In terms of business ethics, the Lockheed case remains controversial to this day. Striving to create better fighter jets for the U.S. Air Force to gain superiority over the Soviet aircraft being flown by the North Koreans, Lockheed engineers had to take several shortcuts. The aircraft that was eventually produced, the F-104, had multiple problems and was not put into operation until four years after its originally scheduled launch date.
Given the aircraft’s disappointing sales (only 170 out of the expected 2,500 jet fighters), the Lockheed sales department decided to sell the Starfighters against all odds, a decision that resulted in the use of several “unorthodox” strategies. These strategies were a direct consequence of the difficulties the company was experiencing. Due to its numerous flaws, the new F-104 aircraft was not competitive enough for the market, which led Lockheed to resort to less conventional sales methods.
The company’s sales strategy included the involvement of intermediaries in various countries, who facilitated purchases of the aircraft by the highest officials. The collaboration with these middlemen could be called somewhat dubious since it involved bribery, among other unconventional methods. As a result of this strategy, Lockheed’s foreign sales reached 2,000 jet fighters, saving the company from bankruptcy. However, in the 1960s, Lockheed faced another financial crisis after it went into the commercial aircraft business by developing the L-1011 TriStar jumbo jet. Despite its engineering and intensive sales efforts, the company was far from financial viability.
Because the major American airlines chose to purchase their aircraft from Lockheed’s competitor, McDonnell-Douglas, Lockheed had to find a way to sell their TriStar jumbo jets abroad. Daniel Terris describes this period in the company’s history as one in which “the company went too far” (56). Indeed, having been defeated in the U.S. market, Carl Kotchian, one of Lockheed’s executives, went to Japan. Although the Japanese were originally interested in purchasing the production of Lockheed’s competitor, the DC-10, Kotchian spared no effort to change the situation. Money and convenient connections saved the company once again.
Eventually, Lockheed could not avoid public scrutiny. Once rumors reached the Senate, the company’s record of shady activities since the 1950s came to light. Scandals erupted abroad, the involvement of certain high officials was exposed, and unofficial deals and corruption turned out to be more than common practice for many American corporations.
The Ethical Question
In reality, Lockheed’s activities did not stand out at the time. There were no proper ethical regulations for American corporations operating abroad; in fact, bribery outside of the United States was not specified as illegal under U.S. law (Terris 56). The Lockheed executives played by the rules that had been unofficially accepted in the industry. Whether it was unethical for them to employ such dubious strategies, strategies which were already employed by a majority of businesses, is an important question.
Alan Hamlin distinguishes two reasons why morality might not matter to the individual in a social, political, or business context (6). The first reason is a lack of consensus regarding moral values. The perceptions of ethical conduct are diverse, and it is not possible to find common ground for all of them. Another reason stems from the idea of human weakness, in which the desire to act in compliance with a moral code proves to be insufficiently strong. Therefore, self-interest dominates over moral judgment (Hamlin 6). In the case of Lockheed, there was no written consensus defining the moral conduct of a company. Moreover, any moral desires that individual executives might have felt were suppressed by the need to increase the sales indices and avoid bankruptcy.
All things considered, the argument supporting Lockheed’s illegal operations, which states that everyone was playing by the same rules, is not actually valid. The impetus for adopting an ethical code of conduct in the late 1970s was created by the disclosure of the secret deals that the company was engaged in and society’s disapproval. Thus, it appeared that there had been a societal consensus after all and that the “shady” rules remained shady, regardless of how many companies followed them; otherwise, the deals would not have been kept secret. Hypothetically, there was a possibility that society would not have disapproved of Lockheed’s dubious operations. However, if that had been the case, it is rather doubtful that any attempt to establish a code of ethical conduct would have been made.
Hamlin emphasizes that there is a concept known as “common-sense morality” (7) that can always provide guidelines for any particular situation. One can argue that ethical conduct must be displayed by an individual, not a corporate entity, the ultimate purpose of which is maximizing profit (Velentzas and Broni 802). From this point of view, Lockheed’s activities are justified because they were compliant with the business trend at the time. Nonetheless, since today the outcome of these activities is known, it is evident that common-sense morality should have prevented Lockheed from conducting potentially unethical operations.
Defense Industry Initiative
The 1980s saw the defense industry firmly embedded in public scrutiny. Public opinion of the defense industry was saturated with mismanagement and criminal allegations. In 1986, major players in the industry established the Defense Industry Initiative on Business Ethics and Conduct (DII). Thirty-two of the largest defense contractor companies in the United States agreed to abide by this ethical code. This development was the key factor in the eventual success of Lockheed Martin’s ethics program.
The DII brought 32 companies together to level the playing field; indeed, the contractors assured each other that they would be competing on the same level, without anyone gaining an unfair advantage in the market. Contractors were to devise their own ethics strategies and train their staff (Shaw 87). Eventually, Lockheed developed ethics awareness programs, helping its staff to uphold the DII principles.
Norman Augustine and Dilbert
In 1995, Lockheed successfully negotiated a merger with the Martin Marietta Company. The CEO of the latter, Norman Augustine, was insistent on further intensive development of the Lockheed ethics program, since the recent Egyptian scandal had made it clear that there was still much to be improved. Augustine’s approach placed ethics at the center of the company’s activities. He used to say that three aspects were crucial: “act ethically, take care of customers, [and] treat everyone with respect” (Bell 32). Augustine argued that once these three requirements are met, profit will follow.
Devising the ethics program for Lockheed Martin was a difficult task. A campaign was designed to illustrate ethical concepts with the use of comic-strip characters, Dilbert and his sidekick Dogbert. Thus, the first ethics-awareness program for Lockheed Martin was created. Later on, a game called “The Ethics Challenge” was designed to help employees develop ethical values, and this strategy proved to be a success. Studies have shown that nearly 75% of the participating staff said that it was “easy to apply what they learned in the training program to their work environment” (“Lockheed Martin Ethics” 10). As CEO of Lockheed Martin, Norman Augustine successfully developed the ethical side of Lockheed and made a significant contribution to the company’s public image.
Bell, Trudy E. Norman R. Augustine: Doing the Right Thing. n.d. Web.
Hamlin, Alan. Moral Motives and Political Mechanisms. n.d. Web.
“Lockheed Martin Ethics Challenge Feature Dilbert to Bring Humor to Critical Thinking.” The Government Accountants Journal. 47.4. (1998): 10-14.
Shaw, Lisa Cuevas. SAGE Brief Guide to Corporate Social Responsibility, Thousand Oaks: SAGE Publications, Inc., 2012. Print.
Terris, Daniel. Ethics at Work: Creating Virtue at an American Corporation, Waltham: Brandeis University Press, 2013. Print.
Velentzas, John, and Georgia Broni. “Ethical Dimensions in the Conduct of Business: Business Ethics, Corporate Social Responsibility and the Law. The “Ethics in Business” as a Sense of Business Ethics.” International Conference on Applied Economics. 3.1. (2010): 795-820. Web.