Business activity is always fraught with a difficult choice. Firms must survive in the fierce competition. Entrepreneurs often resort to illegal activities in order to get more profit. Some experts believe that ethics violations cannot be avoided and should be assessed only by the degree of harm. The sphere of aircraft engineering is very profitable and, therefore, attractive to all sorts of manipulation. Ethics violation in this field can result in numerous casualties. Lockheed Aircraft Corporation has become one of the most notorious violators of ethics and one of the founders of the code of ethics.
A Byword for the Shady Practices
The Lockheed’s F-104 Starfighter was created on the basis of the aircraft missile X-1. The purpose was to outmatch Soviet-made MiG-15. Starfighter made its debut in February, 1954. It had many experimental innovations: it was extremely fast, the top speed was up to 1000 miles per hour, but it was stuffed with inadequate working equipment. Also, it failed to become a multifunctional aircraft due to technical problems (Terris, 2005).
After a failure of the campaign in the United States, Lockheed tried to find a way to the international level. The company paid bribes to support Starfighter advertising campaign abroad. In 1958, Germany bought Starfighter. Italy, Holland, Belgium, Japan, Denmark, Greece, Spain, Norway, Turkey, and even Indonesia followed Germany. Lockheed had one more tricky deal, having imposed the passenger airliner L-1011 to the Japanese Prime Minister Kakuei Tanaka (Terris, 2005).
Lockheed did not do something unusual. In the 1950s and 1960s, bribery was a part of doing business. Bribery overseas was even not illegal according to American laws at that time (Terris, 2005). However, Lockheed’s overspending has drawn the officials’ attention. The Church Cometee brought the light to the Lockheed’s shady deals. This corporation was called a major international bribe-giver in the world. This caused political scandals in Japan, Netherlands, Italy, and Belgium and started the so-called “case of Lockheed”. Lockheed became “…a byword for the shady practices of American multi-national corporations” (Terris, 2005). Having passed through scandals and layoffs, this corporation became a major impetus for new legislation, being the first who introduced a code of ethics (Terris, 2005).
Pragmatism vs. Utilitarianism
From the David De Kremer’s and Henri-Claude de Bettignies’ perspective, business ethics is often gray. In the minds of business people, business is associated with the notions of competition and greed. Acceptance of these beliefs can lead people to a breach of ethics. In business, ethics is perceived very pragmatically. The pragmatic business concept comes from the fact that the recognition of all the subjects of business laws, business practices, rules, as well as the desire to make business successful and infallible have ethical and legal basis.
One says that it is okay to go beyond but not to cross the boundaries of the law. Others consider that ethics refers to the notion of gray areas, so it is difficult to take responsibility (De Cremer & de Bettignies, 2013).
If one judges the entrepreneur’s decision to cross the line in terms of utilitarianism, it must be said that businessmen should have a sense of self-control – they need to determine how serious the breach is and the consequences it will have (Pearson MyCourse Tools, 2015). In terms of utilitarianism, the actions of the Lockheed leadership look like a disaster. The pain that families of dead pilots have suffered is difficult to compare with earnings that aircraft building company received. Public figures, who took bribes for their own enrichment, bought the deadly aircraft, and sent to death the best pilots of the countries deserve the highest condemnation. Lockheed itself has lost much in terms of utilitarianism because it experienced fame as the subject of unfair business. Manufacturers’ corrupt behavior has weakened the credibility of the defense industry, but they assured that their game on the market was not different from the behavior of competitors. In today’s business environment, it is hard to compete ethically. However, the organization should take responsibility, consider the risks to third parties, and minimize them.
In May, 1977, Lockheed published a document in the company magazine, Lockheed Life, under the title “Lockheed Principles of Business Conduct” (Terris, 2005). In this document, they announced their pledge to observe ethical business principles as the most essential, adhere to the U.S. law and laws of other countries, and avoid conflicts of interest. This proclamation, nevertheless, made it possible to maneuver and return on the slippery track. However, Lockheed was the first organization that introduced a code of ethics. It was a shift of thinking (Terris, 2005).
Having introduced the code of ethics, Lockheed continued to spend money. For example, a coffee maker for the cargo plane Galaxy G-5 was estimated in $ 7000, and the money was spent on pets and baby-sitters. In 1986, President Reagan created the Packard Commission, a blue-ribbon commission to investigate the facts of procurement for the defense industry. The Commission recommended defense companies to take the ethics program. From this recommendation, the Defense Industry Initiative (DII) originated in spring of 1986. 32 major defense companies developed its six basic principles (Terris, 2005). Lack Welch, CEO of General Electric, has attracted contractors by the promise to develop and comply with the code of ethics and train employees in the code.
New Lockheed Martin’s Ethics Program
In terms of utilitarianism, it was very important for Lockheed Martin to develop a list of rules to be followed to enhance the benefits and reduce the level of damage (Pearson MyCourse Tools, 2015). Being developed on the basis of the DII, Lockheed Martin’s “Setting the Standard Code of Ethics and Business Conduct” embodies many of the principles of DII. The Code emphasizes that the company commits to the highest standards of integrity. It is extremely important for every employee to fulfill his or her obligations. The Code also states: bribery, violations of export and import laws, and participation in illegal boycotts destroy confidence in the market, undermine democracy, and spoil the economic and social development (Terris, 2005).
Much attention was paid to measures against corruption. Lockheed Martin developed a detailed presentation of the company’s policy with respect to kickbacks, business incentives, and conflicts of interest. Lockheed Martin conducts an audit of all aspects of anti-corruption measures, for example, studies the open sources of information, verification of the documents submitted, and making inquiries at the embassy. The rules formulated in the ethical code made the company with bad reputation more attractive for their customers. Due to improved reputation, Lockheed could overcome the instability period of the early 1990s (Terris, 2005).
Dilbert on the Service of Lockheed
At the height of the corporate scandals of 1970, the company, like many others, has created a Division of Ethics and Business Conduct. Norman Augustine, the president of Lockheed Martin in 1990s, recognized that the ethics program was boring. He told Carol Marshall, the lawyer in charge of the ethics program, to solve this problem. Having traveled around the corporation, Mrs. Marshal understood that comic characters Dilbert and Dogbert were very popular among the corporation workers. The company paid $50,000 for the right to use Dilbert character for their corporate purpose. Steve Cohen, a specialist in employee training, and his partner, David Gebler, developed business games featuring the cartoon character to attract the attention of employees. Since 1997, “Ethics Challenge” game became a mandatory ethics awareness program. All played this “Monopoly-like” game according to the cascade principle, beginning from Norman Augustine and senior staff. Every senior manager had to play like a common team member and then become a team leader for his or her subordinates. All employees had to play the game for at least an hour a day. As a result, employees have become more aware of morality issues. Thus, the game method introduced by Norman Augustine was the turning point in the employees’ corporate ethics possession (Terris, 2005).
Get a Price Quote
Thus, in today’s business environment, the concept of ethics is gray. This means that no organization complies with the rules absolutely. However, in the pursuit of profit, according to the rules of utilitarianism, it is necessary to evaluate the risks and benefits. Being resorting to bribery, Lockheed committed acts that were not acceptable in terms of utilitarianism and human morality. The corporation went through financial and political scandals associated with ethics violations and was among the founders of the ethical code of defense industry enterprises. Lockheed corporate code of ethics has become a model for other companies.