The Defense Industry Initiative on Business Ethics and Conduct

SCRIPT FOR CASES FOR ETHICS TRAINING

Table of Contents

Episode One Script: Ethics in Management

Episode Two Script: Procurement Integrity

Introduction

Leader:The Defense Industry Initiative on Business Ethics and Conduct (DII) was created in 1986 as an outgrowth of the recommendations of the President's Blue Ribbon Commission on Defense Management. Signatories to the DII Principles agree to have a code of conduct, ethics training, internal reporting systems, and other procedures to assure self-governance. As of 1994, there were 60 signatories to the DII, including virtually all of the largest defense contractors.

This training tape includes 3 enacted episodes. Each episode is fictional and intended to generate discussion of issues relevant to DII signatories. An accompanying guide suggests specific questions that should be considered by groups using the tape.

The episodes are not intended to endorse any position or particular action. For teaching purposes, the episodes obviously include comments or situations that are intended to be provocative and to facilitate an open discussion of the issue raised in the episode.

Episode One Script: ETHICS IN MANAGEMENT
Running Time: 5 minutes, 2 seconds
VHS Start Position: 0044

Leader: One of the challenges facing DII signatories has been to take ethics programs beyond compliance with laws and regulations. This scene is designed to encourage a discussion on that subject. We join four employees of Winston Industries, a fictional government contractor, as they await the start of an ethics training session. Their discussion is intended to focus attention on such issues as what corporate decisions have ethical content, and how companies can train their employees to respond to these decisions.

{Scene opens with three employees sitting around a conference room table, waiting for an ethics training instructor. Another employee, John, enters the room.}

John: Good morning

Linda: Hi, John

John: I thought we were supposed to get started at nine

Linda: I guess Jean's delayed.

John: Well, I tell you, I've read all these materials and I've thought for some time we're really missing the boat. I mean of course we have to train our people on the details of government contracting rules, but that should be a starting point. Instead, we teach these rules year after year and we think we're doing a great job.

Bob: What else are we supposed to be doing?

John: Well, I'm not exactly sure, but we call this ethics training. Well if we learn all these detailed rules about what is proprietary information and what is source selection information, and when you can get it and when you can't, well is that really ethics?

Susan: I don't think it matters what you label it, if our people don't understand it and don't observe it, we'll never win a contract and some of your friends and mine are going to end up in jail.

John: No, I know all that, but there has to be something more.

Susan: Like what?

John: Well, you all will probably tell me that even raising this issue is career limiting. But what about the new renovation of the executive offices at a time when we just laid off 400 people. Isn't that an ethics question?

Linda: John, if you think that's an ethics question, and you want to ask it, you go right ahead. I promise I'll volunteer to organize a wonderful going away party for you.

{All laughing}

John: That's just what I mean, Linda. You weren't entirely kidding. I mean, we had this hotline, but who really asks tough questions in meetings around here? I mean you really think if I or someone else asked this and said it was inconsistent with their code of conduct, management wouldn't have the least interest in hearing about it. If this were really such an ethical place, we could say these things and people would take them in good spirits and discuss the merits.

Bob: Well, there is a little hypocrisy in all of this. Look at the letter from our CEO. Brad Shaw writes, Winston Industries is committed above all else to fairness, integrity and trustworthiness in its dealings with its customers, its employees, its suppliers, its shareholders and the communities in which it does business. It couldn't be any clearer. But do you think for one minute when decisions are made around here that anyone asks whether it's fair?

Susan: I can think of a case. Not long ago, our construction division was incurring substantial overruns on a project because the site conditions had unforeseen problems. The lawyers were clamoring to file a different site conditions claim, but the head of the group analyzed it, decided that we had failed to do the full analyses that we should have, and that it was unfair to the customer under the circumstances to ask them to correct for our mistake. The lawyers hated it. They said it was a winnable claim and that we should have been at the Board of Contract Appeals yesterday.

Linda: Well, that's very nice, but what about the reward trip to Hawaii for the Raven Project team in the midst of all our layoffs. Is that fair? And what about the annual Winston Golf Tournament where we provide lodging and gifts for those who play? And most of them are our commercial customers. You know we have all this language in our code about business courtesies that are appropriate to the situation. Is this appropriate to the situation? Is this really not intended to obtain favorable treatment from our customer? Come on. Of course it's intended to obtain favorable treatment. Otherwise, we wouldn't be doing it. And what about the time our space systems division failed to realize that its key computer algorithm was defective due to our own carelessness. And when NASA found out and screamed, what did we do? Ha. We sent them a framed copy of the contract clause that says in research and development, such issues are not our financial responsibility. Is that fair? Is that trustworthy?

Susan: Wait a minute. That may be fair. There's a lot of risk in this NASA work and they probably didn't pay us to take that risk.

John: Well, while we're making a list of ethics issues, I'll give you one more. We really do sit on our suppliers. For many of them, we're their primary customer. And all too often, I've heard us just ignore a legitimate supplier grievance with some comment like "Well, you know they need us more than we need them."

Bob: I can think of another one. Kathy Graham. She complained and complained that the Viper units were not fully spec compliant. Management listened to some extent and I think they had an honest disagreement with Kathy. The specs were inconsistent and reasonable people could disagree on how to harmonize them, but Kathy never felt this was an honest disagreement. She just thought she was being blown off and ignored and that we were cheating the government. Now she's gone and filed one of those whistle blower suits against our company. Even if she was wrong on the basic issue, we didn't treat her well at all.

Episode Two Script: PROCUREMENT INTEGRITY
Running Time: 7 minutes, 9 seconds
VHS Start Position: 0253

Leader: The Procurement Integrity Law has been a major compliance concern of government contractors for the last several years. Because this law deals with gifts to government procurement officials, employment discussions with or offers of employment to government procurement officials, and the improper release or exchange of proprietary and source selection information, the law relates in a general way to overall business practices. We see in this scene the interaction between two long-time friends, one a government procurement official and the other an employee of a government contractor. Please consider their conduct both in terms of whether it suggests possible violations of the Procurement Integrity Law as well as the general appropriateness of their dealings with one another.

{First scene opens with Jim, a contractor employee, walking into the office of Mike, a government employee.}

Jim: Hey Mike. Am I interrupting?

Mike: Of course not. Jim, what brings you over here?

Jim: Oh, I just had a meeting upstairs with one of our project teams. How's the family?

Mike: Just great. You know I can't believe we were ensigns together when Bruce was born. He's in third grade now. He's starting to play Little League baseball. Lauren's in kindergarten and Kathy is with this great marketing firm. She does all this surveying and stuff of packaged goods. So, how are the Burtons?

Jim: Well, I'm afraid the only new additions to our family are a couple of Labrador retrievers. But, hey, no college tuition to plan for there. And Julie started this little garden boutique about a year ago. It's going fine and she loves it. You know its been too long since we've all gotten together. Hey, but first things first. Are you going to San Francisco next week?

Mike: You know I wouldn't miss it. Even us government guys can scrounge up a little travel money for that trip. You know, scientifically I always learn a lot, but that association has the right idea. Once a year, every April in San Francisco. You know, what more can you ask for?

Jim: Well great. We'll use the opportunity to catch up on some things. Here's what's going on. Seven p.m. on Wednesday night is our company reception. Now, I guarantee that it's going to be the best reception there. You've got to come by. The second thing. You still play golf?

Mike: Some people would call it that. Anyway, I have my old set of clubs.

Jim: Great. Thursday afternoon, I have a 1 p.m. tee time at Pebble Beach and we have a slot left in our foursome.

Mike: Jim, that would be great, but you can't get upset with me when I pay for my own green fees and card. You know I can't accept any kind of gifts with these tight government ethics rules.

Jim: No problem. One last thing. How about a Giants game from a skybox at Candlestick Park that night. One of our joint venture partners has given me a couple of tickets.

Mike: I can't very well turn that down, but the same thing. Whatever the ticket costs, I'll gladly pay for it.

Jim: Great. See you next week.

{Jim leaves Mike's office. Fade out. Second scene opens with Mike sitting in a hotel lobby. Jim joins him.}

Jim: Well, here we are. I just wish Kathy and Julie were here.

Mike: I do too. But you've done a great job filling in whatever spare time I'd otherwise had.

Jim: Now look. We're in the satellite room at seven p.m. Do not eat dinner first. We'll have enough food there for 4 dinners. Oh, and look Mike, I just got off the phone with our branch manager in Dallas. We're hiring contracts administrators with three to five years experience. If you know anyone with that kind of background who's looking to leave the government, would you ask him or her to send me a resume?

Mike: Yeah. No one comes to mind, but yeah, sure. I'll send someone your way if they seem ready to leave. Um, speaking of jobs Jim, Kathy said I should talk to you about something. There has been talk the last month that she might be getting a big promotion, but the job's with her company's headquarters in Chicago and I don't think there's anything for me with the government back there. Well, you know, I really like what I'm doing, but I'm not going to stand in her way if this comes through and I don't know anything about the private job market. So, what kind of opportunity would there be for a guy like me?

Jim: Well, I can't answer that in a three minute conversation, but let's have lunch next Wednesday. I'll come by your office around noon and we'll just walk down the block. You know I wish you were eligible to work with us, but with these ethics rules and your being a procurement official, you're not, at least not for a few years. But I can give you plenty of ideas. First, we need to find the right kind of job. Then we'll need to get your resume in shape. And then I'll check on the E-mail system to see if anybody knows of any opportunities in the Chicago area. And then we can give an introduction and some favorable references.

Mike: Jim, I'd really appreciate your help.

Jim: Well, Mike, look, I'll be doing a favor to some company to bring the two of you together. I just hope we don't compete with them too much. We don't need to go head to head with somebody as good as you are.

Mike: Well that's nice of you to say. Look, I'll see you at seven.

{Mike rises to leave. Fade out. Third scene opens in Jim's office. The telephone rings and Jim answers it.}

Jim: Jim Burton. Okay. Tony Kim's at noon. Sounds great. Wasn't that a wonderful meeting last week? And I can't believe you broke 90 on that course. We kept raising the ante and you kept winning and before you know it, you had won enough money from us to turn around and use that to pay the greens fees. Oh, before you hang up. Could you check one thing for me? Yeah, one of my guys just called from Phoenix. It seems your office awarded a sole source contract on some further work on the GRIPS to Broward. You know, Mike, my guys have always thought we could compete for that contract. And they can't get any sensible explanation for the sole source from your people. Well, they're talking about protesting, but I don't want to muddy this up if your people have a good reason for what they're doing. Can you get me some more information before lunch. Thanks. Bye-bye.

{Fade out. Fourth scene opens in Mike's office, with Mike making a telephone call.}

Mike: Yeah, Jim. Yeah. It only took me about 10 minutes to get what I needed, so I thought I'd get back to you so you could get back to your people in Phoenix right away. Well I've got the justification and the approval for the sole source right here. It's just a page, but I think it's pretty convincing. It basically argues that Broward has developed the earlier generation of GRIPS and is intimately familiar with every nut and bolt of it. Uh, particularly with complex details of the software. The upgrades that are contemplated, our people think could not reasonably be made by a company that lacked Broward's intimate and long-term familiarity with the product. I'm just going down the page now. That's about it. Uh, there's a mark in here that the document is source selection sensitive. It's source selection information. Well I didn't give you the document, just an oral summary, and I don't think I've given you any information that's really source selection sensitive. Uh, if I were you all, I wouldn't bother to protest. You're just going to look foolish, and I think the program office is going to take it very personally. If you need to discuss this further, we can do it at lunch. All right, see you at noon.

Episode Three Script: ETHICS PROGRAMS
Running Time: 7 minutes, 6 seconds
VHS Start Position: 0512

Leader:DII signatories have developed comprehensive ethics and compliance programs. In this scene, we observe the diagnostic evaluation by a university consultant of a defense contractor program. The scene is intended to encourage discussion about methods of valuating ethics programs generally, about various details of ethics programs, and about how to ensure a company's ethics program is more than a mechanical exercise.

{Scene opens with four contractor employees seated around a conference table, awaiting an out-briefing by the ethics consultant at the head of the table.}

Larry: {Company president.} Well, let's get started. As you know, I've retained the Business Ethics Center at Northern University to do a complete review of our corporate ethics program and advise us on any improvements that can be made. Today, Pat Wilson is going to brief us on the initial findings and, when we agree on the problems, if any, then they'll proceed with the improvement phase of the work. Pat, I think you know everyone here today, but let me go around the table quickly. Joan is our ethics director and she tells me that she's very much enjoyed working with you on this. Ralph is our general counsel and Susan is our chief human resources executive. Pat, as you know, I'm a bottom line kind of person, so what's the bottom line on this and then you can fill me in on the details.

Pat: {Ethics consultant.} We very much appreciate having been asked to undertake this work for Western and we'd like to commend you and everyone at this meeting for the commitment you've shown to having an ethical environment at Western by virtue of the plan you developed and implemented four years ago. There's very much commendable about this program, but if you ask me to cut to the bottom line, I have to tell you our initial research indicates one major problem. That problem, as well as I can state it, is that you have all the mechanical pieces of a corporate ethics program, but we're concerned that, this is hard to express properly, but the best way to say it is that it seems to lack feeling.

Larry: Wait a minute, Pat. We agreed when you started this that we wouldn't get a lot of theoretical, academic stuff. You assured me that you could be concrete and practical. When you start talking about "feeling" in an ethics program, it makes me a little uneasy, like this is some kind of pop psychology.

Pat: We certainly don't think that's what we're doing. Let me give you a few examples of what we see. First, your code of conduct; It's 64 printed pages long. When we put it through a computer program that tells what level of reading sophistication one must have to understand it, it came out college graduate.

Ralph: {General counsel.} The law department was responsible for the preparation of this and I'm very proud of what we've been doing. Much of what our employees need to know is complicated. Take the Truth in Negotiations Act alone. It takes three or four pages just to explain this to our employees. Pat, length, in and of itself is not a problem. It's the rules. They're complicated and there is simply no way around them.

Pat: I understand. But the problem is, when we surveyed your employees, 27% had no recollection of ever having your code of conduct, 73% said they did not know where their copy was, and 89% had not referred to it in the last year.

Joan: {Ethics director.} Well, but don't our people know what they're supposed to be doing. Whether or not they refer to this code, aren't we getting the message across about how they should conduct themselves?

Pat: That's the problem. I'm not sure that you are and it seems to be a problem in three areas. First, when we interviewed the employees about senior and middle management commitment to the ethics program, only 23% agreed or strongly agreed with this statement, "Senior and Middle Management are Committed to the Ethics Program." So there seems to be a communication problem. Second, when we interviewed them and asked them if they ever confronted ethical dilemmas, 78% said that they do. But when we asked them if the ethics program helps them solve their dilemmas, only 8% said it did. And, third, when we surveyed about basic expected conduct, we get troubling results. For example, we presented them with a rather convoluted scenario related to labor charging and from this, 22% of your employees were convinced that some amount of time shifting was proper. That's clearly not your policy and it's clearly not right.

Susan: {Chief human resources executive.} I'm really surprised. I thought our training was pretty good.

Pat: We observed your standard, one hour, all hands live training program and I think it's well done, but doing the same program each year seems to have sent the message that this is a mechanical exercise. We were also concerned that there was no special training for the people who need it.

Joan: What else did you find?

Pat: Joan, I know you've worked very hard to institute an effective concern line, and I see the posters everywhere I go, but your call rate the last four years is somewhat troubling. From an employment base of 25,000 employees, you're receiving about 250 calls a year or about 1% of your employee base. Nearly half of your employees doubted corporate representations that confidentiality would be maintained and there would be no retaliation for using the concern line. And of those who expressed they had made concern line calls, more than half were unhappy with the feedback you gave them.

Larry: Pat, I haven't heard a good word yet about anything we're doing. We've spent a lot of money on this program in the last four years, we've developed a code, we give it to everyone, we train annually, and we have a concern line. And frankly we haven't had a lot of compliance problems in this four year period. It looks to me like we're doing a responsible job.

Pat: Well, Larry, the pieces are there, but our interviews, survey and analysis suggest that the effort is seen as largely mechanical. People think you're going through the motions to check the boxes, but there doesn't seem to be any real commitment in the delivery. That's what your people are telling us and they also, I have to tell you, wonder about leadership by example. Take this question. We asked people whether they agree or disagree with this statement: "If faced with an ethical dilemma, I am confident that our management would take the moral high road in its actions." Six percent of your employees strongly agree with that statement. Eleven percent agree. That means 83% either disagree or have no opinion. I urge you not to shoot the messenger, but let us continue with our diagnostics and a corrective action plan.

Larry: Well, Pat, I just find this a little difficult to believe. And I want a lot more detail. We even have an opinion letter from our outside counsel that says our compliance program meets with all the requirements of the sentencing guidelines. It's right here. "It is our opinion that the ethics program at Western Industries fully incorporates all required elements of the sentencing guidelines for organizations." With this legal opinion, I can't imagine that our program is all that bad.

{Trailer}
Copies of this tape may be obtained by writing:
Alan R. Yuspeh
Partner, Howery & Simon
1299 Pennsylvania Ave., N.W.
Washington, D.C. 20004
(202) 383-6745

The situations depicted in this tape are completely fictional, and any similarity or resemblance to actual situations is purely coincidental. This tape is protected by the copyright laws of the United States and duplication without prior permission of the DII is strictly prohibited.

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