Topic: Business & Commercial

Boeing Gets It
(3/11/2005)

It seems that if you're a corporation in America, you just can't win.

After all the scandals, after Enron and Tyco and Global Crossing, after Richard Scrushy and the Rigas family and Bernie Ebbers, after the media and consumer watchdogs excoriated the business community and the business schools for their warped values and lack of ethics; after lectures from politicians (and when a politician lectures you on ethics, you know you're in bad shape) and pundits, one corporation demonstrates that it truly understands how an ethical organizational culture must be built and maintained, and what happens? The conservatives say that it has its priorities backwards, and the liberals say the company has over-reacted.

Poor Boeing! Here is a company that has been a leader in proactive and innovative ethics programs for its employees for over a decade, winning awards and plaudits. Then it learns a sober lesson: the best employee ethics program in the world (which Boeing may have in fact had) isn't worth much if the company's brass doesn't think it applies to them. The company's Chief Financial Officer, Michael Sears, was sent to prison for his role in a scheme to rig contract bids with the Air Force, by illegally offering a job to the Air Force official doing the negotiating on a $23-billion purchase of aerial refueling tankers. Meanwhile, Boeing's CEO Phillip Condit resigned in the wake of other scandals, including one in which two Boeing employees lifted proprietary documents from its rival, Lockheed Martin Corp., to win a lucrative rocket-launching contract.

How many documents? Oh, about 30,000, give or take a few. As punishment (George Will would say condign punishment), the Air Force took away about $1 billion of rocket work from the company and indefinitely suspended Boeing from seeking rocket contracts.

And it was clear that this flying fish was rotting from the head down. Condit "created a culture where this type of activity was routine," said Steve Ellis, vice president of the watchdog group Taxpayers for Common Sense. So Condit was sent packing, and a new CEO, Harry Stonecipher was brought in to clean things up. By all accounts, he did a superb job. Under his stewardship, Boeing was well on its way to regaining the trust of the Pentagon.

Then it was revealed that Stonecipher, who is separated from his wife, was carrying on a romantic affair with a Boeing executive, spiced by e-mails over Boeing's system that Michael Jackson couldn't read to his house guests. With the speed of a supersonic jet, the Board asked for Stonecipher's resignation.

"Ridiculous!" screamed the Wall Street Journal. Stonecipher was doing a terrific job! Profits were up, and scandals were down. Why, if the same thing had happened with Boeing's French rival Airbus, the amorous CEO would get a bonus!

"Absurd!" cried pundits like the depressingly predictable Richard Cohen (but who at least doesn't use "condign"). This is right wing Puritanism run amuck! So the guy has an office liaison…everybody's doing it! Hey, CEO's don't have to be perfect…look at Jack Welch!

"Morons!" says the Ethics Scoreboard.

Boeing's action was exactly right, and shows that the lesson of the scandal-filled years past has been learned. A company cannot build an ethical environment if the leadership shows by its actions that all the codes of conduct and training films and anonymous hot lines are just window dressing and PR fakery. If the top executives of a company can violate the spirit and letter of the rules whenever it's enjoyable, profitable, or convenient, then that company has no ethics program. The employees will get the message. You think love and romance are temptations? How about millions of dollars? How about lucrative side deals, inside trading, bribes and pay-offs? Once Stonecipher, who had done a terrific job, was shown to be a leader who believed the rules didn't apply to him, his value to Boeing was at an end. Such a CEO could only injure Boeing's efforts to bolster an ethical culture. He had to go.

For those who may have read too much Richard Cohen through the years and suffer from brain rot, let's be clear. A CEO having an office affair with another executive is a per se ethical violation, and the fact that it's consensual (this is what Cohen can't grasp) has nothing to do with it. The situation creates inherent conflicts of interest, threatens employee morale, and undermines the chain of command. Moreover, the fact that a CEO is hiding anything related to work, be it an affair, his secret identity as Green Lantern, or an infectious disease is a serious ethical breach. Then there are the steamy e-mails, a violation of Boeing policy that became geometrically more serious because of the status of the violator. It's a simple principle, really: a leader has to obey his organization's rules. If he doesn't, the people who look to him as an example won't either.

Sitting in a computer file for over a year has been an unfinished article for the Scoreboard ridiculing the fact that while it was winning awards for its ethics programs, Boeing was ensnared in some of the worst ethics scandals imaginable. It is now deleted. Finally, though a little bit late, Boeing has shown that it indeed is a corporate role model for building an ethical culture, and is willing to make the tough moves that go beyond the polices, codes and training seminars.

It is one company that finally gets it. The rest of corporate America is clearly going to take a little longer.

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