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 December 2004 

Lt. Gen. Lawrence P. Farrell, Jr., USAF (Ret)

Ethical Readiness" Mandatory for Defense Industry

December 2004

by Lt. Gen. Lawrence P. Farrell, Jr., USAF (Ret)

At a time of great stress for our nation’s armed forces, it is worth reaffirming the need for industry leaders to engage in a meaningful discussion on the impact of the recent procurement scandals and to figure out how best to move forward.

As our military services continue to fight extended wars in Iraq, Afghanistan and other troubled spots, the defense industry cannot afford to be discredited, even by the appearance of impropriety. The stakes are high for industry and even higher for those whom we serve, the war fighters.

With respect to the latest ethics-related events, the industry needs to come to grips with what went wrong and, joining with government, reclaim the ethical high ground.

NDIA believes that the best way for the industry to regain and bolster credibility is to assert the principles of “self-policing,” when it comes to business ethics. As many experts have observed, no amount of outside scrutiny or independent investigations can make up for the lack of self-governance in a corporation and industry.

Our readers may recall I made similar points in previous columns, when I raised the issue of business ethics in the early days of the Bush administration’s defense buildup for the war against terrorism.

At the time I cautioned that the industry had to be careful about not repeating the excesses of the 1980s.

Unfortunately, the Air Force tanker probe illustrates how a business ethics issue not only tarnishes the reputation of the industry but also can compromise a service’s ability to acquire a much needed weapon system.

In light of a now-widening probe over tainted Air Force contracts, we cannot forget that, no matter what inappropriate actions were conducted in the process of negotiating a tanker contract, the fact remains that the Air Force still has a need to upgrade its aging tanker fleet. We need to be able to talk about the requirement for new tankers, but in today’s environment, any discussions of tankers are inextricable from the ethics issue—making it almost impossible to debate the subject solely on the basis of its merits.

Not only have these unfortunate developments jeopardized the service’s ability to acquire needed equipment, but they also might stand in the way of senior military officers’ promotions and assignments, causing disruptions in the military command structure. The tanker issue, meanwhile, has prompted the Army to commission a study to the Institute for Defense Analyses on how the service should deal with industry. The study, reported the Wall Street Journal, concluded that the “Army should adopt a policy of ‘Trust but Verify.’”

Trust is a critical element that cannot be underestimated. It is at the core of a new ethics business code that NDIA unveiled last month, with the guidance of our Board of Directors. A special committee assigned by the board has been working actively on this issue since 2001.

NDIA believes that the defense industry can tackle the need for ethical self-governance.

The association’s Ethics Committee has developed a benchmark statement of industry ethics for companies to incorporate into their day-to-day business.

Joe Reeder, chairman of the NDIA Ethics Committee, noted that, “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.”

The code set forth by NDIA introduces some unique provisions designed to promote self-governance as the first line of defense. First, the chief ethical officer of the firm always should 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.

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

We are hopeful that every one of our 1,100 NDIA member companies will accept and endorse the code, which is intended to place the defense industry at the forefront of business ethics in America.

The stakes are high. After all, entrusted to our care are the lives of service members who bear the ultimate risk for their country to provide security to their fellow citizens. As the code indicates, “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 should follow. You will be hearing more about this code in weeks to come as we ask our member companies to endorse this Statement Of Defense Industry Ethics.

The complete text of NDIA’s statement of defense industry ethics can be found on our website, at:

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