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Summary of the case
Michael Sears was the chief financial officer at Boeing and Darleen Druyun was the vice president of the missile defense systems in 2002 when the unethical issue occurred. Sears offered Druyun a job at Boeing that made her influence the outcome of a large contract bid. Druyun’s daughter was working with Boeing. Druyun was seeking a job after her retirement.
The daughter’s fiancée was seeking a job position at Boeing. The favor of offering the fiancée a position had also been considered. There was a violation of the Boeing ethical policy and the Procurement Integrity Act. Sears and Druyun tried to cover up their unethical behavior.
Druyun lobbied politicians in Congress to ensure that Boeing was granted the contract. Congress awarded the contract to Boeing without any publicly presented contests from other bidders. The contract gave Boeing triple the usual amount charged as profit margin. Later, Druyun admitted having influenced the high price given to Boeing.
Boeing was also found in other unethical activities. Boeing was in possession of a 35,000-page document taken from Lockheed Martin. Accessing trade secrets of a competitor that could reduce their advantage in bidding a contract is unethical. Boeing had also used proprietary information from Raytheon on its missile defense system.
Boeing used program accounting system for its financial statements which makes it impossible for auditors to see the exact amount of the actual transactions. The company used financial misappropriation to look attractive to McDonnell Douglas investors when they sought a merger.
The company was accused of discriminating against women, blacks, and Asians in offering salaries. Two top managers at Boeing had romantic relationships with their employees.
The company settled the lawsuit pertaining to program accounting at $92.5 million. The company allocated $10 million to adjust the women pay rates. The company paid the Office of Federal Contract compliance (OFCCP) to settle its salary discrimination case.
The company paid $615 million to settle its unethical behavior cases including Druyun’s case and Lockheed Martin stolen documents. In the workers’ case and Lockheed Martin case, Boeing settled with the Department of Justice without having to admit guilt to avoid new litigation from the aggrieved parties.
The ethical issues
One of the unethical behaviors involves Boeing possessing a proprietary document that belonged to Lockheed Martin without their consent.
In another unethical behavior, Stonecipher had extra-marital affairs with an employee even after signing a code of conduct agreement with the company.
Why they are ethical issues
It is unethical to be in possession of a competitor’s proprietary information that could reduce their advantage during a contract review.
The code of conduct agreement is used to prevent employees behaving in a manner that may be considered as employee mistreatment or that may weaken the brand.
Who is affected and how
Lockheed Martin could have lost its competitive advantage by having its trade secrets exposed to a competitor. Boeing paid millions of dollars to the Justice Department to settle the case.
Debra Peabody resigned after 20 years working at Boeing. Joan Stonecipher filed for divorce after 50 years of marriage. Harry Stonecipher resigned after holding the CEO position for about a year.
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Leadership issue to be addressed
Boeing should strengthen its research and development department to avoid relying on stealing competitors’ information to gain competitive advantage as in the case of Raytheon and Lockheed Martin.