GUIDELINES RE:

PROGRESSIVE ACCOUNTABILITY
FOR COMPLIANCE NONCONFORMANCE EVENTS

Management necessarily retains the authority and responsibility for determining

the application of disciplinary sanctions resulting from deviations from the Code of
Ethics and its associated Company Policies. These Guidelines serve to facilitate
the review process and are not intended to impede or restrict Management’s
discretion. There may be instances when the Progressive Accountability process
does not take into account all factors that must be considered in order to apply the
appropriate disciplinary sanctions in a given set of circumstances. In such
instances, Management may take into account such factors as it deems appropriate.

1. Progressive Accountability Guidelines

These Guidelines are intended to establish a mechanism for applying uniform criteria to
determine whether or not discipline is appropriate, and if it is appropriate, what level or type of
disciplinary sanctions should ensue. Each individual involved in an alleged nonconformance
event/compliance incident should be assessed by the Incident Review Team, using the
Accountability Matrix of the Progressive Accountability Guidelines. A copy of the
Accountability Matrix is shown below and includes criteria as follows:

Schlumberger Confidential

1 V – October 2008
• Were actions as intended?

The actions were not accidental. The employee consciously chose to act or not act.

To answer this question, the interviewer has to determine whether the employee had in
mind or planned to do, carry out, or not do a particular act.

For example, the Review Team might have to determine the following:

Did the employee intend to leave his/her company lap top computer
unsecured?

Note: This is a separate consideration from whether the results were intended, which is
discussed below.

• Were results as intended?

The outcome from the action(s) was desired / planned. Regardless of the act the person
planned to do or not do, did the person plan the consequence(s)?

Schlumberger Confidential
To answer this question, the interviewer has to determine whether the employee desired
[wanted, or planned] to cause these certain consequences of his/her actions or did the
employee believe that such consequences were likely to result from his/her actions?

Consideration should be given to whether the person’s belief about the consequences
being likely to result from his/her actions was reasonable under the circumstances. E.g.,
it is so clear that certain consequences will occur from an act that any reasonable person
would have to be aware and to ignore would amount to reckless disregard.

For example, the Review Team might have to determine the following:

Did the employee intend for the computer to be stolen?

• Were procedures knowingly violated?

The first inquiry here is whether procedures were in place [existed] which address or
relate to the subject area of the nonconformance. If so, was the individual being assessed
aware of those procedures? If not, should the individual have been aware due to his
position or other circumstances?

This element includes knowledge and deliberateness, which refer to an employee’s

knowledge of certain acts or omissions and that these constituted improper activities.
Specifically, if an employee knew at the time a particular action was undertaken that such
action was contrary to Company policy or procedures, such action could be construed as
a deliberate act. If an employee should have known because of his position or
circumstances that such action was contrary to Company policy or procedures, then it

2 V – October 2008
 would also be treated as a knowing violation. In either case, a “Yes” answer is called for.
If the individual had no knowledge nor ought to have known that the action was contrary
to Company policy or procedures, then a “No” answer is appropriate.

For example, the Review Team might have to determine the following:

Did the Company have a Policy, Standard, Guideline, Procedure, local

procedure, etc., (“procedure”) prohibiting leaving laptops unsecured?

• Were procedures clear, appropriate, practical, and required resources available?

If the procedures in place relating to the subject area of the nonconformance event(s) are
clear (unambiguous), appropriate (directly applicable to the subject area), practical
(readily able to be applied and used), and the required resources are available (to
understand and implement the procedures), then they should apply.

If, however, such procedures are insufficient, ambiguous, impractical, contradictory,

ineffective, or otherwise unworkable, then the nonconformance or violation may be more
attributable to a weakness in the procedures themselves than to the individual being
assessed. (See System-induced violation)

For example, the Review Team might have to determine the following:

Schlumberger Confidential

Was the Company procedure in effect at the time of the incident clear,
appropriate and practical?

• Was action done with implied or express consent of manager or action due to
coercion from other people?

If the manager of the employee being assessed clearly indicated his explicit consent to the
actions of the employee being evaluated, then a “Yes” answer is in order. Also, if such
manager was actually aware (or reasonably should have been aware) of the employee’s
actions, and allowed the actions to proceed (did not try to stop them), then a “Yes”
answer is called for.

Coercion refers to compelling a person to act (or refrain from acting) by force,
intimidation, or authority, especially without regard for the person’s own choosing or free
will. Such efforts to control or influence the actions of another can be direct and blatant,
or more subtle and implied.

Determining whether coercion was involved requires an examination of the

reasonableness of the person’s belief that the threatened action will be carried out.

For example, the Review Team might have to determine the following:

Was the employee under pressure from direct or functional management or

from others in positions of authority to leave the laptop unsecured?

3 V – October 2008
• Was the other person the employee supervisor?+

This refers to whether the person consenting to the employee’s action or exerting the
coercion was in a supervisory position over the employee being assessed.

In particular, this relates to personnel in managerial positions who have the authority to
instruct their subordinates. This factor could also relate to an employee's ability to stop
the nonconformance event(s). It is recognized that not every employee is empowered to
stop nonconformance event(s) that occurs around him/her. Nonetheless, those employees
who do have the power are required to exercise it in a timely manner. The failure to do
so is taken seriously by the Company.

Failure to use other available reporting mechanisms (line or functional management,

EthicsLine, QUEST E&C reporting) may be treated as “Human-based error.” Where the
employee has sufficient seniority or understanding of the wrongfulness of the action, the
incident may be treated as an “intended violation” for the purposes of the Progressive
Accountability Guidelines.

Schlumberger Confidential
• Restart model for each involved Manager/Supervisor*

If the consent was given or the coercion was exerted by the employee’s supervisor, then a
separate Accountability Matrix should also be completed for the supervisor. In that
situation, the Accountability Matrix should be completed for BOTH the employee being
assessed and his/her manager/supervisor.

Note: Even when acts are coerced or approved by a manager/supervisor, employee

discipline could still be in order under the particular circumstances. Discipline may be
implemented for the involved employee for clear, obvious, or flagrant violations, or in
especially serious (high severity) matters.

• Was selection, training, or experience defective?

This refers to the individual being assessed. Was that individual properly qualified for
the job he/she was in or capable of handling the duties for which he/she was responsible?
Was the individual given the necessary training in order to carry out his/her job
responsibilities, particularly in the subject area(s) related to the nonconformance event?
If training was received, was it adequate under the circumstances?

For example, the Review Team might have to determine the following:

Was the employee’s SL IT security certification up to date? Does this

certification provide sufficient notice and training as to the need for securing
one’s laptop?

4 V – October 2008
• System corrections and training required.

This applies when, through no fault of the individual, the root cause of the problem is a
deficiency or weakness in the individual’s training, qualifications, or selection for his/her
position/responsibilities; or when the root cause is a deficiency in the Company’s
processes and procedures.

Note: When it is determined that system corrections and training are required, it will be
up to Management to decide whether the Accountability Matrix should be used for any of
the managers/supervisors responsible for the part of the system being corrected.

• Human-based error?

This refers to mistakes made by the individual being assessed. The individual was
appropriately selected, qualified and trained for his/her position but still unintentionally
deviated from/failed to conform with the Schlumberger Code of Ethics, its associated
Policies, or applicable law.

Even if the individual’s acts were coerced or approved by his/her manager/supervisor, the

Schlumberger Confidential
individual could still be subject to discipline, depending on the particular circumstances.
For example, discipline might be implemented for the involved individual for clear,
obvious, or flagrant violations, or in especially serious (high severity) matters.
[Alternatively, this added language could be inserted in the form of a “Note”.]

• System-induced violation

This refers to whether any procedures are/were in place to address a particular

issue/question. If no procedures were in place, or if the procedures in place were/are
insufficient, ambiguous, impractical, contradictory, or otherwise unworkable, then a
source/root cause of the problem lies in the Company’s processes and procedures and not
solely in the individual. Consideration should be given to the employee’s efforts, if any,
to seek clarification or explanation of the procedures in question.

If the violation is found to be system-induced, then appropriate system corrections and

related training will have to be determined.

• Restart model for management

When it is determined that system corrections and training are required, it will be up to
Management to decide whether the Accountability Matrix should also be used for any of
the managers/supervisors responsible for the part of the system which needs to be
corrected.

5 V – October 2008
 Note: This is a separate consideration for Management and should NOT be undertaken
by the Incident Review Team/Manager.

2. Disciplinary Sanctions

Schlumberger has developed a standard methodology for evaluating employee involvement in

compliance related incidents and the resulting recommended minimum disciplinary measures.

Note: Internal Control Responsibility

The Company has an obligation to exercise due care with regard to those employees who have,
as part of their functional or job responsibilities, substantial discretionary authority and/or
responsibility for compliance with internal controls (e.g. senior management and certain
members of the Finance, Legal, Personnel functions). Therefore, the results of an Incident
Review may require the Company to apply sanctions to such employees based solely on those
responsibilities.

The procedure outlined in the Progressive Accountability Guidelines sets out the process the

Schlumberger Confidential
Company will use in deciding the minimum appropriate actions for Schlumberger to take for
anyone involved in a Compliance nonconformance event.

Disciplinary sanctions should be imposed, in a fair and consistent manner, in order to end any
wrongdoing, prevent future misconduct and penalize, as appropriate, any individuals who
engaged in improper conduct.

2.1 Positive Recognition: Where appropriate, the SL Director of Compliance should

provide positive recognition [acknowledgement] to employees who report confirmed
compliance violations.1

2.2 Ranges of Disciplinary Sanctions: In order to ensure consistency, the Company

has developed a range of disciplinary sanctions that can be applied in cases of
deviations from/nonconformance with the Code of Ethics and Company Policies.
The different sanctions are listed from least severe to most severe.
1
Form Acknowledgement:
“Company policy encourages all employees to take actions, as you did, and report any violations of laws and
policies or even suspected violations. The commitment you demonstrated by your actions are necessary for the
Company to maintain the highest standards of ethical conduct and business integrity. Your efforts have enabled the
Company to review its compliance and make improvements, where needed. Thank you.”

6 V – October 2008
Note: Employee deficiencies unrelated to a compliance violation should be
addressed in the annual SLP3 process and not in the disciplinary sanctions associated
with a review. However, where disciplinary sanctions, other than counseling, are
imposed in connection with a Compliance review, this should be noted in the annual
SLP3.

Note: Where an employee is found to have violated the Code or a Company Policy
more than once, even if the underlying details of the violation are different, the later
violation should be treated as either a “second offense” or a “repeat offense” under
the Progressive Accountability Guidelines, as circumstances warrant.

For example: A manager, who was previously counseled for potentially

discriminatory conduct (i.e., the Employment Practices Policy), is later found to
have failed to promote an employee who reported a separate violation (i.e.,
Retaliation—Employment Practices Policy, Sexual Harassment Policy and Code of
Ethics).

2.2.1 Counseling:

Schlumberger Confidential
This refers to advice, guidance or instruction given in order to direct the
judgment or conduct of the individual. Counseling includes and can be
implemented through retraining, coaching and verbal warning. The
nature of the nonconformance/violation and how it could have been
avoided should be explained to the individual. Counseling is appropriate
for an individual who has made a mistake, but for the first time (first
offense). Counseling is appropriate for an individual, who although not
involved in the nonconformance/violation, was in a position such that he
or she should have known about it and thus been able to report it to
management or indeed to have stopped or avoided the violation in the first
place. Senior management should speak to such individual to ensure the
employee is aware of his/her job responsibilities and Company Policy with
regard to the relevant area(s) of Compliance nonconformance. A
proposed basic script to introduce such counseling is attached as Appendix
“A”.

2.2.2 Written Warning:

A written warning or reprimand is appropriate when the

nonconformance/violation is unintentional, but requires more than verbal
counseling. It should be used for an individual who has made a mistake,

7 V – October 2008
 but not for the first time (second offense). This includes circumstances
where there is: a lower level of involvement in the
nonconformance/violation; repeated violation in this area by the
individual; evidence of willful blindness to such
nonconformance/violation, but only by someone who is not a senior
manager; or minimal risk of liability to the Company based on the
nonconformance/violation. Each action or omission of the individual and
its impact should be addressed in the written warning. Where appropriate,
management should also consider coaching or Compliance training in the
relevant subject area. See Reprimand Template, attached as Appendix
“B”.

A copy of the written warning should be signed by the subject individual,

acknowledging his or her receipt of the warning, and returned to the
Company for inclusion in the Company’s records

2.2.3 Disciplinary Action:

Personnel who demonstrate a significant failure in their responsibilities are

appropriate candidates for disciplinary action. This includes: personnel
who were involved in the violation as a participant, who assisted in

Schlumberger Confidential
initiating the activity, who failed to stop the violation when he/she was in
a position to do so, or who hindered the investigation by his/her failure to
be truthful and cooperative. Personnel may also be subject to disciplinary
action if they fail to report a serious violation about which they were
aware or should have been aware, even if they are not a participant.

Depending on the seriousness of the employee's activities and his/her

particular role in the violation, such employee may be demoted, moved
out of a position of authority, removed from a position of control over
Company funds or assets, or be personally financially penalized (e.g., by
not receiving a bonus; losing stock options,; reduction in salary; reduction
in Performance Incentive Program (PIP) reimbursement; or other similar
action) where consistent with local law. Disciplinary action may also
include other sanctions/penalties/measures appropriate to the particular
circumstances, either used alone or in combination with other actions.

An intended violation, but done for the first time, could merit disciplinary
action. If, however, the intended violation was a repeat offense or involved
a malicious (“malevolent”) act, then termination (dismissal) would be
warranted. Where appropriate, management should also consider
compliance training in the relevant subject area. The Company should
inform the employee of the imposition of the disciplinary action in writing
(See Notice of Disciplinary Action, attached as Appendix “C”). A copy of
this notice should be signed by the individual subject to such discipline,
acknowledging the disciplinary action, and returned to the Company for
inclusion in the Company’s records.

8 V – October 2008
 A copy of the notice of disciplinary action should be signed by the subject
individual, acknowledging his or her receipt, and returned to the Company
for inclusion in the Company’s records

2.2.4 Dismissal:

Dismissal or termination is appropriate for an employee who commits an

intended violation, and where such intentional violation is not done for the
first time (repeat/second offense); is severe or malicious (“malevolent”);
or involves an area of Zero Tolerance (no violation of any kind
accepted/allowed), as specifically set out in applicable Company or Client
rules (e.g., substance abuse on certain premises; cheating at Company
Learning Centers). Termination may also be appropriate where an
employee blatantly failed to stop the violation when he/she had the power
to do so; the matter involving the employee was a very serious violation
that could have potentially significant liability for the Company; or the
employee was a senior manager in the Company.

2.3 Other Sanctions:

If an Incident Review has determined that a violation of law may have occurred

Schlumberger Confidential
that could subject an employee to criminal penalties/sanctions, the Incident
Manager should advise Management, Legal and Compliance of such potential
liability.

2.4 Assessment of Non-Employees:

Individuals who are not employees of the Company will obviously not be subject
to disciplinary sanctions imposed by the Company pursuant to the Progressive
Accountability Guidelines. However, the criteria set forth in those Guidelines
should be applied to non-employees to determine their roles and responsibilities.
The results will be used to determine whether any other actions should be taken
with respect to the third-party individual (or his/her company) and in determining
what, if any, additional corrective measures the Company should take in response
to the matter.

9 V – October 2008
 Appendix “A“

Counseling Script

As a result of a thorough investigation, the Company has become aware of certain

issues related to compliance with the [insert topic] and Company policy on [insert topic]
particularly in connection with [insert name/description] Incident Review. In your position as
[insert title] within the Company, we believe you should have been aware of certain facts
relating to these activities. However, it does not appear that you were as diligent in pursuing
your responsibilities to the Company as perhaps you should have been, since you apparently did
not discover these activities and report them to management. Senior management of the
Company takes [insert topic] compliance very seriously. In your position, the Company expects
that you will make every effort to assist with the ongoing [insert topic] compliance of the
Company. Moreover, senior management encourages you to report to [insert name] any
suspected violations of Company policy with regard to [insert topic]. You are to attend a
mandatory [insert subject matter] compliance training course during the [insert quarter] of
[insert year]. You are also encouraged to contact [insert name] with any questions you may
have about [insert topic] to ensure that you fully understand Company policy.

Schlumberger Confidential

10 V – October 2008
 Appendix “B“

Written Warning/Reprimand

MEMORANDUM

TO: [Insert name of employee subject to discipline]

FROM: [Insert senior manager]

CC: Personnel File

[Insert Director of Legal Operations]
[Insert Director of Compliance]

DATE: [Insert date]

RE: Reprimand--[Insert Incident Description, NOCA Number and name of employee]

Schlumberger Confidential
During the [insert name/description] Incident Review conducted in [insert period of review],
Schlumberger determined that the [insert Code provision or name of policy] was violated.

[Insert brief description of why the employee is subject to disciplinary sanctions, i.e., what
actions or inactions of the employee related to the improper activities or violations of the Code
/Company policy.]

For the above reasons, it has been determined that you should receive this written reprimand. In
addition, the Company requires that you are to attend a mandatory [insert subject matter]
compliance training course during the [insert quarter] of [insert year].

The Company takes ethics compliance very seriously. The Company expects that you will make
every effort to assist with its ongoing commitment in that regard.

Agreed to and Acknowledged

[Employee to sign here]

Date signed

11 V – October 2008
 Appendix “C“

Notice of Disciplinary Action

MEMORANDUM

TO: [Insert name of employee subject to discipline]

FROM: [Insert senior manager]

CC: Personnel File

[Insert Director of Legal Operations]
[Insert Director of Compliance]

DATE: [Insert date]

RE: Disciplinary Action--[Insert Incident Description, NOCA Number and name of

employee]

Schlumberger Confidential
During the [insert name/description] Incident Review conducted in [insert period of review],
Schlumberger determined that [insert Code provision or name of policy] was violated.

[Insert brief description of why the employee is subject to disciplinary sanctions, i.e., what
actions or inactions of the employee related to the improper activities or violations of the Code/
Company policy.]

For the above reasons, it has been determined that you should receive the following disciplinary
sanctions: 1) [Insert disciplinary sanction(s): e.g., demotion, loss of bonus, etc.]; and 2) the
Company requires that you are to attend a mandatory [insert subject matter] compliance training
course during the [insert quarter] of [insert year].

The Company takes ethics compliance very seriously. The Company expects that you will make
every effort to assist with its ongoing commitment in that regard.

Agreed to and Acknowledged

[Employee to sign here]

Date signed

12 V – October 2008