A report into BAE's ethics and foreign practices shines the spotlight on corporate reputation and governance
A report by the former Lord Chief Justice has again shined the ethical spotlight on BAE Systems, the UK’s largest defence contractor.
The inquiry—by Lord Woolf but commissioned by BAE—was intended to focus on the ethical standards required in doing business globally, where customers in foreign markets sometimes operate under different rules of engagement.
The report noted: ‘In the global economy, corporate reputation has become an essential part of an enterprise’s value and the effective management of ethical and reputational risks has become a critical element of corporate governance.’
Rather than being a whitewash, as some expected, the inquiry has not been kind to BAE. The company invited Woolf to look at its ethical behaviour to challenge ‘widely-held perceptions that it was involved in inappropriate behaviour.’
However, according to Garry Honey founder of the reputation consultancy, Chiron, ‘the criticism of the company made by the report committee has done nothing to improve the reputation of BAE and has in fact brought the company back into the media spotlight.’
“Rather than being a whitewash, as some expected, the inquiry has not been kind to BAE.
The inquiry revealed top management admitted failing to pay sufficient attention to ethical standards that could have damaged its reputation.
Although the Woolf report was never going to judge past actions, it has again raised the issue of corruption claims in relation to the £43bn (Euro54.5m) Al-Yamamah arms deal with Saudi Arabia. BAE denies making illegal payments to secure the deal.
Dick Olver, chairman, BAE Systems, stated: ‘The Committee’s publication of this Report is an important step towards BAE Systems’ objective of achieving benchmark standards of governance in the conduct of its day-to-day business.’
When the SFO abandoned the probe in 2006 it helped inspire the Organisation for Economic Cooperation and Development (OECD), one of the foremost anti-bribery bodies, to conduct a review of the UK’s foreign bribery laws, which it criticised.
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