Two years after clearing the air over “Dieselgate” in a Q&A at Compliance Week’s National Conference in Washington, D.C., Volkswagen board member responsible for integrity and legal affairs Hiltrud Werner sat down with us again to discuss the end of the company’s three-year, court-mandated compliance monitorship; lessons learned from the experience; and whether she believes the toxic culture at the company has been successfully expelled:
Q. Looking back at where Volkswagen was in 2018 when we last spoke, how has the culture changed since then?
What is ’Dieselgate’?
In March 2017, Volkswagen pleaded guilty to criminal charges that it deceived U.S. regulatory agencies by installing “defeat devices” in diesel vehicles emissions control systems that were designed to cheat emissions tests. The plea included a monitorship overseen by former U.S. Deputy Attorney General Larry Thompson, and the scandal cost VW upwards of $30 billion in fines, settlements, and legal fees worldwide.
Werner: In 2018, we were really in the eye of the storm. We were at the beginning of getting our processes and procedures and adequate internal controls established. We just had finished our new code of conduct—the first one in the history of Volkswagen that is valid group wide for all 670,000 employees. From there on, the last two years were the most intense in my career. We implemented a 10-point plan on risk management and worked through that, and we also pursued a lot of compliance initiatives. I would say the biggest achievements of the last three years were not only to develop the framework for our new compliance management system, but also to get the first elements of it proven by effectiveness assurance testing, together with being observed by the monitor on top of that.
Another thing from 2018 until now was how much initiative was developed worldwide by different companies at Volkswagen to implement “Together4Integrity.” That is our framework for all of our compliance, integrity, and risk management initiatives. I think it’s the biggest change program that this company has ever developed. We have engaged more than 550,000 employees in dialogue formats, not just sending papers out to them. We engage with them in perception workshops, in integrity ambassador meetings, and things like that. To achieve that in the last two years was an incredible job by a lot of people. And wherever we went in the world, whether it was South Africa or China or Sweden, wherever, the [VW employees] already had their own ideas. They had rooted the program into their DNA. And we have learned so much about different aspects of cultural change that now the program is really rich, and we can share best practices much easier. We have come from just rolling out processes to really reaching people emotionally.
Q. If the culture at Volkswagen that led to the diesel emissions scandal was competition above all else, performance above all else, what would you say is the culture at Volkswagen now?
Werner: Everyone at Volkswagen understands that obeying rules and regulations and acting with integrity is the No. 1 priority of the board and the whole company. And that is shown in a role model program we have developed, for example, that helps managers develop dialogue formats, to foster a speak-up culture, to get regular feedback from employees, and also to understand that if people say ‘No, this goal cannot be reached,’ that they have to take it serious, that they have to listen.
One day a few weeks ago, a manager came to me and said, ‘This is really stressful that I get so much upward feedback now, but it’s also nice because I’m growing with it.’ And I would say that is a good summary of what we have achieved.
Q. Looking at your role on the board, how has the tone at the board level changed since you were appointed? What kinds of things is the board talking about now that maybe weren’t being discussed at the time of the scandal? How has your input and your presence there changed the kinds of things that are discussed at the board level?
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Werner: I can clearly say that all of what we have achieved in the boardroom was a joint effort and didn’t come only from me. I have strong support from all of my board colleagues, and there are two elements that I think are noticeable. I made an analysis with my team just recently, and we saw that 20 percent of time spent by the board during meetings over the past 12 months have been on topics around compliance, integrity, risk management, and business partner due diligence. So the awareness about compliance in that room is very high. And No. 2 is that there is not a single board proposal that comes to us that doesn’t have an integrity statement in it. We have an obligation to everyone who wants a decision by the board to answer: How does this line up with our integrity statements? Is it in sync with our targets? Would it positively or negatively affect our reputation? And these statements, when we had introduced them in board proposals, were often very short and generic. Now, it’s often an entire page where people really outline how this affects our role in society, our sustainability statements. This is a huge success because that is the tone at the top that we enforce: that everyone is thinking about integrity in every process and every decision.
Q. At the time you were appointed to the management board, you were the only female. Is that still the case?
Werner: Yes, I am still the only woman on the board, but a lot has changed in the company. We have two female board members at Audi AG, for example. We have also a female board member at Bentley. So it’s slowly changing. For me, it doesn’t make such a big difference in the boardroom on whether I’m male or female because everyone knows that I’ve worked almost 30 years in the automotive industry. I know most of these processes that we are discussing.
My 16 years in internal audit have given me good insight into all business processes. So I’m not just seen as a compliance expert or a legal expert—I’m really seen as a partner for these proposals. I think I pretty much stand my ground.
… From my point of view, diversity and inclusion is something where compliance and HR have to work very, very closely together. It’s an issue where you also earn trust; where you can prove that you stand for humanity and diversity; and also that you speak out strongly against racism, discrimination, or xenophobia. For me, these are all topics where I work very closely with our HR department, with our chief human risk officer, and also with our chief diversity officer to make sure that we keep the company on an ethical path in this respect.
Q. You had said back in 2018 that taking away the element of fear of speaking out is crucial at Volkswagen. Do you think that Volkswagen has done that? And what does your whistleblower program look like now?
Werner: Two figures can illustrate the changes we’ve made. First, more than 80 percent of the [tips] we receive are not anonymous. And that, from my point of view, shows that people trust the system; that they know we protect whistleblowers; and that even if the [tip] proves to be unsubstantiated and there’s no sanction or no wrongdoing that needs to be investigated, people do not fear using the system. That’s very important. And of course, the number of tips we receive is far higher than it used to be. It’s about 3,000 a year now, and out of the latest 12 months, only about 130 were serious violations.
We don’t think the high number means we are unethical. The high number means that people accept the system, that people trust the experts in the central investigation office, and that they also trust us to protect the whistleblowers.
Q. Independent compliance monitor Larry Thompson had been with you since 2017 and that monitorship just wound down in September. What’s the process for moving on from a monitor?
Werner: We tell everyone in the organization that finishing the monitorship is not the end—it is a milestone. And we will do everything to keep the momentum we’ve built and to show what we have achieved and that there is even more we can achieve. We want to keep that momentum from the monitorship in terms of reachability, about trust between compliance and the business. And I’m very optimistic that we are on the right track on that.
… For me, compliance efforts never have a finish line. You are never through; you are never done. So you really need to keep track of what the business units do. And with new business models there are new opportunities. Compliance experts should always be advisors, to be the person on the phone to discuss dilemmas, to explain new rules or new legislation, and also to keep track of the changes in the business.
Q. In scanning Larry Thompson’s latest report on the monitorship, he referenced something called the Golden Rules, maybe a couple dozen times. What are the Golden Rules?
Werner: When the first root cause analysis of the diesel scandal was done, we tried to find points where change is inevitable and those we put into the Golden Rules. There are 11 Golden Rules. There is, for example, a Golden Rule that says we have to check software that we get from suppliers for noncommissioned parts. So if the software models can do more than what we have ordered, we are also responsible for checking whether they have defeat devices. Another Golden Rule is that that we have to have full segregation of duty between the technical development team that develops the cars and the people who maintain the process for certification of cars. There are many Golden Rules that have to do with the interaction between technical development and basically up to the point when we bring a car to a market.
Q. What were some of the things that Volkswagen learned about itself through dealing with the monitor and dealing with the monitor’s team?
Werner: Larry Thompson had lots of fantastic experts on his team, from professors and academics from the field of corporate ethics and behavior, to experts in the Clean Air Act. There were technical experts, too. There was a former board member for technical engineering from a car company on his team. And, of course, all these people in their interaction with us enriched our knowledge, our expertise. And we are very, very grateful that he put together such a highly experienced and diverse team. We had more than 8,000 meetings with the monitor team over the last three years, and each of these meetings left an impression that made us more knowledgeable, stronger, and also made us understand the interpretation of compliance in the United States, in comparison to the more narrow view that we used to have in the past.
Q. How has COVID-19 impacted compliance at Volkswagen?
Werner: At the beginning of the interview, I said that we had reached 550,000 people together for an integrity program in person. So overnight, for all of our integrity and compliance initiatives, we had to shift to a virtual format. That was a huge step, but the team has managed that very well over the many weeks of lockdown and barely being in the office. Everything went smoothly with that. We didn’t develop a backlog in the whistleblower system or in the plausibility checks. We still maintained all of the monitor meetings, even on a virtual basis. We did not have a delay in the rollout of our risk management processes.
My concern at the beginning of the pandemic was when you are in the middle of a change process and people come under pressure by such a crisis that they would switch back to old behavior. But luckily, this company was very disciplined. Everyone understood that processes are only as good as they work under pressure or under a crisis situation. And processes were adhered to. I’m really proud of my company on that.
Q. So would you say that this pandemic was almost like a stress test for a lot of the new policies and procedures you put in place?
Werner: That’s exactly what I think. If people say, ‘This is a crisis situation, let’s put the processes aside and do what we think is right,’ then you have failed. But we did not fail. We adhered to our processes. And from my point of view, we passed that stress test.
Q. Where on the path toward earning back customer trust do you think Volkswagen is?
Werner: Trust is always a difficult issue because it’s so quickly destroyed and it’s so difficult to rebuild. But when you look at the sales figures from Volkswagen in 2019—let’s carve out 2020 with the circumstances of the pandemic—you can see that our customers worldwide trust our products, that they know we take care of quality, that they are safe in our cars, and that we also have learned our lessons from the diesel scandal.