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Air Force 

Association Unveils New Ethics Code for Industry 

11  2,004 

by Joe Reeder 

The profit motive—wherever free market commerce prevails—will always be valid. Indeed, maximizing profits is a fiduciary imperative for officers, boards of directors and employees. But if defense industry members don’t put ethical behavior on an at least equal priority footing as the profit motive, the consequence, at least in the context of providing material and services to men and women in uniform, can literally be fatal. Anytime we deliver to war fighters anything less in quality than is specified by contract, we never know who is put at risk. For this reason alone, highest “ethical readiness” must be a corporate imperative.

Further, when ethics receive less weight than the profit motive in a cost/benefit type trade-off, the profit benefits may be fleeting. Profits invariably are diminished by excesses that result in expensive backlashes such as negative press, and government investigations, proceedings and penalties. No matter how conscientious and vigilant a company is in setting the right ethical tone, deviant employee behavior always can occur. Whenever this happens, investigators and customers, above all else want to know whether the behavior truly was aberrational, or whether it resulted from a corporate climate of arrogance, or disregard for right and wrong.

Every major corporation has ethics rules for very pragmatic business reasons. Untold thousands of hours and hundreds of millions of corporate dollars are consumed attempting to steer clear of the consequences of unethical behavior, such as suspension, debarment and criminal conviction. Cost in time and money for investigations are a very real business threat.

Some provisions are common to every effective code of ethics. NDIA believes, however, that a couple of aspects of the code set forth below may be different, even unique. First, the chief ethical officer of the firm should always be the firm’s chief executive officer, who sets the tone for conduct throughout the corporation. Second, it must be made clear, in everything the company does (board meetings, off-site strategy sessions, conspicuous postings, periodic training and scheduled time devoted by senior management) that ethics, as a corporate value, stands on par with profits. Unless this is conveyed in clear, even stark terms, the objective of maximizing both may be lost in favor of short term profiteering.

We also have strived, in this code, for simplicity. The more complicated the rules of corporate conduct, the less likely they will be read and honored.

Finally, we think that repetition and dedicated training to reinforce these values are essential.

Joe Reeder
Chair, NDIA Ethics Committee

National Defense Industrial Association Statement of Defense Industry Ethics

Preamble

NDIA Member Companies should adhere to the highest ethical standards and seek to place the defense industry at the forefront of business ethics in America.  At a minimum, NDIA members must adhere to applicable laws and regulations governing the conduct of their business.  Moreover, entrusted to our care are the lives of Armed Forces Personnel who bear the ultimate risk for their Country to provide security to their fellow citizens.  Thus, our common ethical mandate is a higher imperative than our individual business interests.  This statement of ethics is intended to capture that mandate by setting forth common ethical principles and emphasizing particular practices that NDIA members may use to put those principles into action. 

Mission

NDIA shall serve in a leadership role in setting high ethical standards for the industry and communicating industry efforts in this area to the public and government officials.  NDIA will work with its membership to facilitate the practices set forth below.   

Common Ethical Principles and Practices for NDIA Membership

NDIA members should aspire to the following ethical principles and make every effort to implement the following practices:

  • Advance National Security by promoting trust among the Defense Industry, our government customers, the U.S. public, and our men and women in uniform.

  • Strengthen the integrity of a federal procurement system that encourages competition, rewards technical innovation, and ensures that American fighters have the decisive advantage on the battlefield and wherever else our nation’s enemies may be found.

  • Operate our businesses from a foundation of ethical readiness where economic pursuits do not overtake our responsibility to our soldiers, sailors, marines and airmen, while acknowledging that America's technological and military preeminence are sustained by promoting the financial health of the defense sector.

  • Contribute to the common good of our industry and promote industry ethics whenever and wherever possible by sharing best practices in ethics and business conduct among NDIA members and including ethics training in NDIA sponsored events. 

  • Implement effective ethics programs for company activities at home or abroad.  When contemplating any international sale to a governmental or quasi-governmental buyer, it is imperative that effective measures be undertaken to ensure full compliance, not only with the letter, but also the spirit of the Foreign Corrupt Practices Act, as amended, and the FCPA’s bar against improper payments to foreign officials.

  • Establish effective mechanisms of control over employees and agents operating overseas to promote ethical conduct based upon principles, not geographic location.

  • Protect U.S. national security when performing contracts with foreign parties by committing to compliance with U.S. export control licensing regimes, and with all anti-boycott and embargo requirements.

  • Establish corporate integrity as a business asset rather than a requirement to satisfy regulators by making ethics integral to all aspects of corporate life and culture to create an environment where employees aspire to do the right thing.

  • Recognize that self-governance is key to management’s commitment to abide by ethical standards.  Accordingly, charge Corporate Boards with responsibility for creating an environment where ethical conduct is the order of the day, including, developing and implementing a corporate-level procedure/process to review company best practices, policies, and procedures governing ethics.

  • Demonstrate the Company’s and its leadership’s commitment to ethics by making the Chief Executive the top ethics officer.

  • Implement a formal company ethics program that includes a written code of conduct to communicate institutional values and expectations and guide employees and management in their decisions and conduct. 

  • Organize training programs as an integral component of company ethics programs to commit employees to the Company’s written code of conduct, encourage them to discern the difference between right and wrong, and act on that knowledge despite pressures to compromise standards. 

  • Establish and communicate procedures for employees to identify and report suspected violations of the code of ethics without fear of retribution, establish mechanisms to promptly and effectively communicate violations to the government, and promote full cooperation with government investigations.

  • Establish written remedial measures for prompt and appropriate corrective action, including disciplinary measures, where instances of unethical conduct are discovered.

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