On Thursday, June 23, 2011, Northrop Grumman Chief Executive Officer and President Wes Bush gave the opening remarks at the Defense Industry Initiative's 25th Annual Best Practices Forum in Washington, D.C. Below are his prepared remarks.
Opening Remarks – DII After 25 Years
Welcome to the 2011 Best Practices Forum. This event marks the initiative’s 25th anniversary. We are here to re-dedicate ourselves to its underlying principles and to celebrate its accomplishments as our industry’s strong moral compass.
For a quarter century, the DII has promoted a body of underlying principles for our industry, and provided its membership with a moral compass that many felt was lacking before the DII was established.
Twenty-five years ago, our industry was not viewed positively in terms of its ethics and integrity. Most of you are aware of the scandals, allegations and improprieties that spawned the Packard Commission study.
In 1986, that commission reported that the American public had a lack of confidence in our industry.
It concluded that defense companies could benefit from a greater emphasis on corporate self-governance.
Soon thereafter, the CEOs of that time got together to draft the principles that would become the Defense Industry Initiative.
The DII reflects industry-wide what leadership should be doing in their respective corporate organizations. Like the leaders of each member company, the DII’s charter requires real, tangible actions. For example, each DII signatory pledges to uphold six fundamental principles:
- They must adhere to written codes of conduct;
- They must train employees in those codes;
- They must encourage the internal reporting of code violations;
- They must practice self-governance;
- They must share “best practices” with other firms, and participate in annual “Best Practices Forums” such as that which has brought us together this morning; and
- They must be accountable to the public.
These membership requirements drive toward three objectives:
- To nurture and promote a code of ethical conduct throughout the defense industry;
- Promote self-governance; and
- Share best practices in ethics and business conduct issues.
Whether or not these principles are effective comes down to leadership. These principles must be more than just checking a box. It is the responsibility of the leader to ensure, through proactive management, that they are embraced as a part of a corporation’s culture.
If a company manages to do this, the ethical culture that ensues will actually empower good behavior and, ultimately, enhance the bottom line.
And nowhere is this truer than in our industry. There are many reasons for this, but I believe three in particular get at the heart of what makes our industry so unique.
First, because of the stakes. The products we build are critical to the national defense. Standards and practices that might be fine for non-defense industries are often inadequate for ours.
Second, the ethical standards of those we equip and support. When you consider what our armed forces have been doing in Iraq, Afghanistan, and now Libya; when you consider the sacrifices they make and the sacrifices their calling demands of their families, you cannot escape the conclusion that the American war fighter is an idealist, almost by definition. And they are our ultimate customers. They give their very best efforts, and they expect the same from us – and rightly so. We cannot meet their expectations absent a strong culture of ethics that reflects their own.
And the third reason our industry is so uniquely dependent on an ethical culture, is our partnership with our nation’s government.
Between the Pentagon, the voters, and Capitol Hill, our industry has a very low tolerance for scandal. If the taxpayers turn their backs on our industry, their elected representatives will too. And our stockholders will soon follow. As I said, a strong culture of ethics has real “bottom line” implications.
Ethics in our industry’s dealings with the government customer must originate in a solid ethical culture within each respective company. The DII was established to promote just such an industry-wide culture.
And like the DII’s charter and membership requirements, the leaders of each member company must actively promote and manage those policies and tools that, over time, will build that culture.
Establishing a culture of ethics is not difficult, but it does require perseverance, commitment and engagement. Policies and pronouncements that are fire-and-forget are not serious and will come to little.
To my mind, it is the leader’s job to set the tone of the organization and I believe that the business leader must never stop stressing that business performance and business integrity is not an either-or proposition. It is an “and” proposition.
We in the defense industry can never indulge in the easy self-perception of ourselves as simply manufacturers. We consider ourselves integral to the defense of our nation, to the security of our fellow citizens, our families, and the freedoms we all enjoy.
Many of our employees spent careers in uniform. Despite what the cynic might believe about industry in general, and the defense industry in particular, the people who comprise our respective companies work hard to ensure they do not break that compact.
I am looking forward to yet another 25 years of success for our DII.
Let’s get these next 25 years underway now with this conference building on our great foundation to create the future for DII.