GE Citizenship

Legal Processes & Systems

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 growth with unyielding integrity and compliance with the law. 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 business CEO but also on a dotted-line basis to the general counsel of the company, ensuring rigor and consistency in acquisitions, employment issues, dispute resolution and compliance.

Many GE legal professionals are dedicated specifically to 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. This team supports and monitors investigations across the globe, and a Compliance Leaders Council meets several times a year to review.

The legal compliance team also works closely with Finance and the global ombudsperson network to report on compliance matters to the Policy Compliance Review Board (PCRB), which consists of senior executives, including the General Counsel, CFO and CEO. Periodic updates are provided to the Audit Committee of the Board of Directors.

Although each GE business and location faces different compliance challenges, they all focus on an approach comprising three basic processes: prevention, detection and response. The GE legal organization works in cooperation with business leaders to execute these three crucial processes.

1. Prevention

   The most effective solution to compliance problems is to prevent them before they occur.

   Company-wide, 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 function. The compliance training received by GE employees includes award-winning videos, in-person sessions, digitized e-learning modules which apply the details of particular policies to real-life scenarios, as well as a web site which helps employees find policies, procedures and answers to commonly asked compliance questions in multiple languages. GE has also designed specialized training for leaders and a “Leader’s Guide” setting forth the specific steps GE leaders are expected to take to achieve a culture of compliance.

   Within each business, a Compliance Review Board (CRB) consisting of senior operational and functional leaders presides 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.

2. Detection

   Measurement and monitoring allow GE to detect compliance problems at an early stage and determine root causes and take corrective action early on.

   All GE businesses are required to have a process in place to ensure systematic monitoring of key compliance risks. Officers and managers must regularly review policy compliance with their direct reports and provide the results of those reviews to the business leader who, in turn, periodically reports on those reviews to the Corporate Policy Compliance Review Board. In addition, GE trains employees regarding their obligation to report compliance concerns and provides a variety of channels to make it possible for employees to do so, including corporate and local ombudspersons, as well as an e-mail address and phone line that allow anonymous reporting of concerns directly to the Board of Directors.

   GE businesses also perform detailed mapping of key business processes to help detect risks, and early warning systems, which monitor problems in their respective industries.

   Compliance issues may also be detected through GE’s rigorous acquisition due diligence and integration processes. Integration of both new businesses and remote locations has been mandated as a priority for all GE business leaders.

   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.

3. Response: Investigations and remedial actions

   Concerns can come in from a variety of sources: from an employee; from an allegation in an actual or threatened lawsuit; from an inquiry or subpoena from a regulator; or from an article in the press. When a concern does arise, leaders act promptly to have it evaluated and investigated by counsel and other persons with the appropriate expertise. If the concern turns out to be warranted, appropriate remedial action is then promptly taken.

   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. If necessary, the legal team may enlist the help of the Corporate Audit Staff or outside counsel to help gather relevant information.

   If allegations of wrongdoing are substantiated as a result of the investigation, the legal team helps management implement measures to stop the misconduct and ensure that it does not recur. Appropriate discipline is imposed through a fair process designed to evaluate relative degrees of responsibility. Steps are taken to make all required disclosures or take other action needed to manage legal exposure arising out of the misconduct.

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

Financial processes and systems

GE has adopted tougher accounting policies and devotes its full resources to ensuring that those policies are applied properly and consistently throughout the world. The company maintains a dynamic system of internal controls and procedures designed to ensure reliable financial record keeping, transparent reporting and disclosure, and protection of physical and intellectual property. Controllers in each GE business and at headquarters conduct regular balance sheet reviews and account reconciliations, and 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 regularly discusses current controllership metrics as well as new and upcoming accounting policies during their Finance Council meetings. The GE internal audit team of 563 auditors, including the 405 members of the Corporate Audit Staff, conducts thousands of financial, compliance and process improvement audits each year, in every geographic area, at every GE business. A centralized database is used to track the audit history, audit schedule and required controllership process improvements for each GE business unit. The Corporate Audit Staff reports directly to the Audit Committee of the Board as well as to the CEO and CFO. In addition, 300 partners from KPMG LLP, GE’s outside auditing firm, work with their colleagues and the Audit Staff to conduct the necessary statutory and auditing reviews.

GE reviews the status of controllership metrics with the Audit Committee. These include account reconciliations, the outcomes of Corporate Audit Staff reviews and Sarbanes-Oxley 404 certification.

This work is overseen by senior management of the businesses and the company, which conducts regular reviews of operations at each business. The CEOs and CFOs of GE businesses have signed representation letters attesting to financial results for years, long before the Sarbanes-Oxley Act made such letters a legal requirement. GE’s commitment to controllership enabled the company to complete the evaluation of internal controls over financial reporting that is required by Section 404 of the Sarbanes-Oxley Act. The company’s assessment found that its internal controls are effective as of December 31, 2005.

Disclosure committees at both the business and corporate levels are composed of executives with detailed knowledge of GE businesses and the related needs of investors. They evaluate the fairness of financial and non-financial disclosures and report their findings to the CEO, the CFO and the Audit Committee.