In a time of rigorous regulatory oversight and enforcement, strong compliance and governance processes are more important than ever for global organizations. Merely having policies and procedures in place is not enough—companies must devote significant attention and resources to ensuring that such rules are truly embedded in their actions every day.
GE infuses compliance and governance into every aspect of its business. The GE commitment to perform with integrity is instilled in every employee as a fundamental expectation. This expectation is guided by our integrity policy, The Spirit & The Letter, and is underscored by an extensive system of policies, processes, training and communications, and an open reporting environment and acquisition framework that contribute to the operational excellence of GE’s Citizenship platform and set the tone for a culture of integrity.
The most effective solution to compliance problems is to prevent as many as possible before they occur. GE’s strong compliance culture is at the heart of the Company’s strategy for ensuring adherence to all applicable laws and to our code of conduct, The Spirit & The Letter. GE leaders, who are charged with setting the tone and personally setting an example, own the Company’s compliance culture. Proactive engagement of leaders (what they say and what they do) is the most important influence on employees’ commitment to knowing and following the rules.
Companywide, GE employees acknowledge their commitment to abide by GE integrity policies as set forth in The Spirit & The Letter, and receive training to help them apply those policies to their particular job functions.
Keeping our integrity communications and training fresh and engaging is one way that we sustain GE’s integrity culture. In 2013, we will release an updated The Spirit & The Letter guide for employees and a new Company intranet site, both of which have been redesigned with the goal of making these resources more simple, user-friendly and global. We have also completely redesigned GE’s online integrity training for new employees to make it more interactive and engaging. The rollout of these new resources will be an opportunity to reinforce leader and employee communications about GE’s unyielding commitment to integrity. More generally, another 2013 initiative is to create a compliance-training “center of excellence” at the Company level with a mission to 1) more effectively assess compliance training needs; 2) create GE-wide compliance training using best-in-class learning principles and instructional design; 3) improve the use of technology to deliver training; and 4) make compliance training processes more efficient and effective.
Financial Compliance Process
GE has adopted robust accounting policies and devotes significant resources to ensuring that those policies are applied properly and consistently throughout its global operations. We maintain a dynamic system of internal controls and procedures designed to ensure reliable financial recordkeeping, transparent reporting, and protection of physical and intellectual property. Controllers in each GE business and at GE headquarters conduct regular balance sheet reviews and account reconciliations; they also discuss issues and best practices at regular meetings of the GE Controllership Council.
The senior finance leadership team oversees the application of accounting policies and is regularly apprised of current controllership metrics, as well as new and revised accounting policies, during its Finance Council meetings.
The GE internal audit function includes more than 600 auditors, including 400 members of the Corporate Audit Staff, and conducts various audits each year, in every GE geographic area, at every GE business. Our Audit Committee oversees the scope and evaluates the overall results of these audits, and members of that committee regularly attend GE Capital Services Board of Directors, internal audit and Controllership Council meetings. GE’s internal audit function reports directly to the Audit Committee of the Board. In addition, partners from KPMG LLP, GE’s independent auditor, work with their colleagues and GE’s internal audit to conduct the necessary statutory and auditing reviews.
GE finance leaders, including the CFO, the global controller and the head of GE’s internal audit, regularly review the status of controllership metrics (including account reconciliations, the outcomes of internal audit reviews, and Sarbanes-Oxley 404 certification) with the Audit Committee.
Senior management of the businesses and the Company conduct regular reviews of the financial operations at each business. For over 30 years, the CEOs and CFOs of GE businesses have been required to sign representation letters attesting to financial results. Executives with detailed knowledge of GE businesses—and the related needs of investors—serve on disclosure committees at both the business and the corporate level. These disclosure committees ensure the completeness of financial and nonfinancial disclosures and report their findings to the CEO, the CFO and the Audit Committee.
Legal Compliance Process
The GE legal organization includes more than 1,000 experienced lawyers, located at GE businesses throughout the world, whose job it is to help the Company achieve its goals with unyielding integrity and in compliance with the law.
Two recent awards speak to the strength and effectiveness of GE’s legal and compliance operations. In 2012, GE was proud to be recognized by Ethisphere magazine as one of the World’s Most Ethical Companies for the seventh straight year, an award that is based on the impact and effectiveness of our compliance program and culture of integrity. In 2010, GE received Transparency International USA’s inaugural Corporate Leadership Award, which recognized the effectiveness of our anticorruption program and the culture of integrity we have fostered in our global operations. GE’s diverse industries and disparate locations are united by a common legal culture with robust processes for the analysis and management of legal risks. The legal team at each GE business reports not only to the CEO of that business, but also to the general counsel of GE, ensuring rigor and consistency in compliance, acquisitions, employment issues and dispute resolution. Many GE legal professionals work full-time on compliance. The legal compliance team includes compliance leaders at each GE business, specialists at corporate headquarters and regional experts who are familiar with local legal requirements in the countries in which GE does business. Principal compliance leaders meet frequently to support and monitor the GE-wide compliance program.
The legal compliance team also works closely with the finance team and the global ombudsperson network to report on compliance matters to the Policy Compliance Review Board (PCRB), which consists of senior executives, including the CFO and general counsel. Members of the PCRB regularly update the Audit Committee of the Board of Directors on issues of importance.
Although each GE business and location faces its own compliance challenges, GE legal and compliance teams work in cooperation with business leaders on a common approach comprising three basic processes: prevention, detection and response.
A hallmark of GE’s compliance program is a steadfast commitment to a vibrant, well-publicized and effective “open reporting environment,” where employees are encouraged to raise integrity concerns and feel confident that they can do so without fear of retaliation. In today’s environment, GE employees remain the Company’s first and best line of defense for the early detection of potential compliance issues. Early detection and reporting depend on maintaining a compliance culture in which all employees:
- understand their responsibility to promptly report concerns about potential violations of GE policies, laws or regulations;
- know and use the channels available to them to report concerns, including managers, compliance and GE’s comprehensive network of approximately 700 ombudspersons; and
- trust that the process is confidential, and has no tolerance for retaliation.
In 2011, GE initiated a campaign that has become known as “Open Reporting”—communicating to colleagues around the world the channels through which they can raise concerns. In parallel, we created a new Manager Open Reporting Tool, whereby any management, HR, Compliance, Legal or corporate Audit staff professional is able to submit a compliance concern that has been raised with them directly and not through one of the ombudspersons. Since June of 2011, we have trained over 20,000 GE professionals via the Managers Open Reporting Tool on their responsibility in managing compliance concerns that are raised with them. By the end of 2013, we expect to have trained an additional 10,000+ other employees on this simple yet very important process. In 2011, as a result of the training and the creation and implementation of the new manager’s tool, reported concerns regarding The Spirit & The Letter policies increased by 30% over 2010, and in 2012 they increased by an additional 24%.
In 2013, Open Reporting continues to be a priority for the GE compliance program. We will expand usage to broader levels of management throughout the organization worldwide, respect all EU data privacy concerns, and expand our global communication efforts, rendering the message global, yet local.
We recognize that it takes courage to raise an integrity concern. Our Capital business, for example, has rewarded individuals for outstanding contributions to compliance and for their commitment to do the right thing to keep our Company safe and secure.
In 2012, GE Capital gave out over 4,000 compliance awards and invested more than $990,000 on its compliance efforts.
GE Capital’s reward program is one of many examples of GE’s efforts to drive integrity in action and to foster an open reporting culture across the Company by valuing and appreciating the courage of our employees in continuing to keep GE safe and secure.
Learn more about reporting concerns.
A key challenge for GE in conducting business across a diversified global platform is the need to ensure that every employee at every site, no matter how small or remote, is conducting business in an ethical way and in compliance with GE’s Code of Conduct.
To assist in these efforts, GE performs an annual risk assessment for approximately 1,400 sites based on common internal and external risk indicators. GE businesses and GE Internal Audit partner to review these risk assessment results and develop site-review plans. Additionally, sites identified as having an elevated level of risk are audited on a three-year rotational basis by the Corporate Audit Staff team. Site reviews and audit results are monitored and reviewed by our business controllers.
A number of initiatives being launched are designed to address common themes arising from the assessments. Projects under way include an updated communications strategy that involves sharing real compliance stories that highlight compliance misses and providing related educational and training materials across the organization.
GE has long taken a leading role in pushing for transparency and integrity in the global marketplace. GE’s policy against improper payments in business transactions is a key element of The Spirit & The Letter, and represents a core belief in how we do business.
Never before have the risks been greater. Aggressive enforcement of the U.S. Foreign Corrupt Practices Act by the SEC and the U.S. Department of Justice remains the norm. Enforcement is not limited to companies—individuals increasingly face prosecution and lengthy terms of imprisonment for breaking the law. Prosecutors continue to broaden their reach across the commercial sector, focusing on healthcare, energy, oil & gas, software, financial services and telecommunications, and across developing and emerging markets such as those in China, India, Russia, Mexico, Brazil, the Middle East and Africa where GE’s presence is rapidly expanding.
Nor are these trends limited to the United States. Global enforcement of anticorruption laws is increasing, and enforcement actions are increasingly coordinated and interconnected. And sometimes a single transaction can expose a company to prosecution in multiple jurisdictions.
Greater attention is being paid to the effectiveness of corporate compliance programs in preventing improper payments. The Justice Department and the SEC recently issued a resource guide on the FCPA that endorses a strong compliance program. The UK Bribery Act and the U.S. Sentencing Guidelines similarly highlight the need for a strong program. GE’s approach to compliance in this critical area is multifaceted. Among its key features are:
- Corporate policies and procedures that reflect the Company’s approach by prohibiting improper payments in every transaction, whether with a government or with a private party.
- Extensive controls over third-party intermediaries such as commercial agents and representatives, distributors and service providers, including thorough due diligence, careful screening and training on GE policies.
- Heightened attention to key risk areas such as gifts and entertainment, travel and living expenses, donations, and facilitating payments.
- Prompt investigation and remediation of any concerns.
- Extensive training of GE employees on improper payments.
- Robust internal controls and accounting processes designed to detect and prevent violations of Company policy relating to improper payment risks and to ensure accurate books and records relating to transactions.
- Increased emphasis and enhanced due diligence concerning improper risk associated with mergers, acquisitions and joint ventures.
- Strategic use of Corporate Audit Staff to identify and assess potential improper payments.
In recent years, government-funded stimulus projects, especially in the United States, presented GE with significant opportunities to expand our business with federal, state and local government. GE’s government-business footprint has also grown in the past two years through a series of acquisitions, primarily in healthcare and energy businesses. While still predominantly focused on private-sector customers, GE recognizes that our managers and employees must understand what makes our government customers unique.
Government customers must balance their role as a customer for our products and services with their larger responsibility to pursue public policy objectives. This means they may request unique contract requirements such as domestic preferences, socioeconomic requirements and especially stringent requirements for business ethics and compliance programs. GE employees recognize that government customers have a variety of remedies to enforce these unique requirements (both contractual and noncontractual, including civil and criminal sanctions and administrative judgments) that go well beyond remedies available to GE’s commercial customers.
In this challenging environment, GE’s compliance and integrity culture places the Company in an excellent position to pursue and compliantly perform government work. For example, GE’s Government Business Center of Excellence (GBCOE) features a well-established Government Business Practice Group whose members come from each GE business. This Practice Group meets monthly and serves as the conduit for government business–related communications both to and from the businesses, many of whom, in turn, have formed business-level government-business centers of excellence to build capability at the local level and elevate issues to the GBCOE as needed. The GBCOE conducts monthly training on contemporary government-business topics as well as business-specific training. The GBCOE intranet site hosts a wealth of information on government policies and processes, as well as training materials to support GE businesses that are working with governments. In 2012, the site received in excess of 5,500 visits and over 12,000 downloads of site materials were performed.
In 2012, the GBCOE and the Policy Compliance Review Board (PCRB) continued their companywide focus on government business; the Company is well-prepared to continue to meet the unique demands of government business. We have taken the following steps to ensure our readiness:
- Solicited and compiled detailed information from GE businesses doing business with U.S. federal, state or local government agencies, based on government requirements and GE policies and GE Government Business Standards, enabling the prioritization of future training activities and CAS government business audits.
- Continued to support a comprehensive CAS-led audit of certain U.S. government Federal Supply Schedule contracts as part of a plan to audit all such contracts every two years. These contracts serve a variety of U.S. government agencies and represent a unique opportunity for GE products and services, but come with particularly complex compliance requirements. In addition to the CAS-led audit, a comprehensive training program reinforced the engagement of employees who manage these contracts, which require knowledgeable and active oversight.
- Conducted numerous training sessions in 2012, including monthly recorded webinars, used to train more than 1,200 employees on key government-business topics.
- Conducted a two-day, off-site companywide training session for 100 GE employees doing business with U.S. federal, state and local government agencies.
- Conducted in-person government-business training sessions at three recently acquired businesses, introducing newly acquired personnel to the GBCOE, GE Government Business Standards, and best practices.
- Partnered with GE government-relations personnel to generate and deliver in-depth, accessible guidance on “pay-to-play” restrictions in key states where GE does business.
- Improved GE’s approach to its government-business-acquisition due diligence process by substantially simplifying data requests to target companies to focus on key issues.
- Expanded monitoring of the Federal Procurement Data System, to include pricing considerations and the identification of any inaccuracies in the reporting of procurements awarded to GE or misrepresentations of company size and basis of awards.
- Dedicated specific attention and resources to state and local contracting issues, which for many GE businesses represent all or substantially all of their government-business activities.
- Developed GE-wide implementation policies for many complex new procurement regulations to ensure a consistently high level of compliance.
- Continued to closely monitor changes and proposed changes to government procurement–related legislation, policies and regulations to assist businesses in understanding new requirements and establishing the appropriate compliance processes in a timely manner.