Question 1: The Boeing case is not just one ethics case. It is rather an unfortunate mixture of four minicases. The first mini-case pertains to the relationship between Boeing employees and the United States Air Force. It was alleged that a high ranking acquisition manager for the Air Force, Darleen Druyun gave some "sweetheart" deals to Boeing in exchange for being hired by Boeing after she retired from the Air Force. Of course these types of relationship violated the codes of conduct at both Boeing and at the Air Force, but these deals were not discovered until after Druyun had retired from the Air Force and started her position at Boeing. It was alleged that Druyun not only made sure the Boeing received the military contracts, but she also made sure Boeing receive a large profit on the sale and she disclosed information about Boeing competitor's, Airbus, bid for the same contract. Both Druyun and her contact at Boeing, CFO Mike Sears, were fired by Boeing once contradicting evidence was presented pertaining to Druyun being involved in the negotiations as an Air Force employee even though she had already started discussions with Boeing for a job after she retired by the Air Force. Druyun was sentenced to nine months in prison and Sears was sentenced to four months in prison. The second mini case relates to Boeing obtaining 35,000 pages of documents from one of its critical competitors, Lockheed Martin. A top executive at Boeing, Larry Satchell was charged with obstruction of justice and conspiracy to violate U.S. procurement laws. It was also discovered that Boeing, in the past, had obtained proprietary information from another critical competitor, Raytheon. After Boeing's acquisition of the Lockheed Martin documents has been made public, the Pentagon withdrew $1 billion in military contracts. Boeing was also accused of manipulating its financial statements during its merger with McDonnell Douglas Page 3 of 6 to make the merger look more attractive. Similar to Enron's mark to market approach, Boeing recorded the operating profit when a program was still being developed. This "smoothing" of financial results made the overall numbers more attractive when the merger did take place. Another ethical issue of merit related to Boeing is its treatment of women and minorities. Boeing faces a class-action lawsuit by 38 women claiming discrimination based on how they were compensated. It was also determined the Boeing was giving lower levels of compensation to Asian and Black workers as compared with White workers. In addition, Boeing's CEO Philip Condit had been romantically linked with Boeing employees. Condit eventually was forced to resign due, in part, to the ethical problems at Boeing This leads to the fourth ethical issue which was the new CEO, Harry Stonecipher. In less than a year as CEO, Stonecipher resigned after having an extramarital affair with a Boeing employee. Update In January 2008, Boeing again was trying to get a large contract from the Air Force to build refueling tankers. Ironically, Boeing had initially won the contract but the deal was cancelled since Darleen Druyun had been negotiating for the Air Force when negotiation for a new job with Boeing. The contract value was $40 billion and Boeing was anxious to win since there are very few opportunities for contracts of this size. One Boeing spokesman said that "We want to win ethically. We want to win the right way". The Air Force had changed its decision process after the Druyun affair. Instead of one person making the final decision as Druyun did, the Air Force had the acquisition officer meet and receive input from advisors. A representative of the Air Force stated that "We want to be more transparent, have more communication, more checks and balances to improve our process and credibility". On February 29, 2008, the Air Force had made it decision. The winning bid when to Northrop Grumman in a partnership with European based Airbus. (Adapted from "Understanding Ethics" by Peter Stanwick and Sarah Stanwick) Required: a. Who are the impacted stakeholders in this case? You are required to give detailed reasons as well as justifications in lieu of them being affected in the given scenarios. (15 marks) b. The cover-up of an unethical action always seems worse than the crime. Do you agree or disagree? Use the Martha Stewart case as an example in support of your discussions. (10 marks) Question 1: The Boeing case is not just one ethics case. It is rather an unfortunate mixture of four minicases. The first mini-case pertains to the relationship between Boeing employees and the United States Air Force. It was alleged that a high ranking acquisition manager for the Air Force, Darleen Druyun gave some "sweetheart" deals to Boeing in exchange for being hired by Boeing after she retired from the Air Force. Of course these types of relationship violated the codes of conduct at both Boeing and at the Air Force, but these deals were not discovered until after Druyun had retired from the Air Force and started her position at Boeing. It was alleged that Druyun not only made sure the Boeing received the military contracts, but she also made sure Boeing receive a large profit on the sale and she disclosed information about Boeing competitor's, Airbus, bid for the same contract. Both Druyun and her contact at Boeing, CFO Mike Sears, were fired by Boeing once contradicting evidence was presented pertaining to Druyun being involved in the negotiations as an Air Force employee even though she had already started discussions with Boeing for a job after she retired by the Air Force. Druyun was sentenced to nine months in prison and Sears was sentenced to four months in prison. The second mini case relates to Boeing obtaining 35,000 pages of documents from one of its critical competitors, Lockheed Martin. A top executive at Boeing, Larry Satchell was charged with obstruction of justice and conspiracy to violate U.S. procurement laws. It was also discovered that Boeing, in the past, had obtained proprietary information from another critical competitor, Raytheon. After Boeing's acquisition of the Lockheed Martin documents has been made public, the Pentagon withdrew $1 billion in military contracts. Boeing was also accused of manipulating its financial statements during its merger with McDonnell Douglas Page 3 of 6 to make the merger look more attractive. Similar to Enron's mark to market approach, Boeing recorded the operating profit when a program was still being developed. This "smoothing" of financial results made the overall numbers more attractive when the merger did take place. Another ethical issue of merit related to Boeing is its treatment of women and minorities. Boeing faces a class-action lawsuit by 38 women claiming discrimination based on how they were compensated. It was also determined the Boeing was giving lower levels of compensation to Asian and Black workers as compared with White workers. In addition, Boeing's CEO Philip Condit had been romantically linked with Boeing employees. Condit eventually was forced to resign due, in part, to the ethical problems at Boeing This leads to the fourth ethical issue which was the new CEO, Harry Stonecipher. In less than a year as CEO, Stonecipher resigned after having an extramarital affair with a Boeing employee. Update In January 2008, Boeing again was trying to get a large contract from the Air Force to build refueling tankers. Ironically, Boeing had initially won the contract but the deal was cancelled since Darleen Druyun had been negotiating for the Air Force when negotiation for a new job with Boeing. The contract value was $40 billion and Boeing was anxious to win since there are very few opportunities for contracts of this size. One Boeing spokesman said that "We want to win ethically. We want to win the right way". The Air Force had changed its decision process after the Druyun affair. Instead of one person making the final decision as Druyun did, the Air Force had the acquisition officer meet and receive input from advisors. A representative of the Air Force stated that "We want to be more transparent, have more communication, more checks and balances to improve our process and credibility". On February 29, 2008, the Air Force had made it decision. The winning bid when to Northrop Grumman in a partnership with European based Airbus. (Adapted from "Understanding Ethics" by Peter Stanwick and Sarah Stanwick) Required: a. Who are the impacted stakeholders in this case? You are required to give detailed reasons as well as justifications in lieu of them being affected in the given scenarios. (15 marks) b. The cover-up of an unethical action always seems worse than the crime. Do you agree or disagree? Use the Martha Stewart case as an example in support of your discussions. (10 marks)