Legal Compliance Process

The GE legal organization includes more than 1,000 experienced lawyers, located at GE businesses throughout the world, whose job is to help the Company achieve its goals with unyielding integrity and compliance with the law.

Two recent awards speak to the strength and effectiveness of GE’s legal and compliance operations. 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 was also proud to be recognized by Ethisphere Magazine as one of the World’s Most Ethical Companies for the fourth straight year, an award that is based on the impact and effectiveness of our compliance program and culture of integrity.

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 acquisitions, employment issues, dispute resolution and compliance. 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.

Prevention

The most effective solution to compliance problems is to prevent them before they occur. GE’s strong compliance culture is at the heart of the Company’s strategy for preventing compliance issues. GE leaders, who are charged with setting the tone and personally setting the 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 this 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. The compliance training received by GE employees includes award-winning videos, in-person sessions, digitized eLearning modules that apply the details of particular policies to real-life scenarios, and a Web site in multiple languages that helps employees find policies, procedures and answers to commonly asked compliance questions. In 2010, we added a new intranet site that discusses real-life compliance cases and how those cases are resolved.

Each GE business has its own Compliance Review Board (CRB), which consists of senior operational and functional leaders who preside over the compliance practices within the business. The CRB is responsible for full implementation of all elements of the compliance program, for establishing business-specific compliance policies and for reviewing current compliance issues and cases. Each CRB uses a database or other automated tool to track open compliance issues within that business. Virtually all businesses have multiple CRBs operating within business units and plant operations or at country locations.

GE businesses conduct an annual risk assessment to identify the top compliance risks across their customers, products and geographies. The risk assessment process is supported by an early warning system, which monitors changes in the regulatory environment. A biannual bottom-up review is also conducted across all the businesses, which solicits feedback from employees on key compliance risks. Concerns and questions are logged, investigated if appropriate and consolidated for the purpose of identifying themes, trends or patterns. The overall results are incorporated into the business’s self-assessment of potential compliance risks, which in turn is rolled up across GE in the annual compliance review process.

Detection

GE uses measurement and monitoring to detect compliance problems at an early stage, determine root causes and take corrective action early. All GE businesses are required to perform detailed mapping of key business processes to help detect and monitor risks and early warning signs. Business leaders regularly review policy compliance with their direct reports and provide the results of those reviews periodically to the companywide PCRB. In addition, GE trains employees regarding their obligation to report compliance concerns and provides a variety of channels to facilitate reporting, including corporate and local ombudspersons, e-mail and a phone line that allows anonymous reporting of concerns directly to the Board of Directors.

GE’s annual Session D process is a key operating mechanism for issue identification. Reported by GE’s business leaders to the PCRB, the Session D incorporates a roll-up of key compliance processes and requires a review of significant investigations. The Session D process is complemented by PCRB-led reviews of compliance programs within GE’s regions and countries, which serves to highlight cross-business and industry trends in those locations.

One of the most effective detection mechanisms is GE’s network of corporate legal specialists who provide deep domain expertise and assistance to the business teams with strategies to stay at the leading edge of legal and regulatory developments. Each of GE’s Spirit & Letter policies has a senior lawyer who operates as the policy owner. Supported by teams of policy coordinators and practice groups, these specialists operate through proactive process reviews, assessments and initiatives to ensure our processes are strong and detect issues at the earliest possible stage.

In addition, GE’s internal Corporate Audit Staff conducts annual risk-based audits across all GE businesses, to identify and address potential instances of non-compliance with law, regulations and GE policies.

GE also employs rigorous acquisition due diligence and integration processes to detect compliance issues. The Company has mandated that all business leaders take on as a priority the prompt and effective integration of new businesses and remote locations into GE’s compliance culture. GE businesses are also required to conduct robust screening of third parties, such as suppliers, dealers and sales representatives, to ensure their compliance with various laws, including laws relating to trade controls, money laundering and anti-terrorism efforts.

Response: Investigations & Remedial Actions

GE leaders act promptly when a concern arises, and have it evaluated and investigated by counsel and other persons with the appropriate expertise. The GE legal team is responsible for finding the facts and analyzing the applicable law, including an evaluation of the Company’s reporting obligations, if any. The GE legal team includes former prosecutors and others with substantial experience in conducting investigations. Significant investigations are carried out by experienced and impartial experts.If necessary, the legal team may enlist the help of the Corporate Audit Staff or outside counsel to help gather relevant information.

If the concern is substantiated, GE leaders must take prompt and appropriate remedial action to address the particular situation that gave rise to the concern and to prevent any future recurrences. Appropriate discipline is imposed through a fair process designed to evaluate relative degrees of responsibility. This discipline not only includes employees who actively engaged in misconduct, but also extends to leaders who failed to take the steps necessary to create a culture of compliance in which such misconduct would not have occurred.

The integration of the prevention, detection and response functions—as part of GE’s compliance culture—ensures that the Company learns from past mistakes and uses our experiences to build stronger, more robust compliance processes.