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Boeing Co.

Boeing Co. Government Contracts and Conflicts of Interest. By McLaws, Fors, Hawkins & Gonzales. Current Situation. Air Force official Darleen Druyun reviewed a $21 billion proposal for the Air Force to lease 100 Boeing 767 air-borne-refueling tankers.

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Boeing Co.

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  1. Boeing Co. Government Contracts and Conflicts of Interest By McLaws, Fors, Hawkins & Gonzales

  2. Current Situation • Air Force official Darleen Druyun reviewed a $21 billion proposal for the Air Force to lease 100 Boeing 767 air-borne-refueling tankers. • During that time, Boeing CFO Mike Sears offered Druyun a job at Boeing. • Sears’ actions violated Boeing hiring policies and elicited scandal at Boeing once again. • The Board of Directors must now decide whether to fire CFO, Mike Sears and Vice President of Missile Defense Systems, Darleen Druyun

  3. HISTORY AND CULTURE • 1916 – William Boeing started Pacific Aero Products Company which became Boeing Airplane Company two years later. • Boeing grows through government contracts during WWI and WWII • 1960’s - Contributed to Kennedy’s Space Race • Major leader in the commercial airline industry.

  4. Employees:the lifeblood of Boeing • “To ensure our continued success, we support our most critical resource: the people of Boeing… At Boeing, we inspire and recognize individual talent, provide job security based on performance, and foster a team spirit and the feeling of personal satisfaction that comes from a job well done.” - Frank Shrontz, Boeing CEO in 1986 • The Lifelong Learning program gives Boeing employees the opportunity of advanced education and career development.

  5. A Rocky Past:Scandals at Boeing • 1985 - Boeing is 1 of 7 contractors accused of misrepresenting $109.8 million dollars in billings to the government. • 1997 - Boeing attempted to produce a record number of airplanes and lost control of commercial plants confusing investors misleading shareholders. Boeing dished out $92.5 million to settle claims. • 2003 - Lockheed Martin Scandal • Current - Boeing knowingly underpaid and denied promotions to female employees resulting in class action suits.

  6. Lockheed Martin Scandal • During the EELV Low Cost Concept Validation the Air Force awarded 2, $60 million, 17-month contracts to Lockheed Martin and Boeing. • The two Companies competed for: • future contracts worth up to $2 billion. • contracts of 28 missions, scheduled to occur from 2002 to 2008.

  7. Erskine & Branch • Prior to 1996 - Kenneth Branch was a Lockheed Martin engineer working on EELV projects. • 1996 - Branch conspired with Boeing engineer Kenneth Erskine, offering to provide Boeing with Lockheed Martin EELV proposal so Boeing could under-bid Lockheed Martin and win contracts. • 1997 - Erskine recruited Branch from Lockheed Martin offering a higher salary in return for Lockheed Martin's EELV proposal.

  8. Success & Scandals • Oct. 1998 - The Air Force awarded Boeing with 19 of the 28 EELV projects and $1.38 billion. • Lockheed Martin was awarded 9 projects and $640 million. • Boeing employee revealed information about stolen papers from Lockheed Martin's EELV project. • Boeing initiated an internal investigation of the allegations. • Aug. 1999 – Branch and Erskine were fired.

  9. Repercussions • 2003 - Undersecretary of the Air Force, Peter B. Teets announced Boeing would lose 10 of its schedules launchings with the EELV project. • Boeing's total estimated loss of funding from the Air Force was in the ballpark of $1 billion.

  10. Ethics at Boeing • Senior management formed Ethical Leadership Group (ELG) to review the company ethics program. • ELG found employees felt betrayed by scandal and saw the media coverage as “a kick in the gut.” • ELG also found employees believed the company had integrity and pride. • ELG suggested changes including increased training, greater monitoring, and more open communication.

  11. Revamping the Ethical Code • The 2003 Ethics Challenge reviewed ethical decisions made by employees and attempted to show accountability in a culture of openness. • The Boeing Rudman report contained 16 recommendations to improve structural issues, hiring and training, staffing and investigations and internal oversight. • Office of Internal Governance is established to report directly to CEO, conduct internal audits and monitor ethics and governance.

  12. Phil M. Condit • 1965- Joined Boeing as an aerodynamics engineer on the Supersonic Transport Program. • Served in several capacities for 30 years • 1997 - Elected to be the Chief Executive Officer and chairman of Boeing. • While CEO Boeing became the largest exporter in the United States, with revenues of more than $54 billion. • Condit also holds a patent for the design of a flexible airplane wing, known as the Sailwing.

  13. Mike Sears • 1997 - Mike Sears joined Boeing during McDonnell Douglas merger bringing over 27 years of experience. • Developed and produced the F/A-18E/F Super Hornet program, which is now the U.S. Navy’s front-line strike fighter. • 2000 – With no financial training, Sears became Beoing’s chief financial officer and executive vice president.

  14. Darleen Druyun • Darleen Druyun was principal deputy assistant secretary for the U.S. Air Force acquisition and management. • Jan. 2003 – Joined Boeing to work on the missile defense program. • It was believed Druyun’s valuable experience and long history with the Air Force and her passion for the defense program were key factors in her acquiring a position at Boeing.

  15. Conclusion • The government is questioning Boeing’s trustworthiness and ethical practices. • The Pentagon Inspector General's Office is investigating communications between Druyun and Boeing surrounding the tanker deal. • The Board has unanimously voted to fire Sears and Druyun. • Condit must announce the resolution to the unforgiving public. • To preserve Boeing's future, Condit must take unprecedented measures to regain stakeholder trust.

  16. Discussion Questions • Is a company the size of Boeing held to higher standards? How is this important to public relations practices? • What sort of effects do these events have on Boeing now that it has changed its emphasis from commercial to government projects? • Who are the key constituents that should be addressed in this issue? What strategies should be used to reach these constituents?

  17. Discussion Questions • How will the scandal affect the company's ethical code and practices? • If you were Phil Condit, how would you begin to approach this situation? • What stakeholder relationships were most affected after the Lockheed Martin scandal? How will you handle repairing these damaged relationships once again?

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