Martin Marietta is a leading-edge aerospace and defense company which produces technology for the federal government. The company has four main operating divisions or companies. Most of the company’s over 60,000 employees work at nine United States locations.
The 1980’s were a climate of government and public mistrust for defense companies. There were many accusations of fraud, waste and misconduct. In 1985, after Martin Marietta found itself under investigation for improper travel billings, the firm’s president decided that it was time to institute an ethics program. The company started with a 12 page “Code of Ethics and Standards of Conduct” which they distributed to the 60,000 employees by mail. They also appointed an ethics steering committee to oversee the progress of the initiative.
In addition, the company joined efforts with over 18 defense contractors to develop the Defense industry Initiative on Business Ethics and Conduct. By, 1990 over 55 companies had joined all agreeing to create an environment of compliance and accept their accountability to the public. The effort was designed to increase self-governance and to prove to government regulators that defense companies were adept enough to regulate themselves. At the forefront of the initiative was a voluntary disclosure and a total audit program.
Upon evaluation of Martin Marietta’s ethics program it appears to be successful. Quantitatively, it can be seen that in the years since instituting the program (see case Exhibit 1) they have seen a net increase in their sales and operating income. This suggests that they have made headway against government and public scrutiny. On a Qualitative level, the program has the total commitment of the president of the company; an endeavor of this magnitude is bound to fail without this aspect. Also, to ensure buy-in from all corporate executives, ethics was made an explicit requirement for their incentives. This benefits the company by ensuring that corporate social responsibility and ethics initiatives will be judged on the same level as other business performance initiatives, like sales and profitability. It ensures that all executives are committed and on the same page; it also clarifies the level of importance that the company is placing on ethical conduct. For the same reasons as stated above, the business also established a system where management and supervision’s evaluation and bonus systems are incentivized with ethics objectives.
In addition, to help ensure that the general work staff is involved in compliance and ethics initiatives, the company has established various channels for employees to express concerns, ask questions and report complaints about ethics violations. Employees are encouraged to report violations to their supervisors or appointed representatives. However, they also have the option of reporting violations anonymously over the phone on the “hotline”, in writing or electronically, using a computer that is provided for them. Once again, giving employees a medium to express themselves has the benefit of getting them involved in the program and ensures that the entire company is mindful of ethics.
The above steps help to present a consolidated front to the government and general public and thereby demonstrate the firm’s full commitment to ethical behavior. However, as Martin Marietta has managed to take steps to get the entire company involved in their ethics program by putting their corporate responsibilities in line with the company’s financial objectives, the steps that they have taken also come at a cost.
First, since an accurate depiction of the efforts of management and executive performance towards this program requires objective assessment, clear measureable guidelines must be instituted to ensure transparency and fairness. While the company has made much progress with their program, the facts of the case indicate that there is still...