Driving a Culture of Integrity With Leadership Commitment and Education: NCMA Presentation

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Driving a Culture of Driving a Culture of Integrity With Leadership Integrity With Leadership Commitment and Commitment and Education:Education:NCMA PresentationNCMA Presentation

Patricia J. Ellis

March 16, 2011

04/22/23

Agenda

Background Raytheon Evolution of Ethics Programs

Driving a Culture of Integrity Leadership and Education initiatives Video

at Raytheon

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Raytheon: Who We Are

A technology and innovation leader specializing in defense, homeland security and other government markets throughout the world

2010 net sales: $25 billion

72,000 employees worldwide

Headquarters: Waltham, Massachusetts

A global leader in technology and innovation

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Our Vision

To be the most admired defense and aerospace systems supplier through world-class people and technology

Ensuring the success of our customers

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Our Strategy

Protect and grow our position in our four core defense markets:

– Sensing: Technologies that acquire data and create accurate, reliable information for effective battlespace decisions.

– Effects: Technologies that achieve specific military actions or outcomes from striking targets to disabling hostile information systems.

– C3I: Integrated real-time systems that optimize operational planning and execution

– Mission Support: Lifecycle solutions including Product support, engineering services and training.

Homeland Security and Cybersecurity

Expand international business by broadening focus and expanding in growth markets

A technology-driven growth strategy

Our Values

People Treat people with respect and dignity. Welcome diversity and diverse opinions. Help our fellow employees improve their

skills. Recognize and reward accomplishment.

Integrity Be honest, forthright and trustworthy. Use straight talk; no hidden agendas. Respect ethics, law and regulation.

Commitment Honor commitments to customers,

shareholders, the community and each other.

Accept personal responsibility to meet commitments; be accountable.

Excellence Improve performance continually. Achieve innovation in all that we do. Stress quality, productivity, growth, best

practices and measurement. Always strive to be the best.

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A culture of performance

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Ethics Programs Yesterday

The companies in the defense industry pioneered ethics programs in response to the contracting scandals of the 1980’s (i.e. the $600 hammer)

The Defense Industry Initiative was established (l986)

The focus was on Fraud, Waste and Abuse (labor reporting, conflicts of interest, proprietary information and quality, etc)

Hotlines meant whistle-blowing

Ethics programs were a cost of doing business

Ethics linked to bottom-line through risk mitigation and management

Focus on compliance - rules

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Ethics Program Today

World class ethics programs

– Understand the role of values as a competitive advantage

– Senior Leadership is committed and link values to the behaviors that achieve company goals; “How” things are done

Regulators have zeroed in on culture and reinforced emphasis on ethics and compliance programs (i.e. S-OX, SEC, DoJ, FSGO, FAR 52.203-13)

Culture is as critical as the rules

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A New Model

Recognition that the culture is as critical as the rules; decision making in the gray areas

Talking about ethics now means talking about company values; at Raytheon (for example)

– People…………. Respect, recognition, diversity, team

– Integrity……...... Honesty, straight talk, trust

– Commitment….. Accountability; do as you say

– Excellence…….. Continuous improvement, innovation, quality

A fundamental shift

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Eight Elements of an EffectiveEthics and Compliance Program

A Code of Conduct

Executive leadership and ownership

Ongoing education and communication processes

A reporting mechanism – a “safe haven” for advice/reporting of wrongdoing

Integrity standards, reinforcement & accountability

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Eight Elements of an EffectiveEthics and Compliance Program

A system for corporate internal investigations and taking relevant corrective actions

Self-evaluation, auditing and internal control processes

Responsibility and accountability by all employees

Disclosure when there is credible evidence of a violation of criminal law

Each element critical to effective programs

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Driving a Culture of Integrity

Focus on two elements

– Leadership Commitment

– Strategic Education and Communications messaging Employee Awareness

A long term initiative; more than program maintenance

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Governance Structure & Ethics RTN Ethics Office reports to Office of General Counsel

Quarterly reports shared with CEO, GC & Senior Leaders

CEO Operating Reviews include Ethics 2x/year

Annual briefing with Public Affairs Committee. Quarterly reports of program metrics submitted to PAC as well

Case reports provided throughout the year on a regular basis to the Audit Committee

Selected compliance topic briefings

Engagement at the highest levels

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Engaging Leaders

Leaders:

– Focus on data & processes using Ethics program metrics

– Serve on Ethics Review Committees in the major businesses

– Contribute topics and ideas to support Ethics education initiatives

– Facilitate and join employees in Ethics education sessions

– Experience Ethics education programs tailored to their roles

The Ethics Office supports leaders with counseling, investigations, and education

Leadership challenges and supports the program

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Data for Leaders

Employee Opinion Survey.– All employee surveys issued every other year since 1999. Off-year surveys

sent to 15% sample of workforce.

– 10 of 90 questions (plus 18 sub-questions on nature of observed misconduct, reasons for not reporting, etc.) are included in “Ethics Index.”

– EOS analysis by business, locations identifies trends, areas for improvement and permits comparative assessments.

Ethics Program Metrics Integrated with “Ops Reviews” of 6 Major Businesses.

Robust Ethics Education program developed centrally and deployed enterprise-wide. Leaders responsible for implementation.

Leaders own building an ethical culture

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Ethics measures incorporated in business financial and operating results presentations given by Company Business Presidents to CEO.

Ethics reported 2x /yr. in business performance reviews.

Encourages sharing of best practices across the Company, plus competition to show best results.

Keeps Leadership focused on ethical health of business.

What gets measured gets done

Business Performance Reviews

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Education Metrics:– # of Employees attending Awareness sessions.– # of Compliance modules delivered (& identify key topic areas).

Ethics Program Metrics:– Contacts with Ethics Office.

Nature of issues raised. # Seeking advice. # Reporting misconduct.

– Investigation Activity # Investigations in process. # Investigations closed/substantiated. Corrective action summary.

Ethics: Another driver of performance


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Ethics Messaging:– Leadership communications, webcasts, etc.

Other Ethics Initiatives:– Outside speakers, Integrity Awards, etc.

Employee Opinion Survey– Ethics index data.

– Action plans.

Underscoring Leadership accountability


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Fundamental element in Ethics education

The Ethics Foundation

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Subject Matter Experts

EMPLOYEE OPINION

SURVEY

COMPANY

STRATEGYCODE OF

CONDUCT

EMERGING ISSUES

INDUSTRY RISK

VALUESETHICS

EDUCATION

SHARING BEST

PRACTICES

CASE

EXPERIENCE

Ethics Education: Key Drivers

Rich variety of inputs to Ethics education offerings

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ETHICAL

BEHAVIORS

REPORTING

CONCERNS SEEKING

ADVICE

BEING

ACCOUNTABLE

SUPPORTING

OTHERS

MAINTAINING

STANDARDS

REASONING &

DECISION MAKINGLEARNING

COMMUNICATING

ISSUE

SPOTTING

KEEPING

COMMITMENTS

Putting values into action

Ethics Education Behavioral Outcomes

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Audience Education Element Outcome

Board/SLT Facilitated Discussion Inspiring a culture of integrity.

All Leaders Online Module Understanding ethical leadership behaviors &

skills.Salaried Employees Online Compliance Modules Familiarity with issues;

aware of and reporting concerns; seeking ethics advice.

All Employees Awareness/Live Discussions Ethical reasoning and of Case Scenarios decision making.

All Employees Code of Conduct Setting fundamental expectations of ethical conduct.

All Employees EthicSpace mini-series Continuous reinforcement.

Ethics Education Differentiated by Level

Format and content tailored for audience

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Ethics Education 2010

Annual All Employee Awareness – “Ethics Checkpoint”

Online Compliance Modules – 40+ in Library

“Fraud in the Workplace” – Emphasizes obligation to report misconduct– Aligns with new FAR Mandatory Disclosure Requirement

“Basic Labor Reporting”– Addresses routine caseload in this area

“Understanding the FCPA”– International growth risk

EthicSpace – a message multiplier

Ethical Leadership programs

Solid offerings in classroom, online, via e-mail

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Ethics Checkpoint 2010

Pause, take an Ethics check, then proceed

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Ethics Checkpoint 2010

Vignettes cover several topics:

“Marking Time” – Labor Mischarging “Partner Problems” – Supplier Relations “The Rush Job” – Product Substitution

Format designed to be “facilitator proof” Vignettes followed by model discussion, “Checkpoint with

Leaders” One hour classroom setting preferred, but online, CD, DVD

and paper formats available

Pause, take an Ethics check, then proceed

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EthicSpace mini-series

“A Credit to his Company” – Company Credit Card Abuse “Playing by the Rules” – Export Controls “Watch Your Step”- Workplace Safety & Safety Reporting “Once Upon a Text” – Social Media

Getting leaders & employees to talk about Ethics

Ethics Education - A Tool for Cultural Change

Ethics Education – 2010

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Ethics Education – 2010 FCPA Aware program

Initial target audience of 13.5K employees in BD, SCM, PMO, Contracts, Finance, HR, Legal & RSL, RA

Due Diligence Books & Records Offsets Gifts & Gratuities

Vignettes & key learning points in memorable format

FCPA Aware addresses a key international risk area

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Take 5 for Ethics was delivered to 10,000+ Leaders via email. It follows spaced learning model (short, frequent bursts) and runs 5 - 7 minutes.

7 Ethical Leadership Skills include: Listen to others and encourage bad news Act according to values Communicate expectations & explain decisions Hold yourself and others accountable Treat everyone with respect Keep promises and commitments Talk about Ethics with your employees

Leaders set the tone

Ethics Education – Ethical Leadership

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BENTLEY PRESENTATION ENDS AT PAGE 28

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Raytheon at a glance

#4 US Defense contractor 2010

Global headquarters: Waltham, MA

$25B 2010 sales

72,000 employees

State of the art electronics and mission systems integration

Mission areas: sensing; effects; command, control, communications and intelligence systems; and mission support services

Leader in technology & innovation

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Ethics programs in the US defense industry

1986 Defense Industry Initiative (DII) starts self-governance and voluntary disclosure programs by major defense contractors

6 DII principles: Have and adhere to written Code of Conduct Train employees in the Code Encourage internal reporting of violations of the Code, within an

atmosphere free of fear of retribution; Practice self-governance through the implementation of systems to

monitor compliance with federal procurement laws and the adoption of procedures for voluntary disclosure of violations to the appropriate authorities;

Share with other firms their best practices in implementing the principles, and participate annually in “Best Practices Forums”; and

Be accountable to the public

Defense industry starts the ethics & compliance journey

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Ethics & compliance programs for US government contractors

Federal Acquisition Regulations (FAR) FAR 52.203-13, Contractor Code of Business Ethics and Conduct.

a) Government contractors must conduct themselves with the highest degree of integrity and honesty.

(b) Contractors should have a written code of business ethics and conduct. To promote compliance with such code of business ethics and conduct, contractors should have an employee business ethics and compliance training program and an internal control system that—

(1) Are suitable to the size of the company and extent of its involvement in Government contracting;

(2) Facilitate timely discovery and disclosure of improper conduct in connection with Government contracts; and

(3) Ensure corrective measures are promptly instituted and carried out.

FAR rule mandates E&C programs, disclosures

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Ethics & compliance programs for US government contractors

Federal Acquisition Regulations (FAR) FAR 52.203-13, Contractor Code of Business Ethics and Conduct.

After December 12, 2008, all new prime contracts and subcontracts expected to exceed $5 million and a 120 day or greater performance period are required to include a new FAR clause requiring disclosure of certain conduct (FAR 52.203-13).

Required to timely disclose, in writing, to the agency Office of the Inspector General (OIG), with a copy to the Contracting Officer, whenever, in connection with the award, performance, or closeout of this contract or any subcontract . . . the Contractor has credible evidence that a principal, employee,agent, or subcontractor of the Contractor has committed:

(A) A violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code; (B) A violation of civil False Claims Act (31 U.S.C. 3729-3733).

FAR rule mandates E&C programs, disclosures

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Ethics Index 84 84 9076

During the past year, have you personally observed 76 NC +277

conduct that you thought violated Company’s standardsof ethical business conduct? (Fav Response = “No”)

Top management talks about the importance of ethics and 90 +3 -284

doing the right thing in the work we do.

Overall, my supervisor sets a good example of ethical 78 +4 +680

business behavior.

How useful have you found ethics training to be in guiding 87 +4 -385

your decisions and conduct at work?

Non-management employees are held accountable if they 75 +2 +570

are caught violating Company’s ethics standards.

Managers are held accountable if they are caught violating 66 -2 -365

Company’s ethics standards.

vs. vs.2010 ‘08 Benchmark BUS

Blue: Significantly more favorable Red: Significantly less favorable

Ethics Index - Business A (example)

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7982 81

8584

86

7881 78 80

75 78

0

10

20

30

40

50

60

70

80

90

100

YES %

CO Total CORP A B C D

2008 2010

Ethics Index

% F

avor

able

2010 Employee Opinion SurveyEthics Index by Business (example)

A cultural barometer by business unit

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“Checkpoint for Leaders” in development for 2011 deployment

– Brief video vignettes delivered via e-mail

– Illustrating both positive & negative Ethical leadership behaviors

– Key behaviors to show organizational support for employees raising Ethics concerns

– Reinforcing Integrity value and leadership competency

– Underscoring accountability of leaders as ethical role models for followers

To be continued…..

Ethics Education – Ethical Leadership

Driving a Culture of Integrity With Leadership Commitment and Education: NCMA Presentation

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