On Saturday, December 9, 2006, Northrop Grumman President and Chief Financial Officer Wes Bush delivered the commencement address at the graduation ceremonies for Pepperdine University’s Graziadio School of Business and Management. He spoke on applying values to business and using values-based guideposts in leadership. Below are his prepared remarks.

Values-based Guideposts for Leadership

Chancellor Runnels, President Benton, Provost Tippins, Dean Livingstone, distinguished members of the Pepperdine community. Thank you for asking me to help celebrate this special occasion – this milestone day of high achievement.

And thank you for awarding me an honorary degree – I sincerely appreciate it.

Let me congratulate the Graziadio School for graduating another fine class – one supremely well prepared to advance George Pepperdine’s vision of entrepreneurship centered on values.

Let me also congratulate all family members and friends; you should be very proud of what you have contributed to today’s successes.

And most of all, let me congratulate the class of 2006 – you have successfully completed a demanding program and will soon be putting it to use in many business workplaces.

I know that four members of your class are also members of our Northrop Grumman team. And let me add, their graduation brings to 434 the number of Northrop Grumman employees who have earned Pepperdine business degrees over the years. This sizeable population has built strong bridges between this great university and our company – we are profoundly and productively linked.

Your education here has prepared you well to take on new and ever more demanding challenges. I know you will take the time to celebrate and reflect on this accomplishment, but I also know you are looking forward to the next challenges that your business education will enable you to embrace.

Pepperdine has provided you with an understanding of much more than the textbook workings of business – one of the reasons that Northrop Grumman employees are so attracted to this university is its values-based philosophy.

Understanding values and applying them in your life is a very personal effort, and we all bring our own way of approaching this. I have found in my own career, though, that I do learn a lot about values from others, and I thought I would take a few minutes to share with you today some thoughts that you might find helpful as you approach your next steps in the world of business.

I’ll start with the premise that each of you, by virtue of your determination and ability to take on the rigor of earning a business degree at Pepperdine, will likely accept positions of increasing responsibility as you progress through your careers. With this increasing responsibility will come an increasingly difficult set of decisions that you will need to address.

The discipline that you have learned in your course work here will help you take on these tough decisions with a strong analytical framework that you should use to help ensure that you have all the facts and that you really understand how any one decision can impact many different things across an enterprise.

But I have learned that a solid set of values-based guideposts are a critical element of any decision-making process, and I would encourage you to establish your own set of guideposts that you can rely upon to help you address the tough challenges that your success will bring.

I’ll share some of the key guideposts that I use – hopefully some of these will be useful to you, but as I said before, this is a very personal effort, and your guideposts need to reflect your own priorities –- your most deeply held values.

My first guidepost when taking on a big decision is the importance of establishing and maintaining trust.

Trust certainly requires honesty and integrity, but it also requires that you and your enterprise meet your commitments. I find the language of meeting commitments to be a great way to get real focus on what a team is doing. And the connection between trust and meeting commitments is a very tight connection.

One of the reasons I feel so good about being a part of Northrop Grumman is that the very vision of our company is founded on trust. Our vision is pretty straightforward. It reads as follows:

“Our vision is to be the most trusted provider of the systems and technologies that ensure the security of our nation and our allies – this trust enables our objectives to be our customers’ provider of choice, our shareholders’ investment of choice, and our employees’ workplace of choice.”

The notion of trust is critically important to our company, as the nation entrusts us with some of the most sensitive programs upon which our national security depends. The 120,000 men and women of Northrop Grumman make a real difference in the work they do every day – and we are very proud of that work, and also very humbled by the incredible responsibility that comes with being entrusted with such critical work for our nation.

Another very important guidepost for me is the need to create value. Like trust, I apply this guidepost not just as a businessperson, but also in the sense of what I want to accomplish in my life as a whole person, including the many aspects of my life outside of business. On the business front, the concept is pretty clear – creating value means using resources in a way that you actually get more out than you put in. The concept of “return on investment” captures the notion very well.

This is why for-profit businesses exist – to deploy resources, like financial and human capital to create more value than is invested. We even set up metrics to see if it is working in a business – we measure the implied cost of the resources that we use – call it “cost of capital” if you will, and we determine if a business is providing a return greater than its cost of capital.

Those businesses that fail to return more than their cost of capital typically don’t make it for very long – those that routinely return substantially in excess of their cost of capital thrive and grow.

Successful enterprises that are not-for-profit also operate on the concept of value creation, as they employ a variety of resources to accomplish their mission in a way that adds to the financial and human resources that are brought to bear.

This notion of value creation can be applied to your own personal life as well. We are each given a certain amount of human capital, each with a little different portfolio of capabilities. And we are only given a certain amount of time to deploy this capital.

It is up to each of us to figure out how to deploy this gift of human capital to create real value for the world around us – and I would suggest to you that the units of measure on the returns are not dollar signs.

So I think a lot about how value is created and sustained, and it helps me as I think about difficult decisions

A third guidepost that I rely upon is whether the spirit of innovation is supported by a decision. I am a firm believer that a strong commitment to moving forward, trying new approaches, and embracing change brings vigor and real value to an enterprise. I also find that those who naturally exhibit these traits tend to make the most extraordinary contributions.

I will also tell you that these traits are frequently suppressed by large organizations, where there is often much invested in the “as is” condition. In fact, I have seen organizations that practically chase good talent out, in order to minimize the inevitable disruption that comes from bright, innovative ideas. These organizations usually don’t last too long, thank goodness.

Some of the best advice I ever received regarding innovation was from my thesis advisor in engineering school. I was very fortunate to have a thesis advisor who had worked in industry for a number of years, as well as having a very accomplished academic career. When I went to see him for the last time before I graduated, I asked him what advice he would offer as I made the transition from graduate school to industry.

His advice was very straightforward. He said that he fully expected me to have some new ideas that I would want to try out and about which I would be passionate. He also said he expected that I would seek the input of more senior folks in the organization to test whether I should pursue my ideas.

His advice was to seek out the most experienced talent I could find, and fully explain my ideas. If they said it could be done, my advisor said he would bet that they would be right, and I should work hard to make it happen.

But if they said it could not be done, and yet I felt passionate about it, my advisor said he would bet even more strongly that it could indeed be done, and that I should not be deterred in making it happen.

As I said, it was some of the best advice I have ever received, and I think about it often as I see innovative ideas put on the table by those who have done their homework. Often times it means that things will have to change, and some risk will be taken, but that is the only way that real innovation can thrive, and there is an extraordinary value in that spirit of innovation.

I won’t give you a long list of all the guideposts I use – mine are very unique to my own outlook, and each person must define their own values-based framework. But I hope these examples can be helpful to you as you move forward in your careers.

I would offer one final thought for you today as you celebrate your tremendous accomplishment in earning your business degree. You can contribute to moving our world forward in many ways.

President Woodrow Wilson once said, “No task rightly done is truly private. It is part of the world’s work.”

Your Pepperdine education has been very aligned with President’s Wilson’s message, and it has given you the right orientation for success. For as long as you are focused on doing the world’s work, you can easily find a role and purpose large enough to fit your dreams.

Again, all my congratulations on your admirable accomplishments. I hope your future work brings many satisfactions – and spreads its benefits far and wide.