The Defense Industry Initiative on Business Ethics and Conduct An Overview

1. The Defense Industry Initiative on Business Ethics and Conduct An Overview Promoting a culture of ethical conduct within the defense industry

2. The Background • In 1985, defense acquisition at height of the Cold war • allegations of criminal misconduct and government mismanagement in defense contracting • “Ill Wind” influence peddling scandal was the (unfortunate) poster child • President Reagan appointed the Packard Commission, or “The President’s Blue Ribbon Commission on Defense Management,” to recommend reforms • The Packard Commission, February 1986 Interim Report • waste, fraud and abuse had eroded the public’s confidence in the defense industry and the Defense Department. • The Commission urged defense contractors to improve the defense acquisition process through greater self-governance

3. From the Report “To assure that their houses are in order, defense contractors must promulgate and vigilantly enforce codes of ethics that address the unique problems and procedures incident to defense procurement.” “They must also develop and implement internal controls to monitor these codes of ethics and sensitive aspects of contract compliance.”

4. The Response • Jack Welch of General Electric and the CEOs and senior officials of 17 other defense contractors voluntarily met • Created the Defense Industry Initiative on Business Ethics and Conduct. • drafted the principles that became central to the DII. • These principles first appeared in the Appendix to the Packard Commission's June 1986 final report • By July 1986, 32 major defense contractors had pledged to adopt DII’s core principles.

5. Original DII Principles • Have and adhere to written Codes of Conduct; • Train employees in those Codes; • 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.

6. Original DII Signatories • Honeywell Inc. • Hughes Aircraft Co. • IBM Corporation • Lockheed Corporation • Martin Marietta Corporation • McDonnell Douglas Corporation • Northrop Corporation • Parker Hannifin Corporation • PneumoAbex Corporation • Raytheon Company • Rockwell International Corp. • The Singer Company • Sperry Corporation • TRW Inc. • Textron Inc. • United Technologies Corporation • Westinghouse Electric Corporation • Aeronca Inc. • Allied-Signal, Inc. • American Telephone & Telegraph Co. • The Boeing Company • Burroughs Corporation • E-Systems, Inc. • Eaton Corp. • FMC Corporation • Ford Aerospace & Communications Corp • General Dynamics Corporation • General Electric Company • Goodyear Aerospace Corporation • Grumman Corporation • Hercules Incorporated • Hewlett-Packard Company

7. Who We Are Today • DII is a nonpartisan, non-profit association of responsible U.S. defense companies • committed to conducting business affairs at the highest ethical level and in full compliance with the law • our members are the professional ethics officers, CEOs and senior officials of 78 top defense companies serving the United States military • DII provides resources and assistance to help train hundreds of thousands of defense-industry employees in ethics and compliance. • DII holds regular meetings and conferences to share best practices • DII mentors suppliers and new firms in how to comply with the laws and regulations that govern U.S. defense companies.

8. The DII Principles Today The DII Principles were updated in November 2013: We, the members of the Defense Industry Initiative on Business Ethics & Conduct (DII), affirm our commitment to uphold the highest ethical standards in all our business dealings with the government, as expressed through the following principles: • We shall act honestly in all business dealings with the U.S. government, protect taxpayer resources and provide high-quality products and services for the men and women of the U.S. Armed Forces. • We shall promote the highest ethical values as expressed in our written codes of business conduct, nurture an ethical culture through communications, training, and other means, and comply with and honor all governing laws and regulations.

9. The DII Principles Today • We shall establish and sustain effective business ethics and compliance programs that reflect our commitment to self-governance, and shall encourage employees to report suspected misconduct, forbid retaliation for such reporting, and ensure the existence of a process for mandatory and voluntary disclosures of violations of relevant laws and regulations.  • We shall share best practices with respect to business ethics and compliance, and participate in the annual DII Best Practices Forum. • We shall be accountable to the public, through regular sharing and reporting of signatory activities in public fora, including www.dii.org. These reports will describe members’ efforts to build and sustain a strong culture of business ethics and compliance.

10. DII Leadership • DII Steering Committee: The DII is governed by a Steering committee, a policy-making body comprised of prominent defense industry CEOs • DII Working Group: The DII Working Group are volunteers, comprised of one representative from each Steering Committee organization, who direct the activities of the DII

11. DII Leadership DII Steering Committee Chair Marillyn A. Hewson Chief Executive Officer and President Lockheed Martin Corporation DII Working Group Chair Leo S. Mackay, Jr. Vice President, Ethics & Sustainability Lockheed Martin Corporation DII Coordinator Angela B. Styles Partner Crowell & Moring LLP

12. DII Steering Committee • Robert (Kelly) Ortberg Chief Executive Officer & President Rockwell Collins • David L. JoycePresident & Chief Executive Officer, GE AviationGeneral Electric Company • Tony Moraco Chief Executive Officer Science Applications International Corporation • Christopher M. ChadwickExecutive Vice Chairman, The Boeing Company • President and Chief Executive Officer,Boeing Defense, Space & Security • Phebe N. Novakovic • Chairman & Chief Executive OfficerGeneral Dynamics Corporation • Tom KennedyChief Executive OfficerRaytheon Company • Harold L. Yoh IIIChairman & Chief Executive OfficerThe Day & Zimmermann Group, Inc. Marillyn A. Hewson Chair, DII Steering Committee Chief Executive Officer & President Lockheed Martin Corporation William M. Brown Chairman, President & Chief Executive Officer Harris Corporation Wes Bush Chairman, CEO & President Northrop Grumman Corporation Louis R. Chênevert Chairman & Chief Executive Officer United Technologies Corporation David M. Cote Chairman & Chief Executive Officer Honeywell International Inc. Scott C. Donnelly President & Chief Executive Officer Textron Inc. Jerry DeMuro President & Chief Executive Officer BAE Systems, Inc.

13. DII Working Group • Laura K. Kennedy • Senior Vice President, Ethics & Compliance • Science Applications International Corporation • Denise King • Director, Business Conduct • Harris Corporation Melisse Ader-Duncan Associate General Counsel Textron Systems Corporation • Dorene A. MacVey • Senior Director, Ethics & Business Compliance • Rockwell Collins • Ellen MartinVice President, Ethics and Business ConductThe Boeing Company • Paul Robert • Noelle S. Slifka, Associate General Counsel, Government Contracts • United Technologies Corporation • Douglas Perry • Vice President, Global Compliance • Honeywell • Angela B. Styles • DII Coordinator • Partner • Crowell & Moring LLP Leo S. Mackay, Jr. Chair, DII Working Group Vice President, Ethics & Sustainability Lockheed Martin Corporation Jamal Ahmed Vice President, Internal Audit and Chief Ethics Officer Day& Zimmermann, Inc Nick Ruscio Vice President, Internal Audit and Chief Ethics Officer BAE Systems, Inc. Patricia J. Ellis Vice President, Business Ethics and Conduct Raytheon Company Sandra Evers-Manly Vice President, Global Corporate Responsibility Northrop Grumman Corporation La Guardia N. Myers Staff Vice President, Ethics General Dynamics Corporation Eric Kantor Deputy General Counsel & Chief Compliance Officer GE Aviation Legal Operation

14. Organization Overview • Current Members – 78 Signatories • New Member Companies Since Last BPF • Agiltron, Inc. • SRA International, Inc. • The Aerospace Corporation • Monthly Meetings Among Working Group Members

15. Current Initiatives • The DII Model Supplier Code Of Conduct And Tool Kit • DII On-Line Community, including Job Board • Increased International Focus • Defense Industry Benchmarking • Increase Membership

16. General Question and Answers