CHICAGO – Boeing Co., faced with a federal probe into the way it bids on defense contracts, has been told to do more to strengthen ethical behavior in two separate reviews commissioned by the company’s board.
The two outside reports released by Boeing on Thursday come as the aerospace giant grapples with stiff scrutiny and criticism over unethical conduct by employees in its defense contracting units.
The reports also predate the recent firing of Michael Sears, Boeing’s chief financial officer, for alleged unethical conduct related to a $26 billion contract for Boeing 767 tankers, and the departure of Philip Condit, its chief executive, who resigned in the wake of the scandals.
The reports were commissioned in the summer after the government banned Chicago-based Boeing from bidding on military satellite launches because it used proprietary information from rival Lockheed Martin Corp. to win a contract in 1998.
One of the reports, which was drafted by the Washington law firm of former Sen. Warren B. Rudman, R-N.H., included 16 specific recommendations that would reinforce ethical behavior at the company.
“Engagement by the company’s senior management in the development and implementation of the ethics and compliance programs has been insufficient in terms of organization and regularity,” the report says.
It also found that Boeing’s oversight of efforts to win government contracts hasn’t lived up to its written policies and guidelines. The report recommends that the company conduct “in-person counseling” with new employees about prohibitions regarding the use of proprietary information from their former employers.
A second ethics report by the Ethical Leadership Group, a business-ethics consulting firm in suburban Wilmette, portrayed a cultural clash between Boeing veterans and employees inherited from acquisitions of several defense contractors in the late 1990s.
“Boeing employees almost universally pine for the good old days before the Boeing acquisition of McDonnell Douglas,” the report says. “In the minds of many employees, any problems are due to another legacy company. The integration of cultures is not complete.”
The report recommended that new employees should be required to sign a statement that they do not possess any proprietary material and will not attempt to obtain such materials.
Overall, Boeing’s ethics program is “above average for Fortune 500 and Fortune 200 companies,” said Steve Priest, president of Ethical Leadership Group. “The hard thing they face is bumping up the level of candor in the employee base.”
Boeing, which has created an office of internal governance that reports directly to its new CEO, Harry Stonecipher, says it is well on its way to addressing the recommendations in both reports.
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