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Governance

BAE "damaged Britain’s reputation"

Tuesday, 06 May 2008

The Woolf Committee has published its report on BAE Systems plc's ethical business conduct.

The report Ethical Business Conduct in BAE Systems plc - the way forward contains 23 recommendations to the board of directors that will lead to BAE Systems having world-class ethical business practices.

The company, at the beginning of the committee's work, promised to implement all the recommendations in full.

Anti-bribery measures

The committee has recommended that the company should publish and implement a global code of ethical business conduct and strengthen their anti-bribery measures in the appointment, management and payment of advisers.

The committee said that BAE could build on the rigorous process the company has recently introduced and extend this process to Offset contracts.

The report also includes a range of measures to strengthen board oversight of ethical issues through the corporate responsibility committee.

Assurance to the board and to the public of high ethical standards will be provided in future by regular, independent external audits of business conduct.

Ethical policies and processes

The Woolf Committee was established at the request of the board of BAE Systems plc to publicly report upon the company's ethical policies and processes.

The independent external committee was chaired by Lord Woolf of Barnes, the former Lord Chief Justice of England and Wales.

The other members were Douglas Daft AC, Philippa Foster Back OBE and Sir David Walker. The committee secretary was Dr Richard Jarvis.

The committee began its work on 3 August. During its work, the committee received submissions and met and interviewed a wide range of individuals from international and UK government agencies, industry and non-governmental organisations.

The committee met and interviewed executives, non-executive directors, and employees at sites in Warton, Barrow-in-Furness and Rockville USA.

It also commissioned a report from the Institute of Business Ethics on ethical business practice for global companies and an analysis by Professor Sir Lawrence Freedman and colleagues at King's College London of key ethical risk areas for defence contractors.

These two papers were presented to a roundtable seminar chaired by Lord Robertson of Port Ellen under Chatham House rules on 6 February 2008 in London.

Past unethical conduct

Lord Woolf, the committee's chairman, said that any company today which aspires to being a world-class enterprise with the benefits of access to the global economy must aim for the highest ethical standards.

He added that the committee’s report provided a route-map for BAE that would ensure it became a leader among global companies for its standards of ethical business conduct.

"BAE Systems' recent transformation from a largely British business into a major global defence company has undoubtedly brought important economic and security benefits to the United Kingdom,” Lord Woolf said.

“During this period the company's reputation has, and continues to be, tarnished by allegations of past unethical conduct, however, which have also damaged the global reputation of this country,” he added.

He pointed out that the committee’s role was not to investigate the allegations of past misconduct, although it made sure that it understood the general nature of those allegations.

Considerable progress

“In my view it is of great importance that the chairman and chief executive have acknowledged to the committee that the company did not in the past pay sufficient attention to ethical standards and avoid activities which had the potential to give rise to reputational damage,” Lord Woolf noted.

He said that BAE had already made considerable progress in creating the procedures that should ensure higher standards of ethical business conduct.

The Woolf Committee’s report also makes a number of observations directed at the UK government, warning that it “could and should do more” to promote high standards of ethical business conduct and help protect the global reputation of all British businesses.

The committee said that the long overdue but critical reform of the UK’s anti-bribery laws could be achieved by quickly bringing forward legislation to implement the Law Commission's recent proposals.

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