On page 83, Terris discusses the company’s ethics code. Why

Ethics at Work Terris, Daniel

Published by Brandeis University Press

Terris, Daniel. Ethics at Work: Creating Virtue at an American Corporation. Brandeis University Press, 2013. Project MUSE. muse.jhu.edu/book/23072. https://muse.jhu.edu/.

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chapter three

Peeling Back the Onion

C    men and women crowd the Palm Room at the Grand Hyatt Hotel in Orlando, Florida, for the start of the  annual Ethics Officer Conference for the Lockheed Martin Corporation. Clean- cut, casual, welcoming to a new face, ranging in age from their mid- thirties to their early sixties, they are at their ease. The Orlando Hyatt is a big step up from the venue of last year’s conference—a colorless facil- ity within easy reach of corporate headquarters in Bethesda—so the mood is upbeat, even if the schedule does not promise much in the way of outings to theme parks. Dress is “business casual.” Most of the ethics officers are Caucasian, but there are a respectable number of non-White faces, mostly African Americans, as well.

Some in the crowd are reconnecting with old friends and colleagues, and others are new to the Lockheed ethics world, so the conference be- gins with an icebreaker: Say something about yourself that no one else knows. After an undertone of ritual complaint about the exercise, they go with the program and settle around their tables to talk, and after fif- teen minutes or so report out to the group. Gail at Table  once worked on venereal disease issues for the county health services. Rick at Table , who works at the Nevada nuclear test site, has  birds on his life list; friends know him as the “bird nerd.” Rose at Table  is revealed to have a “criminal past”: She hooked school in third grade. Someone at Table  admits that he used to cheat at Scrabble. Mock gasps follow each con- fession. At Table , one officer shows the Scrabble cheater that his actions were in violation of page  of the Lockheed Martin Code of Ethics and Business Conduct: “to be honest and forthright with one another.”

As the icebreaker winds down, Nancy Higgins takes the podium. The chuckling tones down. In , Ms. Higgins is the vice-president for ethics and business conduct, Lockheed Martin’s top ethics officer, and the executive in charge of their whole operation. A woman in her forties,

platinum blonde, she sports a broad, toothy smile that seems frozen on her face, even while she is speaking. She calls herself a “recovering lawyer,” having moved over from the general counsel’s office into the ethics operation at Boeing, before assuming Lockheed Martin’s top ethics job in . She speaks slowly, clearly, a bit pedantically, as she moves briskly through a “state of the ethics operation” talk, fortified by Power Point slides sporting Lockheed’s flying star logo.

Higgins’s speech is a pep talk, reinforcing to her team the value of their work to the corporation. Ethics is a frustrating business, she readily concedes, since people tend really to notice us when things go wrong. But she is happy to cite chapter and verse of the division’s accomplish- ments. The ethics awareness program that really took off with Dilbert in  has gone through several reconceptions since then. Calls to ethics officers are up—a sign of confidence in the organization—and more calls than ever are being resolved on the local level, without any formal action being necessary. Lockheed Martin employees as a whole have given feedback that they think that the ethics program is worthwhile, and senior management continues to trumpet ethics as the corpora- tion’s “number one value.”

There are challenges, to be sure. Surveys show that too many Lock- heed Martin employees still believe that they live under a threat of retal- iation if they come forward about ethics violations. It turns out that new employees—those who have been at the corporation for six months or less—are particularly vulnerable to ethics violations, since they have not yet fully embraced the company culture. Managers are sometimes turn- ing a deaf ear to ethics concerns raised by those who report to them; sometimes, apparently, managers do not even recognize an ethics issue right under their noses. These challenges, however, are simply next year’s work, as the ethics division strives for continuous improvement.

Most importantly, ethics is not simply an activity to fulfill a legal re- quirement; it is a “value-added” component of the company’s mission. Part of Higgins’s rhetoric is defensive: Like other divisions that are not “profit centers,” the ethics and business conduct division constantly has to prove its worth in a bottom-line business. So Higgins cites the confi-

dence that “the Customer” (the U.S. government) has acquired in Lock- heed Martin’s integrity as a key to winning new contracts, and she makes broad claims about the savings realized thanks to the prevention of

Peeling Back the Onion : 

waste and fraud. Yet the real value added is larger and grander than new contracts and dollars saved. It is an almost metaphysical infusion of goodness into the company’s products: the fighter jets, the space shuttle, the missile and control systems, the hardware and the software. Ethics, in Higgins’s vision, expands and extends Lockheed Martin’s “mission success.”

The Designers

Lockheed Martin’s division of ethics and business conduct is based at the company’s headquarters in Bethesda, Maryland. The building, a gray concrete box surrounded by manicured lawns and artificial ponds, gives the feeling of a secluded enclave, rather than a complex in the heart of a suburban office park. The five-story structure itself, with its wide hall- ways and large windows, has the feeling of an oversized child’s play set, with big pieces made for stubby fingers: easy to snap together, easy to take apart, and easy to fashion a new arrangement of the parts that looks, in the end, just like the last construction.

Maryanne Lavan, Lockheed Martin’s vice-president of ethics and business conduct as of , oversees an operation that is both highly centralized and conspicuously far-flung. Four senior members of the di- vision work along the second floor hallway in corporate headquarters. Here, the company’s ethics policies and programs are designed and refined, and then disseminated to the hundreds of sites that Lockheed Martin maintains in the United States and around the world. Here is where the company-wide ethics “help line” rings. Here is where consult- ant Steve Cohen comes each winter to help the corporate ethics staff de- velop next year’s “awareness” program.

Beyond Bethesda lie the five “business areas” that make up the corpo- ration. Each business area has an ethics “director,” who jointly reports to the vice president of ethics and business conduct back at corporate headquarters, but who also reports to the business area president. These directors are the primary executives for ethics within their business areas, and they also serve as a kind of cabinet for the vice-president, tak- ing turns with leadership on companywide initiatives. In turn, each business area director supervises a group of ethics officers, who are strategically spread out across the corporation’s facilities. There are ap-

 : Ethics at Work

proximately sixty-five ethics officers across the Lockheed Martin world. Many are full-time; some work in related areas like audit or human re- sources, and the ethics job is only part of their portfolio. An ethics officer’s area of responsibility may be a single large facility, or it could in- clude dozens of small facilities scattered over thousands of miles. Seeing so many ethics officers together at the Orlando Grant Hyatt makes them look like a small army of virtue, but the math works out to just one officer for every , Lockheed Martin employees.1

Maryanne Lavan and other Lockheed Martin officials will not specify the precise budget for the Lockheed Martin ethics and business conduct program. She will say only that the figure is in “the millions,” especially if the calculation includes the labor costs of the time spent by thousands of corporation personnel who participate in regular ethics trainings. At the Boeing Corporation, whose workforce is approximately % larger than Lockheed Martin’s, the annual budget for the ethics and business conduct division was $. million in , although Boeing significantly overspent the budget that year in the wake of large-scale ethics scandals.2

In practice, then, Lockheed Martin ethics officers work in isolation from one another, immersed in the particular problems of local facili- ties, working at the behest of company executives who share supervision of the officers with the business area directors. They are men and women who have come through the Lockheed Martin ranks, who have found their way into ethics work through the door of human resources or au- diting or perhaps engineering. It is a thin, scattered band, so the burden of spreading consistency through the operation falls on the team at cor- porate headquarters in Bethesda.

The man primarily responsible for creating the day-to-day aspects of Lockheed Martin’s ethics awareness program is Brian Sears, an ethics veteran whose zeal and experience typify the operation. Well over six feet tall, with broad shoulders and a vigorous gait, Sears towers over most of his colleagues at the ethics officers’ conference and along the corridors in Bethesda. His low-key manner does little to disguise an ac- tive, self-deprecating sense of humor. When I visited him in November , he was busy mock complaining to anyone who would listen that Michael Sears, the chief financial officer at Boeing who had just been

Peeling Back the Onion : 

fired for ethics improprieties, was “besmirching my good name.” His office on the second floor of corporate headquarters shows the habits of a brainstormer: piles of papers on the desk, boxes of ethics surveys clut- tering the floors, and a whiteboard crisscrossed with diagrams and slo- gans for the next ethics awareness project.

Growing up in modest circumstances in the San Joaquin Valley of Cal- ifornia, young Brian Sears harbored an ambition to become a writer. He won his first writing contest in sixth grade, edited his high school news- paper, and wrote for the UCLA Daily Bruin in college. But he recognized early on that making a living by the pen was uncertain at best. Besides, he was charmed by the romance of flight, and he dreamed of becoming a pilot. He won a Reserve Officers Training Corps (ROTC) scholarship at UCLA in the late s, and he began studying to become a flight navi- gator. Even in college, however, his big frame was still growing, and after two years of training, his commanding officer delivered the bad news: Sears had grown too much. At six feet six inches, he was too tall for the fighter jets.“If you’re over the height limit,” he recalls,“when you have to eject from the plane, you lose your kneecaps.” He received an honorable medical discharge (“I still have the certificate to prove it”), and he had at least the satisfaction of receiving two free years of education.

Sears had been studying economics at UCLA, but once a career in flight was no longer an option, he wanted something more practical, so he switched to California Polytechnic University in San Luis Obispo to study accounting. It was there that he discovered a new passion: the im- probable romance of auditing. The transfer of allegiance from piloting to running numbers might seem unlikely, but the underlying motiva- tion was the same: the allure of travel. His Cal Poly auditing professor spent a great deal of class time describing his overseas consulting as- signments for multinational corporations. Brian Sears wanted to see the world; if he could not fly the planes himself, at least he would ride them at someone else’s expense.

He took his first job with the Burroughs Corporation in , and he spent more than  percent of his time on the road over the next two and a half years. He found that that he loved the travel, but also the num- bers. There was something satisfying about their clarity and their preci- sion, and he loved straightening out the inconsistencies in the corpora-

 : Ethics at Work

tion’s books. His professor had called auditing “the art of aggressive diplomacy,” which appealed to him.

By , Sears had taken a job in the corporate audit department at Lockheed Corporation. It meant less day-to-day travel, but also being at the service of a national operation. Over the next fifteen years, he moved from Burbank, California, to Austin, Texas, back to Burbank, to Titusville, Florida, and then to the old General Dynamics plant in Fort Worth, Texas. Along the way, he was promoted to audit supervisor, and eventu- ally to a regional manager position in corporate audit.

In , Carol Marshall, then in charge of the Lockheed Martin ethics program, asked him to give a talk to her senior staff on how the internal audit department would measure the efficacy of a compliance training program. Sears had no idea how to grapple with this. He was used to the reliable world of spreadsheets; there were no guideposts about how to evaluate the success and integrity of programs intended to coach em- ployees in complying with federal laws and regulations.“But I gave it my best shot,” Sears recalls. “I told a few jokes and improvised.” Several months later, he was offered the chance to move from auditing into the ethics operation as a “sector director” for Lockheed’s energy business.

Was it strange to make the shift from audit to ethics? Sears insists that the transition was simple and smooth. Auditors, he says, are concerned with doing the right thing. The mind set of checking the facts carefully and weighing all the relevant factors, the familiarity with the basic pro- cedures of investigation, the management experience he had gained as he had climbed through the ranks—these were habits and experiences that served him well as he moved into the ethics operation. The main difference was a wider scope of problems to look into, and, more im- portantly, the opportunity to be part of a more service-oriented sector of the corporation. “It was just putting on a different hat,” he says. “One where I could help people.”

In October , Sears and his family moved once again, this time to rural Maryland, giving him a long but manageable commute to the Bethesda headquarters. Starting in the energy area, he moved over to aeronautics, and then became the chief ethics officer for the corporate division itself, meaning that ethics issues involving the corporation’s headquarters staff fell within his domain. In , his title changed to

Peeling Back the Onion : 

director of ethics awareness for Lockheed Martin as a whole, although he also retains his corporate ethics officer duties. He is now the princi- pal developer of several of the corporation’s new initiatives in the ethics area, including oversight of the annual training program.

Like everyone else in the Lockheed Martin operation, Sears has no for- mal training in ethics, nor does such training strike him as necessary or productive.“It’s mostly about developing a set of core values, and living by them,” he says, and that seems to suffice for him as a definition of ethics. He spends a lot of time trying to communicate the message that ethics is not just about distinguishing between right and wrong, but that it’s about “the gray area of conflicting values, the difference between right and right.” He concedes that “we might not have a nice, clean answer to every question.” Sears is not inclined to sweat over ethics in the abstract. He be- lieves that a definition of ethics can and should percolate from the bottom up.“Everyone has their own perspective on ethics,” he says.“Who am I to tell an employee what is or what isn’t an ethics issue?” He is eager to move from beliefs and convictions to the much more practical discussion of the range of the company’s programs and the “robust”quality of its offerings.

Sears is particularly preoccupied—he says “obsessed”—with the con- nection between the ethics operation and the corporation’s competitive advantage. Mulling over the corporation’s  ethics awareness pro- gram, he came up with the idea of an “ethics meter” that would graphi- cally demonstrate the connections between virtuous behavior and tan- gible benefits for the individual employee and the corporation. A rough diagram on the whiteboard in his office displays a timeline of a fictional employee’s career, showing how at critical turning points good ethics leads the way to promotions for the employee, more business for his di- vision, and a better crop of potential employees who are, in theory, at- tracted to Lockheed Martin’s reputation for integrity. Sears is also painfully aware of the fragility of an ethics operation, of how quickly confidence in its effectiveness can erode.“Any one person or small group of people can shut us down,” he muses. “All of our efforts can’t preclude the rogue elephant out there.”

Brian Sears’s sensibility both reflects and affects the tone of the divi- sion: practical, easygoing, nondogmatic, inclined to think of ethics as much as a service operation as a watchdog. Ethics, in the world of Brian

 : Ethics at Work

Sears, should be clear, simple, and measurable.Yes, employees face tough dilemmas, but the corporation’s support structure should be more than adequate to work through them. Even more, ethics should provide a sense of meaning and mission for a Lockheed Martin employee’s work. It should be, at best, a driver, a purpose. Sears is unapologetic about this sense of mission. “We want employees to think: At the end of the career, what is your ethics legacy?” While he is nowhere near retirement, Sears takes pride that his work in the ethics department has already “built value” into the Lockheed Martin empire.

The Code

Brian Sears, and every other ethics officer at Lockheed Martin, bases his work on a foundational document: Setting the Standard: The Lockheed Martin Code of Ethics and Business Conduct. First printed immediately following the merger in , the code, updated every year or two, exists in the form of a spiral-bound, pocket-sized booklet, intended for handy reference. Its fifty-four pages are laid out more like a little marketing brochure than a dry legal document, complete with full-page color pho- tos of Lockheed Martin people and products. On page  is the “receipt and acknowledgment” form; with each new edition, every Lockheed Martin employee agrees that “I understand that each Lockheed Martin employee, member of the Board of Directors, agent, consultant or con- tract worker is responsible for knowing and adhering to the principles and standards of the Code.”In addition to English, the booklet is available in Arabic, Chinese (Mandarin and Traditional), French, German, Greek, Hebrew, Hungarian, Japanese, Korean, Portuguese, Russian, Spanish, and Turkish.

Public and widely disseminated codes of ethics like Setting the Stan- dard are a commonplace now in corporate America. For one thing, they are a basic requirement under the federal sentencing guidelines, Sarbanes–Oxley, and other legislation aimed at promoting corporate accountability and responsibility. A written code is a starting point, the bare minimum for establishing standards. Companies—even small ones—that neglect to write and distribute a code do so at their peril, since the existence of the written document is the first (although mini-

Peeling Back the Onion : 

mal) line of defense against lawsuits or criminal investigations that hold top management accountable for illegal or unethical activity.

With increasing scrutiny, the mere existence of a code of business conduct is no longer sufficient; the content and, indeed, the style of such codes have come to matter a great deal. Companies may be tempted to develop a long, dry, excruciatingly detailed list of rules, regulations, and “don’ts,” thinking that exhaustiveness can immunize them against every conceivable form of wrongdoing. But observers now pay attention not only to the content of the code, but also to its perceived accessibility. If a document is not readily available and easily read by the average worker, outsiders can charge that it is not an effective means of communicating the ethical bottom line. At the other end of the spectrum, a company that simply lists a few basic values is vulnerable to the charge that its code is no more than vague and empty rhetoric.

Setting the Standard aims to fall between these two poles. Its most striking and insistent feature is that it places responsibility for ethical be- havior and for the ethical “performance” of the corporation on each and every individual employee at Lockheed Martin. It begins with a letter from the Chief Executive Officer and the Chief Operating Officer of the corporation, addressed “Dear Colleague,” to suggest from the very first line a kind of parity between leadership, management, and line em- ployees. What matters is “the personal integrity of each of our employees and their commitment to the highest standards of personal and profes- sional conduct.” The development of an “ethical culture” at Lockheed Martin is based on individual integrity, although in a context “that values teamwork, sets team goals, assumes collective responsibility for actions, embraces diversity, and shares leadership.” The letter is intended both to send a message of top-down leadership on the development of this “eth- ical culture,” and to suggest that such a culture is in some sense demo- cratic, built from the bottom of the company up.

The letter spells out the six “principles” through which Lockheed Martin’s expects to “set the standard” for ethical behavior:

Honesty: to be truthful in all our endeavors; to be honest and forthright with one another and with our customers, commu- nities, suppliers, and shareholders.

 : Ethics at Work

Integrity: to say what we mean, to deliver what we promise, to ful- fill our commitments, and to stand for what is right.

Respect: to treat one another with dignity and fairness, appreciat- ing the diversity of our work force and the uniqueness of each employee.

Trust: to build confidence through teamwork and open, candid communication.

Responsibility: to take responsibility for our actions, and to speak up—without fear of retribution—and report concerns in the workplace, including violations of laws, regulations, and com- pany policies, and seek clarification and guidance whenever there is doubt.

Citizenship: to obey all the laws of the United States and other countries in which we do business, and to do our part to make the communities in which we live and work better.

The set of principles is carefully chosen to develop a certain style on which ethics is built, a style that places its signal emphasis on a concept of open communication. Ethics, in the Lockheed Martin conception, develops through the free flow of information—“honesty and forth- rightness,”“saying what we mean,”“candid communication,” and a will- ingness to “ speak up” are the networks through which ethics is sup- posed to flow. The underlying assumption is that the temptation to bend the rules flourishes in isolation, in dark corners and in secrecy, and that frequent and unguarded communication is the best protection against misdeeds. The theory may be sound, but it also poses a particular chal- lenge and strikes an odd chord in a corporate environment where na- tional security concerns and the possibility of corporate espionage make secrecy a paramount necessity.

The bulk of the code, following the opening letter and articulation of the principles, outlines the key topics of concern in maintaining ethics in the Lockheed Martin workplace. The obligation to “  -

  ” covers “cultural diversity” and the insis- tence that “we will not tolerate harassment or discrimination of any kind.” (Since , the list of types of discrimination that Lockheed Martin will not tolerate has included sexual orientation and “family structure,” in addition to the more established categories. This change,

Peeling Back the Onion : 

in a conservative company environment, was instituted in response to shareholder pressure at the company’s  annual meeting.) “ -

   ,” “   -

,” and “  ” make clear that “no one should rationalize or even consider misrepresenting facts or falsifying records.” “      ” provides precise detail about federal law and corporate custom on business courtesies. With federal employees, Lockheed Martin representatives can give coffee mugs or calendars, coffee and donuts, or a meal for less than $; cour- tesies to nongovernment employees simply must be “consistent with marketplace practices, infrequent in nature, and may not be lavish or ex- travagant,” and no employee may give or receive a gift worth more than $. “       ” focuses less on ethical issues, but calls employees’ attention to the U.S. laws that have been enacted in the years since Lockheed was enmeshed in the overseas bribery scandals. Other sections of the code address po- litical contributions (“      ”), conflicts of interest (“ ”), employment of former govern- ment officials (“  ”), company assets like computers and equipment (“ ”), and speculative and insider trading (“  ”).

At the back of the booklet are a list of “ ” and a 

&#x

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