Ethical Performance
inside intelligence for responsible business


BAE sets out plans to put its house in order

September 2008

Defence giant BAE Systems has set out how it intends to implement the 23 recommendations made by an independent committee that looked at how to improve the company’s ethical standards.

The three-year programme will ‘fully implement’ the recommendations of the Woolf Committee, which found that Europe’s biggest defence company had often fallen well short of required ethical standards (EP10, issue 2, p8).

Six working groups of senior managers and ‘functional experts’ will implement all the recommendations of committee chairman Lord Woolf, the former UK lord chief justice. Planning meetings have already been held and one of the working groups is said to be well advanced on producing a ‘principle-driven code of business conduct’ for the company’s 97,500 employees.

Other Woolf-inspired work is now under way, including a new process to identify the non-financial risks of new projects. A uniform global contract for the appointment and oversight of external advisers is also being developed. The payment of such advisers was criticized by the Woolf report and the company has agreed to limit their use.

A steering committee of senior executives from across the business will oversee the working groups, while the board’s corporate responsibility committee, which is chaired by non-executive director Andy Inglis, will have overall responsibility for ensuring that the recommendations are implemented.

A dedicated programme director is to co-ordinate the work and an external auditor will be appointed to conduct an annual assurance review. The auditor’s first report will be published in 2009 in BAE’s annual Corporate Responsibility Report – two years ahead of a deadline set by Woolf.

BAE, which is under investigation by the US Department of State over alleged corruption relating to the Al-Yamamah arms deal, said that ethics training programmes for employees would be central to the effort. Thirty-five per cent of the 327 calls received in 2007 by the company’s Ethics Helpline resulted in enquiries on ‘employee relations and conduct’ – more than any other subject – according to unaudited company figures, with enquiries on ‘conflicts of interest’ the next most frequently addressed (71). Overall, formal ethics enquiries from employees were lower than in 2006, when there were 410.

Outgoing chief executive Mike Turner said the business was now ‘determined [to be] recognized both as a high performing company in terms of its programme and financial performance and as a leader in standards of ethical business conduct among global companies’. He pledged to ‘communicate how we are doing this clearly and regularly with our stakeholders’.

The Woolf Committee was appointed by BAE in June 2007 to carry out an independent review of the company’s ethical policies and processes and to report publicly on its findings. BAE agreed in advance of publication to implement all its conclusions, a move hailed by Lord Woolf as showing ‘courage’.

BAE | Global | Corporate Strategy

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