institutions will prove to be more beneficial in the long run compared to the costs of corruption.

In closing, Pohlmann shared quotes from Warren Buffet and Confucius, both of whom emphasized the need for the drive against corruption to start from the top of the organization and making people live the value of unquestionable integrity.

ABOUT THE SPEAKER

Andreas Pohlmann
Dr. Pohlmann assumed the position of Siemens' chief compliance officer in 2007, reporting directly to the CEO and the company's general counsel. Before joining Siemens, Pohlmann was executive vice president and chief administrative officer at Celanese Corporation in Texas, where he was responsible for legal matters, corporate governance, compliance, and risk management. He earned a doctorate in law from the University of Tuebingen in Germany.