In the latest of our conversations with compliance and governance executives, we catch up with Andreas Pohlmann, chief compliance officer for Siemens AG. Readers can also visit our archive of Q&A interviews.

DETAILS

Pohlmann

Andreas Pohlmann is chief compliance officer at Siemens AG and is chiefly responsible for investigating the infamous 2006 Siemens bribery scandal and for building a company-wide compliance system for the Munich, Germany-based company.

Before joining Siemens, Pohlmann was executive vice president and chief administrative officer of Celanese Corp., a chemical manufacturer based in Dallas. In addition, he served as a member of its managing board and as executive director of Celanese AG. Prior to Celanese, Pohlmann was an attorney in the legal department of Hoechst AG.

COMPANY BASICS

Company

Siemens AG.

Headquarters

Munich, Germany

Employees

398,000

Industry

Electronics/Industrial Engineering

’07 Revenue

$113 billion

Let’s talk about the obvious: the bribery scandal. Tell us what your role has been in sorting out the scope of the problem at Siemens.

As the chief compliance officer, I’m a member of the executive team. The mission is twofold: to investigate the bribery scandal of the past completely and detect the root causes, and to establish a sustainable integrity culture for Siemens for the future.

One specific role is to support the independent investigation of the international law firm, Debevoise & Plimpton, and to provide the right platform for them to really get to the ground of this bribery scandal. It’s also my responsibility to build up the compliance organization for Siemens going forward: a sustainable and effective compliance function on a global basis that’s suited to prevent scandals like we faced in the past. So it’s a role that is pretty broad and very sensitive. We have to be the trusted advisers of the businesses, embedded in the businesses on the one hand and investigating on the other. It’s a sensitive balance.

From that broad perspective, can you tell us what the company might have been doing wrong in the past that led to the misbehavior?

From what we see today, it was clearly a leadership problem within Siemens. Siemens certainly had a comprehensive set of policies and guidelines, although they were not communicated enough and integrated into the organization. There was a lack of communication—a lack of conviction of employees throughout the world. The company was too much relying on written statements, policies, and guidelines. In the past there was too little direct dialogue with employees and driving the tone from the top into the organization—which is the key success factor for establishing a compliance culture within the organization.

You’ve been in your role since September 2007. What changes do you want to put in place to build that strong compliance function going forward?

Over the last 15 months, the internal team has worked hard, with the help of external advisers, to set up a compliance program that can effectively support a large organization like Siemens. We have set up a new regional compliance organization; the regional compliance officers and the business compliance officers report directly to me. We replaced approximately 50 percent of our regional compliance officers over the last nine months. We are conducting a management appraisal for the entire population of compliance officers worldwide, about 140 people. We have directed the regional and business compliance officers to spend 100 percent of their time on compliance, instead of just doing compliance in addition to their other responsibilities.

One of my tasks when I joined the company was to set up by the end of 2007 a new compliance organization at Siemens AG in Munich, emphasizing the core program concepts of prevention, detection, and response. So far, we have trained about 100,000 employees by Web-based tools and more than 1,400 executives in person. We are getting to the sensitive functions within the company, the people in the field. Specialized training is being provided to the compliance officers worldwide. This is a major component of prevention. We are also trying to increase the awareness and sensitivity for compliance throughout the company. We implemented a help desk during the second half of 2007 with the features “tell us” and “ask us.” We have received thousands of inquiries over the last three to four months on specific compliance-related questions.

You mentioned that there are roughly 140 regional and business compliance officers. They all report to you?

Some, and others through the chain of command within the compliance organization. I report to Peter Solmssen, the member of the board responsible for compliance and legal, and also to the CEO, Peter Löscher.

Can you tell us about your working relationship with Solmssen? What do each of you do and how do you work together?

As I mentioned, he’s the member of the board responsible for legal and compliance, overseeing the entire compliance program for Siemens. We are in continuous dialogue concerning various strategic and operational issues.

Siemens also created a new corporate finance-auditing unit. What’s your interaction with them?

The corporate audit function reports directly to the chief audit officer at Siemens AG. In the event that we receive information from inside or outside the company about specific non-compliant behavior, we request that the corporate audit function perform an audit review. We get back an audit report enabling us to remediate the situation. So, there is a close cooperation between compliance and audit.

How often do you personally appear before the CEO and the board? What kind of information do you present to them?

We have a two-tiered corporate governance system in Germany. The supervisory board, composed of shareholder representatives and employee representatives, oversees the board of management and the company’s overall strategic direction. The board of management consists of the most senior executives of the company and leads the company strategically and operationally.

I’m in frequent contact with the CEO and with Peter Solmssen and report to the compliance committee of the supervisory board at least four times a year. In my role as chief compliance officer, I certainly also inform the chairman of the supervisory board about compliance issues whenever necessary.

Can you give us some sense of what remains to be done with the investigation—what it is that you still want to find out?

With all that we’ve done so far, there remains a lot to do. The most important issue for Siemens is to change the culture of the company going forward and to drive the tone from the top into the organization by convincing people that compliance is a principle but not an option. This is something that will not change overnight. This is a longer-term process.

“With all that we’ve done so far, there remains a lot to do. The most important issue for Siemens is to change the culture of the company going forward and to drive the tone from the top into the organization.”

Our CEO has given a clear statement to the organization: clean business everywhere, at all times. There is no tolerance for improper behavior. Everybody has to follow this path. We, as a compliance organization, have to support the businesses in doing their jobs. But at the end of the day, the leadership team, management, is ultimately responsible for being compliant.

To get to the root cause of the bribery scandal, we established an amnesty program last fall. It was a great success. We extended the program until the end of February. We are getting a lot of information from past employees, from current employees, from inside and outside the company. This will provide us with a picture in terms of who is responsible for what happened to the company over the last few years. This is our main task in terms of investigation. Responsibility and accountability have to be clearly allocated. The task of the current executive team going forward is to understand what happened in the past and get back on track for the future.

How do you use all that information coming in through the amnesty program?

We support the investigations of Debevoise & Plimpton to the greatest extent possible. As soon as we learn that employees of the company are responsible for specific wrongdoings, we respond. We have set up a corporate disciplinary committee that deals with non-compliant behavior and takes appropriate actions. That can range from an informal warning to dismissal of the employee. We are also claiming damages for the company. Under the amnesty, the company will not make claims for damages or unilaterally terminate employees who voluntarily disclose information.

You talked about tone at the top. In an organization of 400,000 employees, how do you drive the tone at the top all the way down?

This is the challenge for our organization. You can try to communicate to 400,000 employees in written form by publishing guidelines and policies. That may not be very effective; it’s just checking the box. We have to make sure everybody understands what the mission and the objective of compliance at Siemens are. As I said, that requires a clear tone from the top, from the CEO, from the members of the board of management, from other leadership team members.

For example, we are doing a compliance road show all over the world, with the management team presenting clear messages throughout the organization addressing the issue of compliance. In addition, I also attend town hall meetings, departmental meetings, conferences—wherever employees meet—to address compliance questions and concerns in their daily business activities.

It’s not so much that we have to rely on sophisticated PowerPoint presentations; we need to talk with people. We need to get to their hearts and minds. What we are doing is nothing less than a huge change-management process. We are coming from a culture that was very formalized and getting to a culture where people talk to each other and exchange views on specific compliance issues, where they exchange experiences. This will be the key success factor for reaching the right compliance culture.

How do you measure whether you’ve changed the culture?

For 2008, we are planning a global employee perception survey to verify the compliance awareness in our organization. We’ll ask specific questions. For instance: How often have you been in contact with your supervisor on the issue of compliance? What did your supervisor tell you? Did you understand everything? What issues have you experienced in your daily work?

We are also implementing a compliance review, a process that we built from the bottom up, where the leadership teams will evaluate specific compliance trends and developments with regard to compliance in their region or business. This will be aggregated up to the board of management. I, as chief compliance officer, will discuss it with the board of management, and that will be channeled into the report for the compliance committee of the supervisory board.

Another thing we did at the end of 2007, for the first time, was that we added to our global compensation system a compliance-related target, applicable to the entire leadership team.

How does that work?

We have to meet specific compliance-related targets. For instance, we are implementing a compliance toolkit addressing almost 60 sensitive entities with and more than 100 major legal entities of our organization. We directed the respective management teams to implement additional controls and processes. The deadline for those first units is the 31st of March 2008. The achievement of these objectives becomes a clear key performance indicator. This is clearly something we can measure and which can influence the manager’s bonus.

Another KPI for compliance is the response from our employee perception survey. If we see that a specific executive team was not successful in addressing compliance issues in its specific region and business, then we would address that within the context of the incentive discussion at the end of the fiscal year.

Tell us about the guts of your job. How many hours a week do you put in? How much travel is involved?

I can really say it’s a 24/7 work requirement. To give you an idea, on Sunday, I flew over to an African country to visit our operations there. Tuesday, I came to New York. Today is Wednesday. I will fly to Texas tomorrow, return to New York on Friday, and I will be in Asia next week.

What do you want to have accomplished one year from now?

Our priority is to be among the leading companies in terms of compliance by the year 2010. I hope that in a year, we will have made significant steps to get closer to that objective.

Siemens is 160 years old. The company was extremely successful over the last 160 years, not by being non-compliant, but by being excellent, by being responsible, by being innovative. Siemens is a great company with great people. We will overcome this situation. There’s no doubt about that. We are getting back on track.

Thanks, Andreas.