Beyond Rhetoric – Sustaining Efforts to Combat Corruption

1. 4th ICAC Symposium: Deals Under the Table – the Doing or Undoing of Business Beyond Rhetoric – Sustaining Efforts to Combat Corruption Mark Gough Deputy Head of Compliance Investigations

2. Overview • Siemens History & Problems • Reaction & Results • Investigations at Siemens • Cooperation & Joint investigative activity

3. From Werner von Siemens' workshopto global player – active in over 190 countries 1847 Founding of ''Telegraphen-Bauanstalt von Siemens & Halske" in Berlin 1850 First international sales agency in London 1855 Founding of the Russian company as the first foreign branch 1904 First permanent office in China 1905 Founding of Siemens Brazil 1924 Founding of Siemens India Ltd. 1961 Exports exceed 1 billion DM for first time 1968 Siemens passes the 100-country mark 1970 Founding of Siemens Corporation, USA 1994 Founding of Siemens Ltd. China in Beijing

4. Problems - Independent Investigations & Findings • After raids by Munich prosecutor: • Appointment of Debevoise as Independent investigators • Report only to chairman of Supervisory Board • Unrestricted access to all employees and records • Investigatory work in 32 countries • Over 2,050 interviews + 900 informational meetings • Collection of over 100 million documents • Analysis of 10 million and target searching of 40 million banking records • Extended participation by more than 100 lawyers and more than 100 support staff from Debevoise • Debevoise mandate ended March 2009

5. How to become a "recognized leader" ? (Apr 08 – Sep 10) Immediate Actions (Nov. 06 – Mar. 07) Implementation (April 07 – Mar 08) • Elimination of material weakness • Compliance tools and simplification of processes • Compliance incentive system • NGO cooperation and collective market approach • Settlement with DOJ/SEC and Appointment of a Monitor • Extended scope of compliance and creating a culture of integrity • …. • Definition and creation of a comprehensive compliance program: Prevent – Detect – Respond • Independent investigation & external advisors appointed • External ombudsman active • "Tone from the top": town hall meetings; letters of CEO; etc. • Monitor and review of cases • Use of business consultants restricted • Payments and bank accounts centralized Prevent Prevent Detect Detect Respond Respond § § "Tone from the Top" "Tone from the Top" § § Compliance Organization Compliance Organization § Training § Consequences for § Compliance misconduct investigations § Policies & Procedures § Global case tracking § Program Continuous Continuous § Compliance reviews improve improve - - communication § Monitoring effectiveness ment ment § Compliance controls § Centralization § § Compliance helpdesk (incl. Global Ombudsman function) Compliance helpdesk (incl. Global Ombudsman function) § Integration with personnel • Implement effective global compliance organization and processes • Anti-corruption training for managers and sensitive functions processes From Reaction to Transformation to Sustainability: Outline of the change process

6. Importance of the Compliance Efforts for the Settlement – “Extracts” “The reorganization and remediation efforts of Siemens have been extraordinary and have seta high standard for multi-national companies to follow. These measures, in conjunction with Siemens‘ agreement to retain a Monitor (with support from a U.S. law firm with FCPA and compliance expertise) for a term of four years, highlight the serious commitment of Siemens to ensure that itoperates in a transparent, honest, and responsible manner going forward.” (DOJ Sentencing Memorandum, December 2008) “…the Department of Justice advised the Court that Siemens AG and its subsidiaries havedemonstrated extraordinary cooperation with the Department of Justice‘s investigation, and have engaged what we view as extraordinary remediation and self-cleaning efforts, including the replacement of top leadership with management committed to compliance with anti-corruption laws, centralization of its compliance and audit functions, company-wide training, discipline of wrongdoers, implementation of due diligence, and other best-in-class measures to prevent future violations.” (Letter of DOJ, December 2008) The settlement would not have been possible without the Compliance efforts of Siemens and its Global Compliance Organization

7. Siemens AG Monitor work plan: Year one The four major activities of the Monitor are… Make on-site observations Inspect relevant documents Attend meetings like Supervisory Board‘s Compliance Committee, Managing Board, SOA 404 Subcommittee, Corporate Disciplinary Committee and anti-corruption training sessions, to learn how Compliance issues are addressed Review reports, minutes etc. that demonstrate how anti-corruption Compliance policies and procedures operate 1 2 Conduct analyses, studies and testing Informational meeting with relevant stakeholders • Supervisory Board, Managing Board • Key employees Corporate Departments incl. Cross-Sector-Services and Businesses • Key employees Sector and Division Level: CEO and CFO, General Counsel, Compliance Officer and other functions (e.g. Accounting & Controlling, Sales, etc.) • Key employees RC Level: CEO and CFO, General Counsel, Compliance Officer and selected employees from certain functions likely to face corruption risk • RC site visits schedule from May till Sept: Austria, Mexico, Russia, Brazil, China, South Africa, Argentina, India and United States • Analyze and assess the effectiveness of several of primary anti-corruption Compliance controls through a series of walkthroughs • Business Partner toolkit • LoA and G&H tool • Tools used for approving Donations, Memberships and Sponsoring • Review reports of corruption related misconduct • Enterprise Risk Management and Corruption Exposure Assessments 3 4

8. Video from Peter Löscher is shown in all training – sets 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

9. Compliance Program Objectives: Prevent – Detect – Respond Prevent Respond Detect "Tone from the Top" Compliance Organization • Training • Policies & Procedures • Programcommunication • Centralization • Compliance investigations • Compliance reviews • Compliance controls • Consequences for misconduct • Global case tracking • Monitoring effectiveness Contin- uous improve- ment Compliance helpdesk (incl. Global Ombudsman function) • Integration in personnel processes

10. Incidence of new serious cases (systematic failure) • Adequate sanctions taken • On time reporting Impact / effec-tiveness ofCompliance program 2 Compliance perceptionsurvey 3 Compliance-related Incentive System For Senior Management: Compliance Performance Matters • Compliance impacts the FY 2008 annual bonus by approximately 17% Metrics Assessment Evaluation • Tone from the top & training • Policies implementation • Compliance organization and transparency Implemen-tation kit 1) – tested quality on time Corporate Finance – Audit (CF A) Re-Testing report 1 Compliance Legal: Case tracking and evaluation, Disci-plinary sanctions • Evaluation of each division/ country • Proposal for multipliers prepared in compliance round table Survey team: Compliance index and benchmark Average multiplier in FY‘08 • Employee perception Evaluation scheme: 0.75 0.9 1.0 1.1 1.25 1) If unit not tested, criteria does not apply in this fiscal year Source: CL CO / CD E

11. Global Compliance Organization 2009 – Corporate Functions Siemens: An example how to integrate Investigations into the Compliance Organization Member of the Managing BoardGeneral Counsel P.Solmssen • Compliance represented in Managing Board • Strong corporate governance • Embedded in Business units and Regions

12. 1 2 3 4 Compliance Operating Officer: Tasks • Advise on compliance issues • Responses to "Ask us" questions • Reporting on "Tell us" cases Compliance Helpdesk and Monitoring • Legal guidance and advice for all compliance-related matters (defense of cases handled outside of Compliance) • Prepare and review compliance policies Compliance Legal • Investigation of compliance cases • Add to ‘Prevention & Remediation’ Compliance Investigations • Legal guidance and advice on disciplinary cases and proceedings • Legal recommendations for Corporate Disciplinary Committee Disciplinary Sanctions

13. Compliance Helpdesk Consists of Five Parts Over 4600 questions since Q1/2008 Over 680 reports (448 actionable) since Q1/2008 "Ask Us" Partlyavailable "Tell Us" “Find It" Do you have any questions about compliance? You can ask them at any time via the Compliance HelpDesk “Ask Us.” Use “Find It” to search for compliance related information, such as FAQs, policies & guidelines or training material. The Compliance HelpDesk “Tell Us” function provides global, round-the-clock facilities for making statements on compliance-related breaches. Compliance Helpdesk& Monitoring New Gift & Hospitality Policy “Approve It" Now available “Improve It" “Approve It” is the platform for approval requests regarding gifts and hospitality With “Improve It” you can help to improve the Compliance program by adding your ideas and suggestions.

14. Offences / possible Investigations Categories of Compliance Cases Compliance cases are cases where a legal requirement or an internal rule based on such requirements is violated.

15. Compliance Investigations – Workflow Overview 1) mandate investigation Compliance Investigation / Forensic Audit CCO 2) conduct investigation Compliance Legal 7) report results 6) provide data 3) request collection 4) clear collection CF A IT Audit Legal Clearance Office for Data Collections 5) collect & prepare user data

16. Phases of an Investigation

17. Investigation Process 1.1 Clarify Mandate 2.1 Receive Mandate 3.1 Kick off Investigation 4.1 Draft Report 5.1 Archive Case 6.1 Collect Feedback 1.2 Issue Mandate 2.2 Identify Legal Frame. 3.2 Collect Information 4.2 Review Report 5.2 Close Inv. Mandate 6.2 Evaluate Feedback 2.3 Establish Work Plan 3.3 Review Information 4.3 Request Evaluations 6.3 Implement Improvements 2.4 Approve Work Plan 4.4 Distribute Report

18. TRACI TRACI Global Compliance Case Tracking Tool

19. to manage and track status of cases… Web based solution which suppliesreporting functionality,which includesboth predefined, ... …this includesautomaticacknowledgements, ... …and user defined reports (graphical and chart) ...notifications(queuing), escalations,reminders, … …task management and bring forward / follow-up tasks. Introduction of Global Case Tracking Tool in FY 20097FY 2010 Old tool New Tool “TRACI” Case tracking tool "PAULA": All cases (resulting from the reporting + from other sources) at Compliance Legal are entered into a data recording, tracking and reporting system ("Paula") by the resp. lawyer. Paula was introduced in October 2007 and has since then been updated or adjusted to new requirements several times. From May 2008 to November 2009, Compliance Investigations used basic excel spreadsheet to manage all cases under mandate. Global Case Tracking Tool: In FY 2009 a global case tracking tool was introduced. This tool includes a global process / progress tracking of all cases worldwide including creation of a workflow, a local administration and reporting on compliance issues for all Compliance delegates. Tool requirements:

20. Advantages of TRACI? Global platform for the recording, management and documentation of Compliance Cases … supportingcentral and localworkflow … Global casetracking … Supporting the global collaboration of the Compliance organization Transparency and reporting functions … according to US requirements. … and reporting on compliance violations, Supports us in the settlement requirement of an effective and complete reporting system of suspected or actual non-compliant behavior of Siemens employees

21. Users and Numbers • Chief Compliance Officer • Compliance Operating Officer • Compliance Legal • Investigation • Disciplinary Sanctions • Remediation • Corporate Unit Compliance Officer • Sector Compliance Officer • Division Compliance Officer • Cluster Compliance Officer • Regional Compliance Officer Numbers • 600 Users (globally) already more than 300 working with the system • 82 Countries • Siemens AG and approx. 1030 affiliated companies

22. Users and Numbers • Chief Compliance Officer • Compliance Operating Officer • Compliance Legal • Investigation • Disciplinary Sanctions • Remediation • Corporate Unit Compliance Officer • Sector Compliance Officer • Division Compliance Officer • Cluster Compliance Officer • Regional Compliance Officer Numbers • 600 Users (globally) already more than 300 working with the system • 82 Countries • Siemens AG and approx. 1030 affiliated companies

23. Users and Numbers • Chief Compliance Officer • Compliance Operating Officer • Compliance Legal • Investigation • Disciplinary Sanctions • Remediation • Corporate Unit Compliance Officer • Sector Compliance Officer • Division Compliance Officer • Cluster Compliance Officer • Regional Compliance Officer Numbers • 600 Users (globally) already more than 300 working with the system • 82 Countries • Siemens AG and approx. 1030 affiliated companies

24. “TreuInfo” – a reporting & control system • TreuInfo is a global electronic system which facilitates the reporting of economic loss and material damages. TreuInfo has now been integrated into the Siemens compliance setup. There are three criteria which have to be fulfilled to enter a case into the TreuInfo System: • Damage to the company’s property • Amount of loss higher than €100 and under € 50,000 • Deliberate act. The compliance officer has to ensure that all such incidents are reported; The correct reporting of ALL cases is certified by the responsible CEO quarterly.

25. Meeting the challenges • Investigation Manual – Circular & Process • Prioritizing of Investigations • Training – investigators & compliance organization • Developing Regional Hubs (South-East Asia; Americas; USA and Canada; Africa) • Creation of pool of investigative expertise on regional basis • Launch international forum for private sector investigators (collective action)

26. Cooperation & Joint Activities • Cooperation: the SIEMENS position • History of Cooperation • Disclosure Policy: Transparency the key to build trust • Company wide agreed investigation process encouraging cooperation The way forward • Working with MDBs to define policy on joint activities • Workshop with other investigative offices to define best practices • Use results to define international standards (collective action process)

27. Siemens needs to go beyond internal programs in order to become a recognized leader in compliance “Collective Action" can have a key role fostering equal compliance standards for all market players and thus reducing the risk of corruption. Become a recognized leader in transparency and compliance Collective Action External Reach out to industry peers via neutral facilitators (such as Transparency International) and initiate joint activities to fight corruption Internal Share internal policies, experiences, best practices and success stories Siemens Compliance Program • Prevent • Detect • Respond Siemens achieved best score in the2009 Dow Jones Sustainability Index (ElectronicEquipment industry) regarding categorycode of conduct / compliance

28. SIEMENS SIEMENS Collective Action – Joint Forces Against Corruption • Three ways to drive Collective Action Approach competitors to set up long-term industry initiative against corruption 1 Siemens &competitor Approach Public Sector customers directly and propose project-specific Integrity Pact 2 Siemens Customer Approach Public Sector customersvia independent 3rd party and propose project-specific Integrity Pact 3 Independent3rd party (NGO)

29. Building a world class compliance structure is one process Sustaining the clean business message to 405,000 staff globally is another Creating a level playing field for all stakeholders is the absolute objective

30. Mark Gough Compliance Investigations Tel. Office: + 49 (89) 636-32844Tel. Mobile: + 49 1522 8874914 Email: mark.gough@siemens.com