Can defence and security companies operate ethically?

Can defence and security companies operate ethically?

With some of the biggest fines for corporate corruption imposed upon leading multinational defence companies, the latest GoodCorporation debate at the House of Lords asked: Can defence and security companies ever operate ethically?

Hosting the debate, Baroness Pauline Neville Jones stressed that we should focus the discussion on how the industry moves forward.  Corruption scandals within the defence sector damage countries as well as corporations.  The industry must move towards an agreed code of conduct in order to avoid the reputational damage that we have witnessed in recent years.

Pedro Montoya, Chief Compliance Officer for EADs opened the debate by acknowledging that marketing defence products internationally is a challenge.  The competition is tough, the procurement process is not always transparent and widespread corruption does exist.  However, the majority of defence procurement is conducted with integrity, namely in the NATO countries. He said that EADS was promoting the level playing field with defence companies operating within a tightly controlled compliance programme to ensure a high standard of ethical conduct. Going a step further he suggested that the defence and security sector does, in fact, operate more, not less, ethically than many other industries.

Delegates were asked if they felt that this was so.  A significant number felt that they operated more ethically. A similar number felt it was about the same and more steps were needed.  Very few felt they operated less ethically than those in other sectors.

Many felt that there was a clear gap between the public perception of what was going on in the industry and the reality.  The scandals that hit the headlines today, generally took place some years ago.  However, it is essential that defence companies are honest about how well their policies and processes are actually implemented.  It was agreed that this is an industry where bribes are solicited and undue influence is still a problem.  Consequently companies need to be very secure that they have the right regimes in place to combat such behaviour.

The era of complicit governments in deal making was felt to be over, paving the way, many thought, for an industry-wide code of conduct. A sizeable majority felt that corruption within this sector would never be eradicated until an industry-wide approach was agreed upon and implemented forcefully.  This would also ensure that emerging countries in this market would be required to comply with a global code ensuring that the playing field remains level for all participants.

Others felt that leaving compliance in the hands of corporations would allow businesses to use it in order to develop a competitive edge.

It was suggested that market intelligence from other industries operating in areas where the defence sector does and wishes to do business should be valued and shared.  This would provide the opportunity for partnership and co-operation that would raise the bar significantly.

There was some discussion on new approaches to defence procurement, whereby equipment is purchased along with some agreement and a view was expressed that this might reduce the scope for unethical practice.

The industry is clearly focused on the necessity for robust and transparent ethical conduct.  All felt strongly that the sector was taking significant measures to operate ethically.  The draft Bribery Bill was discussed at some length.  It was felt that further guidance is needed to ensure that the legislation is both clear and workable.  It was also suggested that internal audits are likely to become an essential part of compliance with the proposed Bill as the only way to really check that the rules are not only in place but are working.  Boards, the debate concluded, have a huge role to play here: not only enforcing and maintaining ethical standards but reporting that the required standards are being implemented.

GoodCorporation Business Ethics Debate October 2009