3rd Annual Conference for the International Forum on Business Ethical Conduct for the Aerospace and Defense Industry

September 13th-14th, 2012 Madrid, Spain

Conference Report

Foreword

The International Forum on Business Ethical Conduct for the Aerospace and Defense Industry held its

third annual conference on September 13th and 14th in Madrid, Spain. The conference took place at the

Centro Superior de Estudios de la Defensa Nacional (CESEDEN), the primary educational center for the

Spanish Armed Forces. The 2011 IFBEC conference took place in Lansdowne, Virginia, in October. The

purpose of the conference is to promote trust and integrity within the global aerospace and defense

industry, with companies from both Europe and the United States coming together to discuss business

ethical conduct in the industry.

The IFBEC

The IFBEC was created in 2010 by member companies of the Aerospace Industries Association of

America (AIA) and the Aerospace and Defense Industries Association of Europe (ASD). The IFBEC is

managed by a Steering Committee composed of global leaders in the aerospace and defense industry,

including BAE Systems Plc., BAE Systems Inc., The Boeing Company, Dassault Aviation, EADS,

Finnmeccanica, General Dynamics Corporation, Lockheed Martin Corporation, Meggitt Plc., Northrop

Grumman Corporation, Raytheon Company, Thales, Safran, Rolls-Royce Plc and Saab. This past year the

IFBEC has added seven new members to bring the total number to twenty.

Participants

Over 80 individuals from the aerospace and defense industry participated in this year’s conference. In

addition to representatives from major American and European companies, industry representatives

from China, representatives from NATO and the OECD, and former members of the U.S. Department of

Justice and UK Serious Fraud Office were speakers.

Program

The conference included a range of topics, including discussions on performing due diligence on the

supply chain, encouraging fair competition and practices, and utilizing social media and the Internet to

effectively spread the message of the aerospace and defense industry to the public. The panels at the

conference were as follows: Human Rights, Corporate Responsibility, Ethics and Compliance: How to

Achieve a Successful Mix; Best Practices: Implementing Effective Due Diligence for Suppliers; Counterfeit

Goods and the Global Supply Chain; The Tone from the Top; A Regulator’s Perspective; Offsets and

Ethics & Compliance Programs; and Stakeholder Dialogue: Analyzing Integrity Programs from the

Outside. A copy of the agenda is attached.

Conference Topics

The IFBEC Conference took place over two days. The first day was open only to industry participants,

while the second day was open to industry participants as well as individuals involved in government,

academia, and non-governmental organizations.

Day 1 Sessions:

Human Rights, Corporate Responsibility, Ethics and Compliance: How to Achieve a Successful Mix

Moderator: Deborah Allen, Director, Social Responsibility, BAE Systems Plc

This first session of the conference focused on the emerging importance of human rights as an issue that

defense contractors must confront in the 21st century. Outlined were ways to promote human rights

and ethics industry-wide and ways to handle the public image of companies in the face of growing

activism by advocates in non-governmental organizations. The panel featured representatives from the

Raytheon Company, Textron Defense Systems, and Thales.

Panelists first detailed the challenges defense companies in the 21st century face regarding increased

activism for human rights across the globe. Lisa Atherton, Vice President at Textron Defense Systems,

explained that Textron began work in the 1980s to develop an area munition that dramatically reduces

the potential for innocent civilians to be injured by legacy cluster munitions in the event of an armed

conflict. Ms. Atherton outlined how international activist groups used social media outlets to campaign

for a ban on all area weapons. Certain activists also began to criticize Textron for its product without

understanding the product and how it differs from legacy cluster munitions. Although initially reluctant

to respond to these attacks, Textron ultimately engaged the activist community and independent

experts in order to help address humanitarian concerns, safeguard their product and reputation with

ethical and legal arguments, and provide accurate information to counter incorrect statements. Textron

continues these efforts, and Ms. Atherton emphasized the need for the defense industry to be alert to

such developments and actively address unjustified criticisms.

Tim Schultz, Director of Business Ethics and Compliance at the Raytheon Company, discussed the strong

work that Raytheon does in supporting human rights and its commitment to high standards for

international ethics and compliance. In Raytheon’s 2011 Corporate Responsibility report, CEO William

H. Swanson outlined the company’s focus on international compliance and its membership in the IFBEC.

The Raytheon Code of Conduct added a human rights provision due to shareholder interest in the issue

and false Internet articles accusing Raytheon of working with companies that utilize prisoners assigned

to manual labor. This provision emphasized fair and equal treatment of the workforce. It is therefore

vital to remain a step ahead and have a plan in place to successfully combat negative publicity and false

accusations.

Dominique Lamoureux, Vice President of Ethics and Corporate Responsibility at Thales, outlined the

overall human rights challenges now faced by the defense industry in major reputation risk areas and

the current state of the Arms Trade Treaty. In particular, there is increasing concern with surveillance,

drones, the internet, and other civil electronic technologies. The presentation closed with a proposal on

how to deal with this issue, specifically voluntary self-regulation, due diligence to assess the human

rights impact of products, and possibly a world-wide charter or industry code.

Finally, the impact of social media was further emphasized, with the proposal that perhaps the IFBEC

needs to take advantage of the Internet and social media with a blog and other tools.

Best Practices: Implementing Effective Due Diligence for Suppliers

Moderator: Tim Schultz, Director, Business Ethics and Compliance, The Raytheon Company

In the panel entitled “Best Practices: Implementing Effective Due Diligence for Suppliers,” the

conference heard from representatives of Lockheed Martin UK, the Boeing Company, and the Raytheon

Company on the practices that their companies use to eliminate corruption and perform due diligence

on suppliers.

Nigel Strutt, Sub-contract Management Lead for the Lockheed Martin Corporation in the United

Kingdom, discussed Lockheed Martin’s globally acclaimed anti-corruption practices. LMUK has

implemented an effective due diligence process for its supply chain which is risk-based, in accordance

with the U.K. Bribery Act. All suppliers are subject to a risk based assessment, and those with a higher

risk for corruption based on their answers and other factors are subject to further scrutiny. Also

outlined was the “Adequate Processes” defense for the U.K. Bribery Act, as well as LMUK’s use of the TI

Corruption Perception Index to determine the level of due diligence a supplier will be subjected to.

Representing the Raytheon Company, Andrei Quinn-Barabanov, Director, International Supply Chain

(ISCM), detailed Raytheon’s approach to vetting low-risk, medium-risk, and high-risk non-US suppliers.

The approach includes a questionnaire to be filled out by the supplier, certification, third-party research

and integrated analysis. ISCM approves lower-risk suppliers with no red flags, with all the others

requiring approval from Legal. ISCM proposes mitigation for all identified red flags. Medium-risk

suppliers require more research and analysis, compared to the low-risk group. High-risk suppliers are

often abandoned once labeled as such. If they are deemed essential, Legal gets heavily involved, usually

requiring additional research and analysis from ISCM as well as from third parties.

Finally, Larry Weng, the Director of Supplier Quality at the Boeing Company, outlined the Boeing

Company’s due diligence process for suppliers. Suppliers are subject to strict contractual requirements

to prevent corruption, and the Boeing Company has both supplier oversight and intelligence divisions.

Furthermore, Boeing employees that work with suppliers must receive training on ethics, the Foreign

Corrupt Practices Act, global trade controls, and business courtesies. The Boeing Company also engages

the local populace with knowledge of the prospective supplier to provide intelligence on their practices.

Counterfeit Goods and the Global Supply Chain

Moderator: Barney Rosenberg, Vice President, Ethics and Business Conduct, Meggitt

The third and final panel of the first day of the conference detailed the growing problem of counterfeit

goods on the defense market. Representatives from The Raytheon Company, Deloitte and Lockheed

Martin Corporation sat on the panel.

Barney Rosenberg, the moderator, opened the panel with a brief overview of the problem of counterfeit

goods, illustrating that most originate in China and the Internet has only increased the problem. Greg

Bradfield, the Director of Supplier Quality Assurance at The Raytheon Company, then discussed his

company’s experience with both counterfeit goods and the Senate Armed Services Committee

investigation to address the problem. Counterfeit goods have become a $200-$250 billion industry,

focused primarily on technology, drugs, and consumer goods. This issue was brought to the attention of

the U.S. government in 2008, with a U.S. Department of Commerce survey published in 2010 and a

Senate Armed Services Committee investigation begun in February 2011. In November of the same

year, hearings were held, and House Resolution 1540, the National Defense Authorization Act for fiscal

year 2012, became law in December 2011. This bill authorized the Secretary of Defense to assess the

acquisition policies and systems of the Department of Defense to detect counterfeit electronic parts,

amended the federal criminal code to provide criminal penalties for the international trafficking of

counterfeit military goods and services, and ordered the Secretary of Homeland Security to develop a

methodology to detect counterfeit electronic parts. It is vital for U.S. companies to continue

standardization of regulations and to work with the U.S. Department of Defense to continue this process

in combating counterfeit goods.

Emily Cromwell, Senior Manager at Deloitte, outlined the compliance risks associated with counterfeit

parts, specifically the danger of violations to the FCPA and the UK Bribery Act, which apply extra-

territorially. Violations of custom rules will lead to the revocation for up to three years of Authorized

Economic Operator (AEO) status (which allows for simplified customs for accredited companies). In

2004 the U.S. Department of Defense and National Security Agency began the Trusted Foundry Program,

which only allows trusted suppliers to work on custom-designed integrated circuits and mission-critical

defense systems.

Kurt Ravenfeld, Director of Strategy, Systems & Solutions for the Global Supply Chain Operations for Lockheed Martin Corporation, discussed his company’s approach to combating counterfeit goods, emphasizing a consistent approach is necessary to dealing with this issue. A company must restrict its sources for goods, employ advanced testing and inspection techniques, and evaluate emerging technologies to truly be able to identify counterfeit goods. The Lockheed Martin Corporation developed a cross-functional corporate policy on Counterfeit Prevention to aid the company in stopping the supply of counterfeit goods. An audience member posed a provocative question as to whether companies should implement policies to prohibit travelers from procuring counterfeit consumer goods while on travel for the company. This would reinforce the point that counterfeit parts are a problem that pervade some parts of the world economy and highlight some of the ethical aspects of the issue.

In the question and answer portion of the panel, the panelists emphasized that if there is a known source or supplier of counterfeit goods, a company must discontinue business with them. The panelists also feel that IFBEC should continue to monitor the problem of counterfeit parts and encourage/ facilitate the sharing of best practices within the industry. Dinner Reception at the Real Academia de Bellas Artes de San Fernando Speaker: Mark Pieth, Chairman of the OECD Working Group on Bribery in International Business Transactions The first day concluded with a reception at the San Fernando Royal Academy of Fine Arts, where Mark Pieth, Chairman of the OECD Working Group on Bribery in International Business Transactions, gave an address. Mr. Pieth detailed the efforts of the OECD to effectively enforce the bribery convention for all member states, and urged companies to support these efforts. Both the OECD and private companies have a shared interest in promoting fair competition and a level playing field, especially in preventing unethical behavior on the demand side, such as solicitation and extortion. The OECD is about to test a new initiative known as “High Level Reporting Mechanism” in Colombia, a canidate for OECD membership, that will allow fast and confidential reporting of corrupt practices in procurement to an independent agency. This agency would then work with the local authorities to investigate the accusations quickly to ensure no unneccesary delays in the procurement process. This mechanism, if successful in Colombia, will provide a powerful tool to stop solicitation and prevent corruption.

Day 2 Sessions:

Keynote Address – Pedro Argüelles Salaverría, Secretario de Estado de Defensa, Spanish Ministry of

Defense

In the keynote address of the conference, Pedro Argüelles Salaverría of the Spanish Ministry of Defense

emphasized the need for trust and ethical conduct in the defense industry, especially in light of recent

economic difficulties. Business ethical conduct and establishing public trust is one of the strongest ways

a company can ensure it has a successful and sustainable future in this industry.

Mr. Salaverría opened his speech by stressing the commitment of European defense companies to

ethical conduct, and the global recognition these companies have received as a result of their strict and

far-reaching policies. Operating by an ethical code of conduct should not be seen as a burden, but as an

opportunity to build credibility and trust with the public. For private companies, strengthening their

brand name through positive ethical conduct will ensure prosperity. Transparency in the defense

industry, a critical element of this conduct, is not only the responsibility of companies but also

governments. Governments must ensure contracts are awarded fairly and foster a strong and equal

spirit of competition. Those companies that have weak or nonexistent business ethics programs and

codes will suffer in the long run with a loss of business and credibility with the public. It is not just the

responsibility of the executives at a company to ensure high standards of ethical conduct are being met,

but of every employee.

The Tone from the Top

Moderator: Pedro Montoya, Group Chief Compliance Officer, EADS

The first panel of the second day featured three executives responsible for defense at major European

companies discussing the importance of ethical conduct on an executive level. The executives

represented General Dynamics European Land Systems, the Defense Division of Indra, and Airbus

Military.

Pedro Montoya, the moderator, opened the session by recalling that during the consultation for the

new UK Bribery Act, the British House of Lords had openly questioned whether the defense industry

could be conduct themselves in accordance with ethical standards. To this challenge he replied, “Not

only can we, we must.”

Ethical behavior is the responsibility of every employee, but it starts with the top-level executives.

Alfonso Ramonet, President of General Dynamics European Land Systems, then outlined GDELS’

approach to ethical conduct and its commitment to ensuring such conduct across the entire company.

Mr. Ramonet stated that, “at General Dynamics European Land Systems, ethics is in our DNA.” GDELS

has an ethics officer in each business unit, while also maintaining an ethical hotline for all employees. A

blue book on ethical standards is available to all employees as well, and, according to Mr. Ramonet, is

“more than a piece of paper.” Both the President and the CEO of GDELS have sent a strong message that

ethical behavior is the expectation of every employee. Both the leadership and general employees of

the company must be held accountable, and every employee is trained, and biannually retrained, in

ethical standards.

Domingo Ureña, the CEO of Airbus Military and member of the Executive Committee at EADS, further

emphasized the need for ethical conduct to be the responsibility of all employees, and not just a matter

for the legal counsels of a company. At Airbus Military, compliance teams have an excellent record of

protecting whistleblowers, which is important in fostering an environment of trust and security for those

willing to speak out against misconduct. Training was also emphasized, as 100% of Airbus Military’s

employees have been trained in ethical standards.

The Executive Vice President of the Defense Division at Indra, Carlos Suárez, discussed his company’s

history of a strong ethics program and the challenges this program now faces with the financial crisis

forcing Indra to look to other markets. Indra’s compliance office is separate from its legal department,

allowing it greater independence to operate within the company. The company’s commitment to

ethical conduct is not done for the sake of marketing, but builds trust and credibility with its

shareholders. Roughly 70% of Indra’s sales come from countries with a high level of transparency, but

the financial crisis has forced Indra to increasingly deal with countries that have a low level of

transparency. Thus, it is vital that employees receive training in ethical conduct and that strict standards

are followed and enforced.

In answering questions, the executives stressed that the financial crisis is the greatest risk area for ethics

in the industry. With the global economy weak, there is more competition to capture lucrative contracts

and meet the numbers that all CEOs and executives are responsible for. It is important, however, to not

cut corners and to always conduct business according to ethical standards. It is the supply chain that is

most damaged by the economic downturn, and companies must be vigilant that standards are being

met at every step in the contract process. Both employees and leaders are responsible for building an

ethical environment, but leaders must be aware of and keep a close eye on internal issues with

unemployment high and employees afraid of losing their jobs. The executives also stressed that

companies must advertise their ethical initiatives and be as transparent as possible in their dealings with

the public. As one executive said, “We cannot afford to hide.”

The executives also discussed the challenges facing the global supply chain, and a question was raised

whether the IFBEC should require suppliers to sign and uphold the Global Principles. While further

requirements might be difficult for suppliers to meet, in this environment it is important to ensure

ethical conduct in the supply chain. The panelists suggested that the Principles should encourage

companies to take a risk based approach in assessing a company’s ethics and compliance program.

Public Accountability – IFBEC Survey & Report

Speaker: Charlie Chadwick, Vice President, Contracts and Business Conduct, BAE Systems Inc.

Charlie Chadwick, the chair of the Transparency and Accountability Subcommittee for the IFBEC,

presented the results of the first Public Accountability Report that the IFBEC has developed with its

membership, compiling answers to a detailed questionnaire. This questionnaire drew on the DII Public

Accountability Questionnaire and the Transparency International Defense Index Questionnaire and was

then modified and expanded by the full subcommittee. It is a summary level report, not company by

company, and will be posted online and mailed to companies by request.

The report found that the revenue turnover per fiscal year for over 50% member companies of the

IFBEC exceeded €50 billion, but over a third of the member companies were below €10 billion. So IFBEC

membership represents both prime contractors and those in their supply chain. According to 72% of the

respondents to the survey, the head of the ethics and business conduct program reported directly to the

Board of Directors or CEO. This would not have been the case ten to fifteen years ago, and shows the

increased importance of ethics in the defense industry. The report also found that the smaller

companies relied more heavily on employees who were only responsible for ethical conduct

enforcement on a part-time basis, whereas the larger companies had more full-time ethics officers. In

35% of respondent companies there are over 100 individuals working on ethics and compliance. Every

member company surveyed has a written ethics and business conduct policy and distributes it to all

employees. Each company conducts anti-corruption training for employees who are in high-risk

scenarios, with e-mail and a hotline the most popular forms of reporting ethics violations in these

companies.

When asked what trends he noticed in the Public Accountability Report, Mr. Chadwick noted that

companies are increasingly confronting the cultural issues behind maintaining strong ethical codes of

conduct, as most companies have the basic rules in place. The questionnaire for the Public

Accountability Report is now mandatory for all potential IFBEC members to complete before acceptance

into the organization, and a written version of the report will be published in two to four weeks.

The Regulator’s Perspective

Moderator: Alice Eldridge, Vice President and Chief Counsel, Land and Armaments, BAE Systems Inc.

In this panel, three regulators spoke on the state of ethical conduct in the defense industry, how

regulators were evaluating ethical codes of conduct at companies, and the importance of recent

legislation dealing with business ethical conduct for the defense industry. Members of the panel were

former members of the U.S. Department of Justice, UK Serious Fraud Office, and the U.S. Air Force.

Richard Alderman, former Director of the United Kingdom Serious Fraud Office, outlined how the

Serious Fraud Office prosecutes ethics cases and the UK Bribery Act. The SFO has a 70%-90% conviction

rate in their cases, and over 50% of those cases now deal with bribery. The UK Bribery Act

applies only to bribes paid after July 1, 2011, and the UK is one of the few nations globally that enforces

anti-bribery legislation. When investigating a company, the SFO looks at the example the top

management at the company sets in regards to ethical conduct and whether the processes in place exist

only on paper or are regularly enforced and used. Mr. Alderman also highlighted the growing

cooperation between the Serious Fraud Office and the U.S. Department of Justice, with the new director

of the SFO very focused on bringing more cases to trial.

Greg Andres, a former Deputy Assistant Attorney General in the Criminal Division of the U.S.

Department of Justice, discussed the Department of Justice’s recent public announcement to decline to

prosecute Morgan Stanley after a lengthy FCPA investigation, citing among other factors, Morgan

Stanley’s robust compliance program. Mr. Andres noted that this declination would serve as important

precedent as to what constitutes an effective compliance program. Morgan Stanley clearly

demonstrated a commitment to ethical conduct when investigated by the Department of Justice, and

the misconduct at issues was limited to the actions of a rogue employee and not the company. Morgan

Stanley had a rigorous compliance program that trained its employees frequently, including the

employee responsible for the misconduct, and had resources dedicated to maintaining a strong anti-

corruption regime. Mr. Andres encouraged all attendees to read the relevant court papers associated

with the case as it provided a road map on the relevant aspects of an effective compliance program. He

also noted among other enforcement trends, the Department’s efforts at industry-wide investigations,

and how cooperation by competitors in a particular field could be used to further these efforts. As with

Mr. Alderman, Mr. Andres stressed that the SFO and the Department of Justice continued to work

closely and that cooperation with other foreign law enforcement officials should be expected to

increase as well

Steve Shaw, the former Deputy General Counsel of the U.S. Air Force, discussed the issue of debarment,

specifically what the process of debarment looks like today and how companies can avoid debarment.

Increasingly, debarment is used as a punishment, with a focus on increasing numbers of debarred

companies. This can be seen in the increasing number of automatic debarment laws there are on the

books in the United States, with a permanent debarment law proposed in New Jersey. In fact, today

there are over 700 bills in the U.S. House of Representatives dealing with the issue of debarment.

Mr. Shaw also spoke about what debarring officials look for in deciding whether to debar a company.

He noted that the culture of an organization is scrutinized. This includes a review to determine if ethical

conduct training is part of the training for all employees, not just the top level management. Mr. Shaw

also offered his perspective that training on ethical conduct should cascade from the top leaders

throughout the organization, rather than being facilitated by an outside organization.

In the question and answer portion of the panel, the panelists stressed how dedicated anti-corruption

professionals, not just part-time employees, were critical in demonstrating a commitment to ethical

conduct. Mr. Shaw discussed how there was no room for judgment with mandatory debarment, and

companies that had a good overall record and made one mistake cannot be distinguished from worse

offenders. The panelists agreed that while the actions of the Department of Justice and Serious Fraud

Office sometimes have far-reaching economic impact, the criminal justice system never allows economic

impact to dictate which cases to pursue.

Offsets and Ethics & Compliance Programs

Moderator: Leo S. Mackay, Jr., Vice President, Ethics and Sustainability, Lockheed Martin Corporation

This panel discussed the challenges that offsets pose to a company operating by a strict code of ethical

conduct. The panelists featured were from L-3 Communications Corporation, Lockheed Martin

Corporation, and the European Club for Countertrade and Offset (ECCO).

The first panelist to speak, Vincent O’Connor, the former Vice President of FCPA Compliance at L-3

Communications Corporation, detailed the ethical guidelines and risks of offsets in the defense industry.

It is critical that a company has a specialized staff experienced in dealing with offsets, and must address

risk throughout the training for this specialized staff using the code of conduct and anti-bribery policies.

Special monitoring provisions are vital for an offset contract, as well as due diligence and compliance

standards for third parties who are part of the offset contract. Risks associated with an offset contract

include the possibility of bribes, a lack of transparency on the contract, and the misuse of funds

allocated for the offsets package. Strong penalties must be put in place to deal with the failure of a third

party to perform their contractual obligations as well.

Susan Maraghy, the Vice President of International Business Development for Lockheed Martin

Corporation, outlined the current market for offsets and the changing realities in the industry.

Increasingly the United States government is shifting its stance from “buy American” to pursuing the

best technology and best prices available for products. Countries no longer are looking for a short-term

contract with offsets but long-term partnerships with companies and an investment in the countries’

industrial footprint. Increasingly, contractors are entering new countries where they must learn new

local business practices. In order to execute an effective offsets package in a contract, the customer,

company, and government must be involved in the process.

The Chairman of the European Club for Countertrade and Offset, Christian Sylvain, discussed the

objective of ECCO and the evolving offsets market. ECCO’s objective is to share the best practices for an

offset contract with member companies, with offsets now required for almost all government

procurement. Increasingly, especially in the BRICS countries, direct offsets are overtaking indirect

offsets in frequency. While there is only a very small risk for corruption in an offsets package,

companies must nonetheless remain vigilant and monitor their offset programs with a dedicated offsets

department. Mr. Sylvain also suggested that joining offsets associations and providing training to all

employees that deal with offsets can further enhance the protection companies have against unethical

conduct within offset activities.

At the end of the session the panelists discussed why there was little risk for corruption in an offsets

contract, mainly because the main contract must be signed and put into action before an offsets

contract is put in place. From an ethics perspective, companies must ensure that those performing the

offsets contract are provided adequate living conditions and care and the proper amount of government

oversight is being applied. Mr. Sylvain also stated that he hopes for more cooperation and dialogue with

the IFBEC, as the most recent Transparency International report raises serious ethical questions about

offsets in the defense industry.

Stakeholder Dialogue: Analyzing Integrity Programs from the Outside

Moderator; Dominique Lamoureux, Vice President of Ethics and Corporate Responsibility, Thales

In the final panel of the conference, three members of NATO, the OECD, and CM-CIC Securities

discussed the importance of ethical standards in the defense industry from the perspective of

stakeholders of the industry rather than from the perspective of the companies themselves.

Agnes Blazy, a Sustainable Responsible Investment Equity Analyst for CM-CIC Securities, specialized in

Corporate Governance, emphasized that ethics is a critical component to a company’s profile for long-

term investors in the market. In order to make a sound financial investment, an investor must have

extensive knowledge of the company they are seeking to invest in. The presence of a strong ethical

code of conduct is crucial in making the investment. In their evaluation of a company, investors look at

the corporate governance structure of a company and the performance of the top management in a

company to identify the potential risks of the investment. The lack of an ethical code of conduct is a

large risk for an investor, and thus companies seeking to market themselves on the investment market

must make sure their ethical program is strong and enforced. Finance has a real interest in the IFBEC

because it works on the sector’s risk mapping. Institutional investors track the companies which present

a good CSR level. The companies that have an overall positive assessment of their social responsibility

programs show the highest return on their equity.

Susan Pond, a Senior Officer in the Defense & Security Economics and Political Affairs & Security Policies

Division at NATO HQ outlined NATO’s Building Integrity Program and the common challenges faced by

the public and private sector to promote good governance and reduce the risk of corruption. The

program was launched in 2007 and is focused on providing practical support to nations. The tools

developed- BI Self Assessment and peer Review, pool of Experts and Training and education are

available to nations. At the request of nations, tailored BI program are being developed for Afghanistan

and South Eastern Europe.

NATO civilian and military authorities understand the value of public trust and the corrosive effect of

corruption has on our institutions and operations. While more research is needed, corruption is clearly

to contributor to peace and stability. Ms. Pond congratulated the IFBEC and its members for the

considerable achievements, noting the common areas of interest and suggested that there might be

areas for collaboration to promote good practice in the defense and security sector.

Nicola Bonnuci, Director of Legal Affairs for the OECD, discussed practices the OECD has identified as

positive for ethical conduct and what companies need to do to avoid ethics violations. While all

companies must follow compliance rules, a truly ethical company aims to do more than just follow the

rules. While certification programs add value to ethics standards, the defense that a company followed

compliance rules is not enough to protect it from litigation. The B-20 and G-20 are considering collective

action to ensure ethical standards are met, and such collective action is a vehicle for reform in the

industry. International institutions such as the World Bank have sent strong messages that ethical

conduct is a critical part of operating procedure, evidenced by their decision to stop funding the

Bangladeshi dam. As the CEO panel discussed, ethical codes of conduct must be more than just pieces

of paper and ethics is not just a matter for the lawyers, but a day-to-day activity of all employees.

Acknowledgements

The IFBEC would like to thank all those who helped make this conference a success, especially all of the

speakers and moderators who are listed in the attached agenda. A special thank you goes to Pedro

Argüelles Salaverría and the Spanish Ministry of Defense for the keynote address and to CESEDEN for

hosting the conference. Special thanks also to Rocío Rodriguez of Tedae, the Spanish Association for

Defense, Aeronautics and Space Technologies, as well as to Anne-Catherine Rochefort, and Marion

Marhuenda from EADS for their hard work in putting together the conference and the excellent

leadership of former IFBEC Chairperson Alice Eldridge over the past year. Charlie Chadwick assumed the

role of IFBEC Chairperson at the conclusion of the conference, with Pedro Montoya continuing to serve

as Vice Chair.

Finally, we would like to thank AIA and ASD for their continued support of the IFBEC.

About the IFBEC The IFBEC provides an opportunity to exchange information on ethics best practices and trends globally among industry participants and identify areas of commonality. IFBEC members developed a set of Global Principles of Business Ethics for the Aerospace and Defense Industry that were endorsed by AIA and ASD in October 2009. The Forum is open to all companies willing to share business practices for sustainable competitiveness. In order to participate in IFBEC, interested companies must execute an annual Company Statement about their corporate ethics policies and practices, their participation in industry‐wide ethics activities and their commitment to bolstering adherence to the Global Principles within their company and among other industry partners.

For more information, or to learn about how to join the IFBEC, visit www.ifbec.info.