Breakout Session #7 Robert J. Ingersoll Vice President Contracts & Pricing The Boeing Company

1. What is an Effective Compliance Program for a Multi-National Company Breakout Session #7 Robert J. Ingersoll Vice President Contracts & Pricing The Boeing Company April 8, 2003 2:00 – 3:00 pm NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

2. Agenda • Today’s Environment/Challenge • Overview of Boeing’s Compliance Program • Boeing’s Framework • Compliance Management Oversight Process • Compliance Assessment Process • Emerging Issues • Independent Leadership • Ethics Compliance • Financial Governance – Sarbanes-Oxley • Globalization • Export Compliance • Import Compliance • International Service Providers (Foreign Corrupt Practices Act) NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

3. Today’s Environment • International Terrorism/War • Increased Attention to Corporate Responsibility and Governance • Volatile Financial Markets • Greater Globalization • Evolving Business Models NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

4. Today’s Challenge • Design and implement an effective compliance program to prevent and detect violations of laws and regulations in an increasingly complex global environment NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

5. Boeing Limited The Boeing Company Vision “People Working Together as a Global Enterprise for Aerospace Leadership.” …people working together as a… Removing any barriers that prevent application of entire company (and supplier) resources -- both commercial and military/space -- from providing best value solutions to our customers. …global enterprise… Eliminating impediments that constrain business opportunities and limit supplier sources in the international market place. …for aerospace leadership Creating a business environment that provides opportunity for strong financial returns, technology advancement and growth in the commercial and government marketplace.

6. Boeing LimitedBoeing Framework Company Values Compliance with Law Vision 2016 The Law Leadership Integrity Quality Customer Satisfaction People Working Together A Diverse and Involved Team Good Corporate Citizenship Enhancing Shareholder Value NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

7. Boeing LimitedBoeing’s Approach • Established an oversight process designed to effectively prevent and detect violations of laws and regulations • Identified and targeted about 25 to 30 Compliance Risk Areas to focus efforts • Revisit and update compliance risk areas annually • Implement an annual self-assessment of each Compliance Risk Area • Corporate executive and management participation in compliance processes NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

8. Boeing LimitedCompliance Management Oversight Process NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

9. Boeing LimitedCompliance Assessment Process (CAP) Overview • Cornerstone of the CMOP • Formalized and Systematic Approach to Annually Identify and Assess Corporate Risk • Identifies and targets Compliance Risk Areas (CRA) • Requires an annual self-assessment of each identified CRA • Responsible executives designate one Executive Focal for a given Compliance Risk Area NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

10. Boeing LimitedCAP Overview (Continued) • Executive Focal ensures the coordination and completion of the annual assessment among the appropriate business units, segments and subsidiaries throughout the Company • Requires review and approval (with signature) by the Responsible Executive for each Compliance Risk Area • Process launches in March and concludes in December NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

11. Boeing LimitedCAP Process Annual Timeline • Compliance Risk Areas finalized and responsibility mapped to Process Councils and the Executive Focal (March) • Business units, segments, etc assess risk areas (June) • Enterprise wide assessment compiled for each risk area (July) • Senior management review of consolidated assessments (September) • Internal Audit completes independent review (4th Quarter) NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

12. Boeing LimitedCompliance Risk Area Criteria • General Counsel, Corporate Auditor, Controller, and V.P. of Ethics and Business Conduct select corporate Compliance Risk Areas (CRA) • CRA’s are selected based on specific risk factor criteria: • Business Interruption • Damage to Company Reputation • Significant Financial Impact • History of Compliance Issues • Likelihood of Non-Compliance • Risk of Criminal Charges under FSG • Potential for increased Government Oversight NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

13. Boeing LimitedCompliance Risk Areas for 2003 Finance/Contracts Operations Shared Services Group Cost Accounting Estimating & Pricing Export Compliance Financial Disclosure Forecasting Overhead Industrial Security Safety, Health & Environmental Affairs (SHEA) Boeing Commercial Airplanes Quality Government Property Management Export and Import ComplianceProcurement Integrity Domestic Consultants Tax FAA Production & Quality Assurance Product Substitution FAA Design & Certification Washington D.C. Supplier Management People Lobbying - Federal Lobbying - State & Local Political Contributions (PAC) Political Contributions (State & Local) Equal Employment Opportunity (EEO) Restrictions on hiring current and former U.S. government employees Anti-Kickback Accepting Gratuities Sales & Business Development Legal Offering Gratuities Antitrust Insider Trading Foreign Sales Consultants NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

14. Emerging Issues for 2003 –Focus on Corporate Governance Maintain a keen focus on corporate governance through three key areas: An active, informed and independent leadership A strong Ethics Program to communicate values and standards of ethical business conduct to the workforce An efficient and sustainable internal control program for financial accountability that satisfies the requirements of the Sarbanes-Oxley Act of 2002 NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

15. Independent Leadership • Active, informed and independent Boeing Board of Directors ensure the on-going integrity, transparency and long-term strength of Boeing • Long history of independent leadership • Nine of eleven directors are independent of the Company • Board has established its own areas of governance and adheres to key guiding principles which are reviewed annually NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

16. Boeing LimitedEthics Compliance • Initiated an extensive Code of Ethics for employees more than 25 years ago • Established formal, active Ethics Program in 1986 • Avenues for guidance, reporting ethical issues or discussion concerns are available through on-site ethics advisors or toll-free numbers • Boeing’s Ethics Program includes: • Policy formulation • Employee education • Advisory support • Compliance assessment • External regulatory interface NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

17. Boeing LimitedEthical Business Conduct Guidelines Booklet • Company Values • Letter from the “Office of the Chairman” • Code of Conduct (Policy 2 - “Ethical Business Conduct”) • Ethical Decision Making Model • Ethics Procedures • Ethics and Business Conduct Program • Marketing • Gratuities • Conflict of Interest • Proper Relationships with Suppliers • Proper Use of Company Resources • Insider Trading • Additional Business Conduct Issues • Antitrust Compliance • Government Audits and Investigations • Proprietary Information NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

18. Financial Accountability --Sarbanes-Oxley Act of 2002 • Legislation that addresses corporate responsibility, accountability, transparency and behavior • Boeing is creating an efficient and sustainable internal control program to satisfy the requirements of the Act • Established an enterprise-wide framework and process to support management’s assessment of the design and operating effectiveness of internal controls and procedures over financial reporting. NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

19. Boeing LimitedSarbanes-Oxley Compliance • Executive responsibility assigned to: • Corporate Controller • Corporate Secretary/Assistant General Counsel • Assistant Corporate Controller designated as project leader • Visibility room created: • Used to track changes in accounting guidance and governance requirements • Status reports posted related to all material projects and rules, including Sarbanes-Oxley, SEC Rules and NYSE Listing Requirements • Regularly scheduled meetings to assess status of proposals NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

20. Boeing LimitedSarbanes-Oxley Compliance • Certification Process • Created Disclosure Committee • Responsible for reviewing SEC filings for completeness and accuracy • Members include executive sponsors and heads of functional groups • Committee reports to CFO • Conduct internal “ground up” certification – • Working groups assembled with business unit representatives NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

21. Globalization • The ability to operate broadly and effectively with the entire globe as a market and source of production, as well as a source of new ideas and innovation • Opportunity for: • Business growth • Increased source of supply • Greater access to intellectual capital • Global business integration & partnership NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

22. Globalization - Increasing Integrated Source: OSD . NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

23. Global Business Challenges International Politics Customers Supply Chain Global Economies Boeing E- commerce & Data Systems Infrastructure Competition Employees NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

24. Global Business Challenges Rules-Based Environment Anti boycott FCPA Customers International Politics EAR Global Economies Supply Chain Boeing OFAC E- commerce & Data Systems Infrastructure ITAR Competition Employees Federal Firearms Customs NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

25. Export Challenges • Customers • USG Approvals of licenses & agreements • Access control on onsite customers • Employees – global diversity in workforce • Internal control plans • Control of e-data & e-commerce • Suppliers (Products & Infrastructure) • USG Approvals of licenses & agreements • Access control on onsite suppliers NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

26. Import Challenges • Customs-Trade Partnership Against Terrorist (CTPAT) Initiative between business and government to protect global commerce from terrorism. (Enhance security in supply chain) • Benefits • Leadership & support to Homeland Security • Essential for partnership with US Customs • Prerequisite to Importers Self Assessment program & other initiatives (Importer Self Assessment, Fast track, etc.) • Strengthens the security of Supply Chain NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

27. International Service ProvidersChallenge • Changing Environment • USA Patriot Act • Anti-Terrorism/Money Laundering • Substantially expands/changes responsibilities of US financial institutions • Expands due diligence requirements • Verification of customers and their funding source • Key Message: Know with whom you are doing business NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

28. Boeing LimitedForeign Corrupt Practices Act (FCPA) • FCPA is an anti-bribery law promoting fair and open competition • Boeing implemented a compliance program that focuses on two primary areas • Consideration and resolution of FCPA issues that may arise in business transactions (i.e. sales, joint ventures) • Reviewing the activities of foreign sales consultants • Procedure broadened to address International Service Providers (Distributors, sales brokers, industrial participation consultants) NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

29. FCPA Challenge • Due Diligence Process • In Country Validations – active validation process to examine prospective consultants • Active Executive Management • Periodic Training NCMA 3rd Annual Commercial Contract Management Conference International Contract Management—Better Business by Crossing Borders

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