Chat with us, powered by LiveChat THE HISTORY OF BUSINESS ETHICS AND STAKEHOLDER THEORY IN AMERICA Based on your readings, describe what you consider to be the responsibility of top leadership in a large organization wi | EssayAbode

THE HISTORY OF BUSINESS ETHICS AND STAKEHOLDER THEORY IN AMERICA Based on your readings, describe what you consider to be the responsibility of top leadership in a large organization wi

  

THE HISTORY OF BUSINESS ETHICS AND STAKEHOLDER THEORY IN AMERICA

Based on your readings, describe what you consider to be the responsibility of top leadership in a large organization with respect to reaching a balance between profits and stakeholder concerns. Please support your position by giving some examples from the text or from other sources where CEOs did a good or poor job of finding this balance.

Terris discusses the history of business ethics in America since the late 1800s with respect to anti-competitive practices, seeking unfair advantage through immoral arrangements with suppliers and public officials, failing to adhere to laws and regulations, and lack of transparency. Discuss to what extent you believe things to be better or worse in the present day for businesses in general.

On page 41, Terris discusses the ideas of Howard Bowen regarding the evolution of social responsibility of businesses. To what extent do you think his predictions held true since 1953?

Your paper should be double-spaced and in 12-point type size.

Your paper should have a separate cover page and a separate reference page containing the full citations corresponding to the in-text citations you choose to use in the body of your paper. So in addition to the 4- to 5-page body of your paper you will have a title page and a reference page. So overall, you will be submitting a 6- to 7-page document.

Use APA style, and proofread your paper.

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/.

For additional information about this book

[ Access provided at 8 Nov 2022 01:54 GMT from Trident University International ]

https://muse.jhu.edu/book/23072

Introduction

In the Shadow of the Skunk Works

D s  me at the entrance of the Lockheed Martin fa- cility in Palmdale, California, just outside the security office, the credit union, and the gift shop carrying toy models of U-s and Stealth fighters.1

An understated man in his fifties, Sanders is the site’s full-time ethics officer, one of eighty men and women throughout the corporation charged with communicating and implementing the company’s values. He greets me in the desert sunshine in shirtsleeves, and we spend a good part of the day touring the premises, stopping to chat with some of the employees on the line.

The Palmdale facility occupies dozens of acres of desert, in close proximity to the enormous expanse of Edwards Air Force Base. Once a manufacturing plant, Palmdale is now primarily a refitting facility, where Lockheed Martin installs up-to-date technology into some of its most venerable aircraft. In one enormous hangar, I climb into a C- cargo plane, now being retooled as a mobile, in-flight media station. Loaded with tons of new electronics, the plane will now be capable of flying halfway across the world to jam radio signals within a radius of hun- dreds of miles. The half-finished plane, with its crisscross of colorful wires, gleaming cables, and mysterious boxes, will one day have the mis- sion of carrying the American message of liberty and opportunity to drown out enemy voices in the far corners of the globe.

The sleek bodies of the famous U- planes, with their distinctive pointed noses, dot another hangar. Rechristened the TR- after the U-

became infamous, these planes, too, are being refitted with the latest space-age technology. After more than a year in Palmdale, they will emerge with even more sophisticated capacity to spy on earth from sixteen miles in the air, answering the call for better information, deliv- ered more quickly, more precisely, more secretly. Later that morning, a

flat, black, batlike craft glides through the desert haze and comes to rest on the tarmac. The Stealth fighter was one of Lockheed Martin’s tri- umphs, the first plane capable of disappearing in midair, its jet-black surface jumbling radar signals and baffling those who scan the skies.

I am not allowed to bring a camera or a tape recorder with me on these rounds, and there is one part of the facility that I cannot visit at all. An unassuming jumble of buildings at Palmdale houses the current iteration of the Skunk Works. The top-secret design facility was moved to Palmdale when Lockheed closed its original headquarters in Burbank. Off limits even to most of those who work in other parts of Palmdale, the Skunk Works retains its aura of mystery and its reputation for de- veloping the most sophisticated of the military’s top-secret projects. To enter the Skunk Works is to enter the “black” world of aircraft and weaponry, whose products may not be seen, deployed, or even acknowl- edged for decades to come. The gift shop at the entrance to the facility sells caps with the jaunty little skunk logo on the bill.

Standing near the Skunk Works barracks and the U- hangars, I am in the shadow of the nerve center for some of the most innovative engi- neering projects accomplished in human history. I am also standing in a principal outpost of one of the largest enterprises in the United States, the corporation that does the most business with the U.S. Department of Defense, running to more than $ billion in  alone. Lockheed Martin is about big ideas, big products, and big business.

Amid the heavy machinery and the high-security fences, Dave Sanders moves comfortably, chatting casually with line employees and super- visors, moving in and out with ease, clearly a man known and liked and trusted in the facility. He has been in the ethics office for three years now, after a career in various aspects of human resource management. Ethics, he tells me, is not complicated. It’s a matter of helping people see that doing the right thing is just as easy as doing it wrong. Sanders introduces me to the men and women who work on these planes, and who do their part for Lockheed Martin and, as they see it, for the United States of America. Much of his time, he tells me, is spent simply troubleshooting: resolving problems between a line worker and his supervisor; helping an employee receive a benefit she is owed; advising an executive on how to handle a client’s gift. Sanders also oversees the annual ethics awareness program at Palmdale. Ethics awareness is a mandatory exercise for every

 : Ethics at Work

Lockheed Martin employee; one year everyone had to play a board game based on the Dilbert comic strip. Sanders sees himself as a specialist in prevention. No issue is too small; if a worker thinks a problem is an ethics issue, then it is an ethics issue, as far as he is concerned. Yes, he pursues investigations of wrongdoing as well: labor time charged incorrectly, or an accusation of harassment, or a violation of safety regulations. But by Sanders’s lights, his facility is pretty clean. The expected dose of human frailty is contained and defused, he explains, by an ethics program that values the individual and rewards work done according to the company values.

Dave Sanders is the face of ethics at Lockheed Martin, and, in some ways, the face of corporate ethics in the United States today. Low-key, commonsense, and practical, Sanders also embodies a clear sense of mission, as he represents the corporation’s neatly packaged and scrupu- lously documented program. He is part of a conscious and sustained effort to make ethics an integral part of Lockheed Martin’s “value” as a corporation, crucial to its sales and recruiting efforts, as well as to its inner workings and its public image. Values and ethics now reinforce Lockheed Martin’s image of a noble enterprise; innovation in delivering goodness is presented hand in hand with innovation in delivering space- age engineering.

Between  and , a series of dramatic scandals rocked corporate America. In their wake, writers and commentators rushed to examine “what went wrong” at Enron and WorldCom and Tyco and others. The tales of unbridled greed, the exposure of faulty systems of checks and bal- ances, and the charges of poor public oversight gave impetus to the rapid development of programs in ethics and business conduct in corporations across the United States. The accounts of failure made a compelling case for the reexamination of the fundamentals of American business.

This book takes a different tack. Instead of focusing on failure, it be- gins with the premise that there might be something to learn from a corporation that has made a sustained and public commitment to ethics and values going back over two decades. It is a portrait of how one American corporation—Lockheed Martin—responded to scandal and has since continued to develop an ethics and business conduct pro-

Introduction: In The Shadow of the Skunk Works : 

gram that involves hundreds of thousands of hours and millions of dol- lars each year.

This work is intended to contribute some sense of vitality and detail to discussions of corporate ethics, and to complement the rich trove of writings on ethics in American business: philosophical works that tease out the theory behind applied ethics; cautionary works that narrate stories of waste, fraud, and abuse; and practical works that advise busi- ness leaders on how to integrate ethics into their organizations. By simply describing the power and the limitations of one company’s efforts, I hope to illustrate the complexities and challenges of developing and maintaining a corporate ethics program.

In conceiving this book, I have tried to address a series of straight- forward questions:

• What led Lockheed Martin to develop its ethics program, and how did the program come to take so prominent a role in the corporation’s public image?

• What does the corporation mean by “ethics,” and how does it conceive of the goals of its ethics program?

• What activities have been implemented under the ethics banner? • How well do those activities meet the goals it has set for itself in

this area? • Does the corporation’s ethics program match public expectations

of what it means to be a good corporate citizen in the United States?

In answering these questions, I have focused more on the design and execution of Lockheed Martin’s ethics program than on its results. Assessments of a corporation’s ethical performance are difficult and con- troversial, and they require much more access and data than I was granted as I conducted my research. The question of whether, in the largest sense, an extensive ethics program has made Lockheed Martin a more “ethical” corporation is, therefore, beyond the boundaries of this study. I am more interested, in any case, in the choices that the corpora- tion has made in defining ethics and in creating activities to promote ethics as a part of its culture. Some of these choices respond effectively and powerfully to the challenges that the company faces. Other choices—

 : Ethics at Work

notably, the key questions that Lockheed Martin chooses to exclude from its ethics program—may leave the corporation vulnerable to future scandals and public disapprobation.

The defense industry has, to some people’s surprise, the broadest and most sustained set of ethics programs of any sector of American busi- ness today. Lockheed Martin has built and maintained an extensive for- mal ethics and business conduct program since the mega-corporation was formed through a merger in . The program builds on efforts first developed in the s in the corporation’s “heritage” companies— Lockheed, Martin Marietta, and parts of IBM, General Dynamics, and General Electric, among others. Defense contractors had responded to a series of crises—global scandals involving bribery, overcharging, and collusion—that severely undermined their public image and their standing with their biggest client, the U.S. government. Lockheed had been rocked by a sensational overseas bribery scandal in the s; its new management was particularly eager to change the corporation’s practice, image, and fortune. The company helped to found the Defense Industry Initiative, a consortium of companies that pledged to establish substantive programs to improve their integrity.

Defense contractors were among the first to initiate formal ethics programs in a big way, but a number of other developments stimulated attention to ethics throughout American business during the s. Perhaps the single biggest “stick” was the development of federal sen- tencing guidelines for wrongdoing involving organizations, first put into effect in  and strengthened several times since. The guidelines have for the first time made senior executives personally and legally respon- sible for fraud and abuse committed by their companies during their tenure, and they also created a series of benchmarks by which American corporations would be judged. Organizations that took specific steps to shore up ethics efforts would be treated less harshly when problems did surface. The  guidelines specified that punishments of organiza- tions found to be in violation of the law would be mitigated by the exis- tence of “an effective compliance and ethics program.” Of course there were positive incentives for attention to ethics as well. These included

Introduction: In The Shadow of the Skunk Works : 

the benefits of an improved public image, the reciprocal goodwill of customers, and long-term efficiencies that came from eradicating waste and fraud.

The corporate scandals of the first years of the twenty-first century in- stigated additional federal measures that raised the bar for corporate ethics programs. In , Congress passed the Sarbanes-Oxley Act, which tightened regulations regarding financial disclosures and conflict of in- terest, and which also increased penalties for certain types of white-col- lar crime.2 Building on Sarbanes-Oxley, the U.S. Sentencing Commis- sion (USSC) issued new sets of revised guidelines in  and . The  guidelines dramatically increased the criminal penalties for execu- tives whose white collar crimes affected a large number of people or en- dangered the solvency of publicly-traded companies. A defendant who shredded a substantial number of documents could spend more than three years in prison; an executive whose actions defrauded more than  employees or investors could face a sentence of more than ten years.

The  USSC guidelines expanded and detailed the government’s requirements for corporate compliance and ethics programs. The origi- nal  organizational guidelines had included benchmarks for such programs; the  guidelines added detail and raised standards, by re- quiring corporations to promote an “organizational culture” to encour- age ethics and compliance with the law. That “organizational culture” would minimally require the knowledge and participation of the corp- oration’s board and senior officers in the ethics program, the identifi-

cation of specific individuals to operate the program, extensive training and communication about ethics throughout the workforce, and audit- ing and evaluation of the ethics and compliance efforts. In other words, it would no longer be sufficient simply to post the rules and regulations on a notice board, or to distribute an occasional memo about business conduct. Companies whose ethics programs were viewed as pro forma would be subject to more severe penalties than corporations that could credibly claim that they had woven ethics into the structure of their in- stitutional life.3

These developments, among other things, heightened attention to business conduct and helped to stimulate a new cottage industry in the United States: the work of the ethics consultant. Lockheed Martin is part of an intricate web of peers, clients, and providers who have made ethics

 : Ethics at Work

into a big business within big business. Amid the complexities of legal requirements, government regulations, and public expectations, various subfields emerged. Some consultants specialized in “compliance” with the law. Others focused on “ethical standards” that went beyond legal requirements. Others promoted a “values” approach that emphasized in- ternal transformation rather than external pressures and incentives. Non- profits, for-profits, academics, philosophers, psychologists, marketers— the field was wide open to a variety of players who have helped reinvent and redefine ethics in the modern workplace. The cooperative arrange- ments between companies and consultants have put into place impor- tant new measures, but both parties also have sometimes had a vested interest in creating programs that place a premium on shiny surfaces rather than searching self-examination.

When the corporate ethics scandals made headlines, defense contrac- tors could take some comfort in being ahead of the curve. They already had in place the basics: codes of conduct, corporation-wide awareness programs, investigative teams, incentives for right-minded behavior. These efforts, however, do not mean that the defense industry has en- tirely quelled illegal and unethical behavior. Lockheed Martin’s own program was born on the heels of a  settlement involving a bribery scandal, which had developed after Lockheed had begun its ethics ini- tiatives. (Note that “Lockheed” refers to the Lockheed Corporation be- fore its  merger with Martin Marietta; the merged corporation is “Lockheed Martin.”) More recently, the Boeing Corporation was rocked by two simultaneous but unrelated scandals—one involving document theft (from Lockheed Martin, no less), and the other involving a high- ranking Air Force officer’s conflict of interest. Boeing’s chief financial officer, who was directly implicated, was summarily fired, and its chief executive officer resigned in December . During the Iraq War, alleged abuses at Halliburton, once run by Vice-President Dick Cheney, took center stage.

These particular incidents aside, the defense industry also raises spe- cial concerns as a sector whose products and business interests them- selves are controversial within American society. The sheer size of the industry invites exploitation and the misuse of power. The web of rela- tionships between corporate leaders and high-ranking government offi-

cials offers ample opportunity for foul play, as multi-billion-dollar deals

Introduction: In The Shadow of the Skunk Works : 

are made and broken. And, of course, defense contractors make weapons, whose presence and use raise a host of questions about the morality of defense, warfare, and violence.

So what has been accomplished in fifteen years of persistent ethics initiatives at the defense giants? What difference does the work of an ethics officer like Dave Sanders make? What does “ethics” mean in this context anyway? I was curious to explore these questions in depth within a single organization, to try to make more sense of the promise and the perils of making a substantial commitment to an ethics program.

In , shortly after I became director of the International Center for Ethics, Justice, and Public Life at Brandeis University, my colleague Jerry Samet from the philosophy department dropped into my office. He was carrying a bright yellow board-game box, marked in bold letters with the words “Ethics Challenge.” He opened up the box and showed me a board with stations something like the old game of “Clue,” only there were brightly drawn characters from the comic strip Dilbert lurking by the “Cooler” and in the “Boss’s office.” Samet told me that he had chipped in some ideas for this game, which had been developed by some friends of his in the consulting business in downtown Boston, and he thought that people at a Brandeis center with some concern about ethics might be interested. The “Ethics Challenge,” he said, had been developed for the defense industry giant, Lockheed Martin. Each year, every one of the company’s , employees played the game.

The “Ethics Challenge” sat on my bookshelf for several years. We played the game at the center instead of having a staff meeting one week, and I tried it out in a couple of undergraduate classes. Visitors to my office would spy the bright yellow box, open it up, shuffle through the Dilbert cards, and chuckle appreciatively. Every so often, Jerry Samet would call me up and ask whether I had followed up with his friends who had developed the game.

Then the wave of corporate scandals hit the American business world. The spectacular implosions of Enron, WorldCom, Tyco, and a host of other giant concerns touched off inquiries and investigations that fo- cused on mismanagement and wrongdoing. These also brought renewed attention to the question of how American corporations had failed to

 : Ethics at Work

address ethics effectively within their organizations. How had they ne- glected ethics so completely that billions of dollars went up in smoke?

I found myself interested in the opposite question: What were Amer- ican corporations doing to address ethics? In particular, I was interested in institutions that made a sustained and visible commitment to ethics and values as an integral part of their organizational culture. By “sus- tained,” I meant institutions that had been doing ethics seriously and consciously for at least a decade. By “visible,” I meant that an organiza- tion was confident enough about its program to stake its reputation on claims about its integrity. By “organizational culture,” I meant that the ethics effort was widely diffused, somehow touching the lives and work of individuals at every level of the institution. Now that the U.S. Sentenc- ing Commission guidelines had given the idea of “organizational cul- ture” such prominence, these questions were more compelling than ever.

As I was mulling these questions over, the “Ethics Challenge” game box caught my eye. I called Jerry Samet and told him that I was ready to follow up. I was ready to learn how a corporate giant like Lockheed Martin went about its ethics program.

My inquiry started in the downtown Boston offices of Convergent Learning, the successor to the consulting firm that had worked with Lockheed Martin to develop the original “Ethics Challenge.” There I met Steve Cohen, who in turn introduced me to Joe Kale, a senior Lockheed Martin ethics executive who soon went on to become the ethics business area director for the new Integrated Systems & Solutions (ISS) unit of the corporation. Kale is tall, lean, and neatly dressed, with the gentle manner of an understanding clergyman or the ideal coach for your son’s Little League team. He explains things patiently, but never pedantically. “Here’s a guy who lives and breathes ethics,” Steve Cohen told me. “This is a guy who plays the ‘Ethics Challenge’ at home with his kids . . . and his kids are five and three!”

Joe Kale sketched out the history of Lockheed Martin’s ethics efforts. Beginning in the s, many companies in the defense industry began ethics programs, under pressure from the U.S. government following a series of scandals. After a wave of mergers and acquisitions created Lockheed Martin as a single corporation in , the company invested heavily in consolidating and expanding those earlier efforts, so that ethics was not only central to the Lockheed Martin culture, but a crucial

Introduction: In The Shadow of the Skunk Works : 

element in creating a common identity for a widely scattered organiza- tion. The new Lockheed Martin, after all, included divisions that manu- factured, repaired, and outfitted sophisticated aircraft, other divisions focused on information technology, and dozens of other types of ser- vices related to aircraft and modern weaponry. The “Ethics Challenge” was only one of many efforts undertaken by the corporation’s sixty-five ethics officers that attempted to bring a common sense of values to divi- sions and employees working in widely different circumstances. Kale invited me to take a closer look.

I traveled to Lockheed Martin’s headquarters in Bethesda, Maryland, where I negotiated permission for access to the company’s facilities and materials in order to conduct the research. Such inquiries are obviously a delicate matter, not only because any large corporation is sensitive about its image, but because so many of Lockheed Martin’s operations involve projects related to national security. Eventually I worked out a formal agreement that allowed me to conduct the research under the watchful eye of Brian Sears, the corporation’s “director of ethics aware- ness.” I could visit company facilities and conduct interviews with Sears’s permission and in his company, and the corporate ethics office would share the materials that it used as a part of its work. Lockheed Martin would have the right to review the manuscript to ensure that I was not disclosing proprietary information or compromising national security, but otherwise the company would have no control over the book’s con- tent. Naturally, I would have preferred to work with fewer restrictions, but I also appreciated Lockheed Martin’s willingness to cooperate at all. Keeping my options open, I had approached another defense industry giant, Raytheon, with a similar proposal. Raytheon turned me down, anxious about the uncertainties of exposing its operation to the scrutiny of an outsider. Unlike their competitors, the people involved with Lock- heed Martin’s ethics program had the courage and the confidence to let an outsider peer in.

My research at Lockheed Martin took me to a number of the com- pany’s facilities and activities in Maryland, Virginia, Florida, and Cali- fornia, as well as to the corporation’s annual ethics officer conference in Orlando, Florida. I have spoken with dozens of ethics officers, as well as employees who are the “customers,” so to speak, of the company’s ethics program. Joe Kale and Brian Sears have sent me boxes of ethics program

 : Ethics at Work

materials, dating back to the earliest Lockheed Martin efforts in  and , and I have had a chance to witness the annual ethics awareness program in action. Explaining my project, I told every Lockheed Martin employee I talked with that I would be trying to paint a fair and accurate portrait of the company’s ethics program, and that I would also be ask- ing tough questions about the ultimate value of the corporation’s ethics effort both to Lockheed Martin itself and to the larger world. I have tried to be faithful to that explanation in writing this book.

Two genres dominate the market of contemporary books about corporate ethics in America: narratives of scandal, and prescriptions for avoiding them. The tales of fraud and abuse focus, for the most part, on the ac- tions of corrupt corporate leaders. They portray organizations whose cultures have permitted a small number of individuals to perpetrate var- ious types of fraud on a hitherto unthinkable scale. The emphasis of these books, some by former insiders, is on greed in its crudest form: greed abetted by new technologies, by the speculative quality of the American economy, and by the laxity of colleagues. These are caution- ary tales; their moral, by and large, is the vulnerability of large-scale modern organizations to calculated deception by a small number of clever people determined to put their own interests ahead of every other stakeholder.4

At the same time, books and articles have been published with the in- tent of helping corporate leaders figure out how to implement ethics programs that will engender public confidence, avoid lawsuits, and create a sense of integrity throughout the enterprise. These books pay some attention to the excesses of individuals, but they are focused more closely on the culture of businesses as a whole. These prescriptive books take as their starting point a variety of disciplinary contexts—philosophy, management, economics, organizational behavior, to name a few—to provide vocabulary and strategies for heading off scandal while main- taining profits. Some of these works are intensely practical in nature, providing specific advice for companies looking to create or transform their ethics programs, and using contemporary companies as models.5

A particularly useful approach has identified the broad acceptance of the idea of a corporate “personality,” and suggests models for corporations

Introduction: In The Shadow of the Skunk Works : 

to think of ethics and the long-term health of the company as symbiotic components of the corporate enterprise.6 These works differ greatly in their methodology and their prescriptions, but they share a common didactic purpose: to provide a clear road map for organizational leaders who wish to make ethics a central part of their institutional culture.

Tales of scandal and prescriptions for change are not the only types of books that have emerged in recent years. Some thinkers and researchers have focused more on the “experience” of work, and the quest for mean- ing within the life of an organization. These writings treat ethics as the outcome of “good work”: Individual and organizational character is strengthened if the mission of an organization is clear, if workers have maximum opportunity for growth, and if the larger social conditions allow corporations to thrive without resorting to underhanded tactics. Some have focused more on personal transformation, building on the idea that institutional ethics has to begin with the passion and commit- ment and investment of professionals and leaders within the organiza- tion.7 O

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