The essay should address the following: Lockheed has an interesting history that seemed innocent enough up until around the 1950s. You’ll note on p. 56 of Terris book that the company began to engage in some questionable sales strategies with other nations in an effort sell the F-104 Starfighter so as to recoup costs when their US sales strategy failed. Describe some of the unorthodox strategies covered by Terris during this era that made Lockheed become “a byword for the shady practices of American multi-national corporations, and a major impetus for new legislation…”. On the issue of overseas bribes, Terris asks the questions, “Who was hurt by the [overseas bribes to secure sales of aircraft]? The competitors, of course, but what was unethical about beating out the competition that was playing by the same rules? (p.59). Write about about a situation where underhanded and back door deals are the way the game is played if everybody is on the same playing field? That is to say, if everybody is playing by the same shady rules, is it unethical to compete? In the reading note that defense contractors continued to find themselves in hot water well into the 1970s as a result of overpricing and additional charges of bribery. In the late 70s Lockheed established its first code of ethics and later the major defense contractors came to the table to level the playing field with the Defense Industry Initiative (DII), by agreeing on a set of ethical principles. This was an important turning point as was bringing Norman Augustine on board. Why was the DII so important to the eventual success of Lockheed Martins ethics program? Discuss Norman Augustine’s and Dilbert’s contribution in helping Lockheed Martin turn the corner with its ethics program. Assignment Expectations The paper should be 4 to 5 pages, should be double-spaced and in 12-point type size. The paper should have a separate cover page and a separate reference page. Make sure to cite your sources. Use APA style, and proofread your paper. I have added pages 56 and 59 below: Page 56 Since they had difficulty persuading governments to place orders for the F-104 strictly on its merits, Lockheeds overseas executives turned to unorthodox sales methods. In countries around the world, they found willing partners, middlemen with access to the highest reaches of govern Success and Scandal: who were able to sway decisions for a price, and with access to a pool of funds that would not be tracked too closely. In the Netherlands, Lockheed acquired the friendship and the services of Prince Bernhardt, who had married into the Dutch royal family, and who accepted payments through a variety of middlemen. In Japan, the company worked with a secret agent named Yoshio Kadama, a hardline nationalist and underworld figure who had been imprisoned by the Americans for war crimes, but who emerged in the 1950s and 1960s as a close associate of more than one prime minister. In Indonesia, Lockheed made generous contributions to a Widows and Orphans Fund with close ties to higherups in AURI, the Indonesian Air Force. In Italy, various political parties were beneficiaries of Lockheeds largesse. In Saudi Arabia, Lockheed did business with Adnan Khashoggi, later to become famous as one of President Richard Nixons closest supporters and In the end, Lockheed sold more than 2,000 Starfighters overseas; it managed to sell fewer than 300 to the . Air Force. Not all of these overseas activities were illegal, and many of them were typical of the era and the industry. There was and still is a customary practice in the defense industry of using overseas agents to facilitate contracts with governments. In the 1950s and 1960s, bribery was widely accepted as part of the cost of doing business. “At the time, bribery overseas was not even illegal under American law; corporations doing business in other countries were presumed to be subject to the laws (or lack of laws) in those places. The American government and the public at large turned a blind eye to undisclosed cash payments and other clandestine deals that helped sell . products. In the case of the Starfighter, the tactics worked: Lockheed eventually sold a modest number of the planes. It never became the huge hit that the company had initially hoped for, but questionable business practices helped prevent, at least, a financial disaster. With the marketing campaign for the Starfighter, Lockheed had taken a series of steps into murky terrain. These measures succeeded for the company because of secrecy, but also because the prevailing norms were in a state of flux. Then the company went too far. In the 1960s, Lockheed took another large gamble when it made a decision to enter the commercial jumbo jet market. Boeing was in the process of launching what would become one of the greatest commercial jet successes of all time, the 747. Lockheed: Ethics at Work decided to try to keep pace by developing a plane that was slightly smaller than the 747, and that might therefore be more economical for the . domestic market, while still attractive as an overseas flier. Late to the game, the company had fierce and direct competition from another major player, McDonnell-Douglas, which was developing the DC-10. Page 59 Lockheed became a byword for the shady practices of American multinational corporations, and a major impetus for new legislation that, at long last, put the onus on American companies for their own behavior, even when operating outside of the United States. In the wake of the scandal, Lockheeds top management, including vice-chairman Carl Kotchian and CEO Dan Haughton, were forced to resign. While taking the fall, both men were clearly somewhat baffled by the turn of events. They had been operating under a set of rules that had appeared to them to allow a certain amount of latitude at the boundaries. Kotchian, in particular, steadfastly maintained his conviction that the prurient examination of business practices had done more harm than good, that the shady dealings around the edges of global salesmanship were insignificant in comparison: Ethics at Work comparison to the good that was done by saving jobs and, perhaps, saving the financial viability of the corporation. Kotchian justified the bribes as the admission to a ball game, complained that Lockheed had been made a scapegoat, and compared himself to a beleaguered Richard By their own light, Lockheeds senior executives had operated within the boundaries of ethics as they understood it. Who was hurt by the payments? The competitors, of course, but what was unethical about beating out competition that was playing by the same rules? Lockheed did not have an internal ethics program in the 1960s and 1970s. But if it had had one, it is unlikely that global business dealings would even have been a topic for discussion. Carl Kotchian and Dan Haughton were operating in an environment where senior executives were admired for pushing the envelope, even if it meant transgressing ethical boundaries. It would have taken a courageous willingness to consider the fundamental aspects of Lockheeds workthe ethics of the tangled relationships between corporations and middlemen and governmentsto have challenged these practices from within. The Brink of Bankruptcy The overseas bribery scandals by themselves were enough to send Lockheed reeling, but they were not the only major scandal that the company faced during this period of rapid economic and military expansion. On the home front, the cozy interdependence between the defense contractors and the . government gradually came under public scrutiny, finally bursting into the headlines with the disclosure of Operation Ill-wind in the late 1980s. Lockheed was less prominently at center stage in the overcharging and corruption investigations than it had been in the global bribery scandals. Nevertheless, the company (and many of the heritage companies that make up Lockheed Martin today) were embedded in a process of doing business with the Pentagon that was finally exposed as deeply tainted. The American taxpayer was footing the bill for long-term practices that served the interests of big defense contractors and corrupt members of the Pentagon brass. The public relations costs of these scandals, even more than the bribery escapades, paved the way for the development of Lockheeds ethics program.
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