FINAL ASSESSMENT NORTHROP GRUMMAN CORPORATION

NORTHROP GRUMMAN 09/09/14 HTTP://WWW.NORTHROPGRUMMAN.COM/PAGES/DEFAULT.ASPX

FINAL ASSESSMENT

NORTHROP GRUMMAN CORPORATION

The following pages contain the detailed scoring for your company based on

public information.

The following table represents a summary of your scores:

Topic Number of

questions

% score based

on public

information

Leadership, Governance and Organisation 10 75%

Risk Management 7 42.9%

Company Policy and Codes 12 91.7%

Training 5 80%

Personnel and Helplines 7 85.7%

Total 41 76.8%


A1:

Does the company publish a statement from the Chief Executive Officer or the Chair of the Board supporting the ethics and anti-corruption agenda of the company?

Score:

2

Comments:

Based on public information, there is evidence that the Chairman, CEO and President supports the ethics and integrity agenda of the company. Statements from the Chairman, CEO and President, which emphasise ethical standards and integrity, appear in the Corporate Responsibility Report, Standards of Business Conduct, Annual report, company website, and in guidance documents for business associates.

References:

Public:

Corporate Responsibility Report (2013), Message from CEO:

‘We at Northrop Grumman are committed to be a top-performing company for our customers, shareholders, and employees. It is our objective to sustain top performance over the long term. To achieve that objective, we believe that our company must operate on a

foundation of strong values that includes:

• A steadfast commitment to ethics, integrity, and compliance

• Effective corporate governance and leadership

• A diverse and highly engaged workforce operating in a safe and inclusive environment

• Dedication to quality and customer satisfaction

• Effective partnership with suppliers and other business partners

• Conducting our operations in an environmentally sustainable manner

• Effective corporate citizenship programs to advance education, support military service members and their families, and partner with the community leaders and groups where our employees live and work.’

http://crreport.northropgrumman.com/public/pdfs/2013CorporateResponsibilityReport.pdf

Values, Ethics, and Business Conduct for Northrop Grumman Business Associates:

‘We are committed to delivering the best possible performance while upholding the strong ethical standards that are the hallmark of Northrop Grumman. Wes Bush, Chairman, Chief



Executive Officer and President, Northrop Grumman Corporation.’

http://www.northropgrumman.com/CorporateResponsibility/Ethics/Documents/pdfs/NOC_BusAssoc_VisionValuesBehaviors.pdf

2013 Annual Report, p.1:

‘We are proud to have achieved strong 2013 results while demonstrating the highest levels of ethics and integrity.’

http://www.northropgrumman.com/AboutUs/AnnualReports/Documents/pdfs/2013_noc_ar.pdf






A2:

Does the company’s Chief Executive Officer or the Chair of the Board demonstrate a strong personal, external facing commitment to the ethics and anti-corruption agenda of the company?

Score:

2

Comments:

Based on public information, the Chairman, CEO and President is a member of the Defense Industry Initiative (on Business Ethics and Conduct) Steering Committee. Furthermore, the Chairman, CEO and President has demonstrated active external engagement in anti-corruption matters on more than one occasion over the last two years in public speeches.

References:

Public:

Corporate Responsibility Report (2013), p.5:

‘The Chairman, CEO and President participated in a CEO panel at the 2013 Defense Industry Initiative Best Practices Forum, where he discussed the importance of ethics and integrity to an audience of 400+ ethics professionals from the defense industry (2013 Corporate Responsibility Report, page 5).’

http://www.northropgrumman.com/CorporateResponsibility/Documents/pdfs/2013-noc-cr-report.pdf).

The Chairman, CEO and President has talked about the importance of ethics in multiple different avenues, including:

John Hopkins Carey Business School Graduation – May 2013 Chairman, CEO and President spoke from 22:45 – 36:30, his main ethics message was from 27:00 – 28:00)

http://www.youtube.com/watch?v=EJSDRPpEQ6M

Kansas State University address to the Engineering students (March 2013)

http://www.northropgrumman.com/MediaResources/Presentations/2013/Pages/111413WesBushAt2013TIAACREFHigherEducationLeadershipConference.aspx

http://www.northropgrumman.com/CorporateResponsibility/Documents/pdfs/2013-noc-cr-report.pdf

http://www.northropgrumman.com/CorporateResponsibility/Documents/pdfs/2013-noc-cr-report.pdf

http://www.youtube.com/watch?v=EJSDRPpEQ6M




NCMA International Congress (July 2014)

http://www.northropgrumman.com/MediaResources/Presentations/2014/Pages/07282014WesBushAtNCMAInternationalCongress2014.aspx

Defence Industry Initiative (DII) Steering Committee:

http://www.dii.org/dii-steering-committee



http://www.dii.org/dii-steering-committee


A3:

Does the company’s Chief Executive Officer demonstrate a strong personal, internal-facing commitment to the ethics and anti-corruption agenda of the company, actively promoting the ethics and anti-corruption agenda at all levels of the company structure?

Score:

1

Comments:

Based on public information, there is some evidence that the Chairman, CEO and President has demonstrated an internal-facing commitment to the ethics and integrity agenda of the company over the last two years. TI notes that in 2013 the Chairman, CEO and President sent out messages to employees highlighting the company’s 2013 theme, “Ethics: The Foundation of Performance.” The company therefore scores 1.

References:

Public:

Video Message from Wes Bush, Northrop Grumman Chief Executive Officer and President, 2010:

‘As we drive for top performance, we must also uphold the strong ethical behavior that is the foundation of our company. Superior results must be achieved with absolute integrity. This is not an ‘either-or’ proposition. A flawless reputation for integrity requires the awareness and involvement of every one of us. We must never forget that a single misstep can destroy years of effort, and even the perception of an ethical lapse can be as damaging as the real thing. Remember to promptly raise any ethical issues or concerns you have with your manager, the law department, your ethics and business conduct officer, or anonymously through the company’s toll-free, 24/7 OpenLine number. Please join me in helping to ensure top performance and integrity at Northrop Grumman.’

http://www.northropgrumman.com/CorporateResponsibility/Ethics/PublishingImages/pageImages/WBEthics0310.wmv


‘During 2013, Northrop Grumman employees received ongoing ethics communications from managers and company leaders, including messages from Chairman, CEO and President Wes Bush highlighting our 2013 theme, “Ethics: The Foundation of Performance.”’







A4:

Does the company publish a statement of values or principles representing high standards of business conduct, including honesty, trust, transparency, openness, integrity and accountability?

Score:

2

Comments:

Based on public information, there is evidence that the company demonstrates its commitment to high standards of business conduct through the publication of ‘Our Vision, Values and Behaviors’. This document emphasises the importance of trust (Vision), honesty, accountability, openness, and equitability (Values), and transparency, integrity and openness (Behaviours). The company’s values are well publicised and explained, and have been translated into policies and codes.

References:

Public:

Northrop Grumman website, Corporate Responsibility, ‘Our Vision, Values and Behaviors’: ‘Our Vision: Our vision is to be the most trusted provider of systems and technologies that ensure the security and freedom of our nation and its allies... Our Values… We act with INTEGRITY in all we do… We are each personally accountable for the highest standards of behavior, including honesty and fairness in all aspects of our work... Our suppliers deserve fair and equitable treatment, clear agreements and honest feedback on performance... Our Five Key Behaviors. 1. Live the Company Values: We all have the company values listed on the back of our badges—Quality, Customer Satisfaction, Leadership, Integrity, People, Suppliers. Integrity must characterize everything we do. We want everyone who comes in contact with us to know that we do things the right way at Northrop Grumman. We don't take short cuts. 2. Focus on Operating Excellence… 3. Act With Speed… 4. Communicate Openly.... We need to be mindful of the importance of honestly communicating problems as well as breakthroughs... 5. Collaborate Across the Company…’

http://www.northropgrumman.com/CorporateResponsibility/Ethics/Pages/OurVisionValuesAndBehaviors.aspx

Corporate Responsibility Report (2013), Our Values:

‘We act with INTEGRITY in all we do. We are each personally accountable for the highest




standards of behavior, including honesty and fairness in all aspects of our work.’


Our Vision, Values and Behaviours:

http://www.northropgrumman.com/CorporateResponsibility/Ethics/Documents/pdfs/NOC_Vision_Values_Behaviors.pdf





A5:

Does the company belong to one or more national or international initiatives that promote anti-corruption or business ethics with a significant focus on anti-corruption?

Score:

2

Comments:

Based on public information, the company is a member of the Defense Industry Initiative (DII) and International Forum on Business Ethical Conduct (IFBEC). The company also subscribes to the IFBEC Global Principles of Business ethics for the Aerospace and Defense Industry, which are based on the Common Industry Standards for European Aerospace and Defence.

References:

Public:

Defense Industry Initiative (DII):

http://www.dii.org/groups/northrop-grumman-corporation

International Forum on Business Ethical Conduct (IFBEC):

http://ifbec.info/our-members/

Global Principles of Business Ethics for the Aerospace and Defense Industry, October 2009 (IFBEC):

‘These Global Principles are based on best practices including the Common Industry Standards for European Aerospace and Defence and the Defense Industry Initiative on Ethics and Business Conduct in the US.’

http://www.northropgrumman.com/CorporateResponsibility/Ethics/Documents/international/europe/Global_Ethics_Principles.pdf

http://www.dii.org/groups/northrop-grumman-corporation

http://ifbec.info/our-members/




A6:

Has the company appointed a Board committee or individual Board member with overall corporate responsibility for its ethics and anti-corruption agenda?

Score:

2

Comments:

Based on public information, there is evidence that the company’s Policy Committee has overall corporate responsibility for its ethics and anti-corruption agenda.

References:

Public:

Northrop Grumman website, Corporate Governance:

‘Policy Committee Charter

Purpose

The purpose of the Policy Committee (the “Committee”) of the Board of Directors (the “Board”) of Northrop Grumman Corporation (the “Company”) is to: (1) assist the Board in identifying and evaluating global security, political, budgetary and other issues and trends that could impact the Company’s business activities and performance; (2) review, monitor and provide oversight over the Company’s policies and programs for ethics and corporate responsibility;’

‘Duties, Responsibilities and Authority

… 2. Review, monitor and provide recommendations regarding the Company’s ethics and corporate responsibility programs and policies, including its Standards of Business Conduct;’

http://investor.northropgrumman.com/phoenix.zhtml?c=112386&p=irol-govCommittee&Committee=308




A7:

Has the company appointed a person at a senior level within the company to have responsibility for implementing the company’s ethics and anti-corruption agenda, and who has a direct reporting line to the Board?

Score:

2

Comments:

Based on public information, there is evidence that the Vice President of Global Corporate Responsibility is responsible for implementing the company’s ethics and anti-corruption agenda. This individual is identifiable by name: Sandra Evers-Manly.

References:

Public:


‘Reporting Structure

The ethics office, led by the vice president of global corporate responsibility, reports quarterly to the Audit Committee of the Board of Directors and annually to the Policy Committee of the Board of Directors. To ensure the appropriate “tone from the top,” the corporate responsibility reporting chain includes the highest level of management of our company:

CHIEF EXECUTIVE OFFICER

VICE PRESIDENT OF GLOBAL CORPORATE RESPONSIBILITY

CORPORATE DIRECTOR OF ETHICS AND BUSINESS CONDUCT

SECTOR DIRECTORS OF ETHICS AND BUSINESS CONDUCT

BUSINESS CONDUCT OFFICERS

(approximately 125 full- and part-time employees positioned throughout the company’


Northrop Grumman website, Corporate Responsibility, OpenLine Process:

‘The Corporate Ethics and Business Conduct Office, with reporting requirements to the Compliance, Public Issues and Policy Committee of the Board of Directors, is responsible for the Northrop Grumman ethics program. The program is administered in each sector by a lead Business Conduct Officer (BCO) working with a Sector Ethics Committee and local



BCOs.’

http://www.northropgrumman.com/CorporateResponsibility/Ethics/Pages/Openline.aspx

Northrop Grumman website, Corporate Commitment:

‘Message from our Vice President Corporate Responsibility…Sandra Evers-Manly…’

http://www.northropgrumman.com/CorporateResponsibility/Diversity/Pages/CorporateCommitment.aspx



A8:

Is there regular Board level monitoring and review of the performance of the company’s ethics and anti-corruption agenda?

Score:

2

Comments:

Based on public information, there is evidence that the wider ethics agenda is reviewed on a regular basis. The ethics office reports quarterly to the Audit Committee of the Board and annually to the Policy Committee of the Board. The Board reviews the Principles of Corporate Governance at least annually to determine whether they should be modified in response to changed circumstances or legal or other requirements, or otherwise to be made more effective.

References:

Public:


‘At Northrop Grumman, we regularly evaluate the breadth and strength of our internal anti-corruption program using external experts. We assess our program and performance against standards and benchmarks set by the U.S. government in Foreign Corrupt Practices Act (FCPA) settlement actions, the U.S. Federal Sentencing Commission, the Organization for Economic Cooperation and Development and the U.K. Ministry of Justice. These standards cover a wide variety of governance matters including internal policies and procedures, business risk assessment, business courtesies, due diligence of third parties and partners, training and communication, monitoring, enforcement and continual process improvement… Abiding by the applicable anti-corruption laws of the countries in which we operate, and adhering to internal policies and procedures, is only the beginning. We continue to work to ensure a culture of ethical behavior that further reduces the risk of corrupt behaviour.’


Corporate Responsibility Report, 2013, p.6:

‘The ethics office, led by the vice president of global corporate responsibility, reports quarterly to the Audit Committee of the Board of Directors and annually to the Policy



Committee of the Board of Directors. To ensure the appropriate “tone from the top,” the corporate responsibility reporting chain includes the highest level of management of our company:’

‘The Board of Directors has adopted Principles of Corporate Governance that align with and reinforce our values and strong commitment to ethics and integrity. Our commitment ensures that integrity is at the center of all our actions, from our Board of Directors and company leaders to each employee on the line.’

(p.8): ‘The Board periodically reviews the Principles of Corporate Governance to determine whether they should be modified in response to changed circumstances or legal or other requirements. Over the years, the Board has modified these principles and will continue to do so as appropriate to advance the interests of the company’s shareholders.’




A8(a):

Is there a formal, clear, written plan in place on which the review of the ethics and anti-corruption agenda by the Board or senior management is based, and evidence of improvement plans being implemented when issues are identified?

Score:

0

Comments:

Based on public information, there is no readily available evidence of a formal, written plan on which the review of the ethics and anti-corruption agenda is based or examples of improvement plans that have been implemented when issues have been identified. TI does note that the Board reviews the ‘Principles of Corporate Governance’, which guides the company’s values and commitment to ethics and integrity, at least annually to determine whether changes should be made.

References:

Public:

TI notes:


‘The Board of Directors has adopted Principles of Corporate Governance that align with and reinforce our values and strong commitment to ethics and integrity. Our commitment ensures that integrity is at the center of all our actions, from our Board of Directors and company leaders to each employee on the line.’

‘The Board periodically reviews the Principles of Corporate Governance to determine whether they should be modified in response to changed circumstances or legal or other requirements. Over the years, the Board has modified these principles and will continue to do so as appropriate to advance the interests of the company’s shareholders.’




A9:

Does the company have a formal process for review and where appropriate update its policies and practices in response to actual or alleged instances of corruption?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company has a formal process for review and where appropriate updates its policies and practices in response to actual or alleged instances of corruption.

References:

Public:

NA


A9(a):

Does the company have a formal anti-corruption risk assessment procedure implemented enterprise-wide?

Score:

1

Comments:

Based on public information, there is some evidence of a company risk analysis process, as identified in the 2013 Corporate Responsibility Report. However, there is limited detail provided about this process and no mention of mitigation planning related to the anti-corruption risk assessment. The company therefore scores 1.

References:

Public:


‘We conduct various risk assessments throughout the year related to our ethics and compliance programs.’

(p.7): ‘At Northrop Grumman, we regularly evaluate the breadth and strength of our internal anti-corruption program. We assess our program and performance against standards and benchmarks set by the U.S. government in Foreign Corrupt Practices Act (FCPA) settlement actions, the U.S. Federal Sentencing Commission, the Organization for Economic Cooperation and Development, and the U.K. Ministry of Justice, among others.

Our company standards cover a wide variety of governance matters including internal policies and procedures; business risk assessments; business courtesy restrictions; due diligence of subcontractors, suppliers, and partners; training and communication; international controls enforcement, and continual process improvement.

A Step Above

Abiding by the applicable anti-corruption laws of the countries in which we operate, and adhering to internal policies and procedures, is only a starting point. We continue to work to promote a culture of ethical behavior that further reduces the risk of corrupt behavior’





‘The supply chain could be vulnerable in times of budget reductions with a potential impact on small businesses. Being sensitive to the financial stresses of small businesses in the current economic environment, in 2013 we continued to monitor the financial risk of those most vulnerable to catastrophic financial impact and to consider an array of mitigation measures. To address concerns and potential vulnerabilities, we are vigilant in our compliance to corporate procedures governing Northrop Grumman supplier risk identification, management, and mitigation. We are monitoring the approximately 9,500 firms that serve as Northrop Grumman suppliers to understand the health of our supply base. As part of our corporate risk analysis process, we maintain a supplier watch list addressing supplier financial health risk. We seek to manage supplier performance with a robust improvement process and risk mitigation exchange with suppliers.

Increasingly, past performance by a supplier is an important element in sourcing decisions with added consideration given to outstanding performing suppliers. We systematically monitor critical supplier risk with particular focus on the risks associated from single-source, small, and foreign businesses that may be more vulnerable to program performance deficiencies.

Our Northrop Grumman Corporate “counterfeit material prevention” policy prescribes preventive measures, training, communication, counterfeit alert management, and procedures for comprehensive material assurance. Our Enterprise Material Authenticity team, chartered by our Corporate Quality Council and comprising members from quality, engineering, supply chain, contracts, and the law department, takes the lead on counterfeit parts protection efforts. This level of focus strengthens practices across the company to mitigate risk.’




A10:

Does the company have a formal anti-corruption risk assessment procedure for assessing proposed business decisions, with clear requirements on the circumstances under which such a procedure should be applied?

Score:

1

Comments:

Based on public information, there is some evidence of a formal anti-corruption risk assessment procedure for assessing proposed business decisions. However, it is unclear how the procedure should be applied or to precisely which business decisions it applies. The company therefore scores 1.

References:

Public:


‘The supply chain could be vulnerable in times of budget reductions with a potential impact on small businesses. Being sensitive to the financial stresses of small businesses in the current economic environment, in 2013 we continued to monitor the financial risk of those most vulnerable to catastrophic financial impact and to consider an array of mitigation measures. To address concerns and potential vulnerabilities, we are vigilant in our compliance to corporate procedures governing Northrop Grumman supplier risk identification, management, and mitigation. We are monitoring the approximately 9,500 firms that serve as Northrop Grumman suppliers to understand the health of our supply base. As part of our corporate risk analysis process, we maintain a supplier watch list addressing supplier financial health risk. We seek to manage supplier performance with a robust improvement process and risk mitigation exchange with suppliers.

Increasingly, past performance by a supplier is an important element in sourcing decisions with added consideration given to outstanding performing suppliers. We systematically monitor critical supplier risk with particular focus on the risks associated from single-source, small, and foreign businesses that may be more vulnerable to program performance deficiencies.

Our Northrop Grumman Corporate “counterfeit material prevention” policy prescribes preventive measures, training, communication, counterfeit alert management, and procedures for comprehensive material assurance. Our Enterprise Material Authenticity


team, chartered by our Corporate Quality Council and comprising members from quality, engineering, supply chain, contracts, and the law department, takes the lead on counterfeit parts protection efforts. This level of focus strengthens practices across the company to mitigate risk ‘.



‘At Northrop Grumman, we regularly evaluate the breadth and strength of our internal anti-corruption program. We assess our program and performance against standards and benchmarks set by the U.S. government in Foreign Corrupt Practices Act (FCPA) settlement actions, the U.S. Federal Sentencing Commission, the Organization for Economic Cooperation and Development, and the U.K. Ministry of Justice, among others.

Our company standards cover a wide variety of governance matters including internal policies and procedures; business risk assessments; business courtesy restrictions; due diligence of subcontractors, suppliers, and partners; training and communication; international controls enforcement, and continual process improvement.

A Step Above

Abiding by the applicable anti-corruption laws of the countries in which we operate, and adhering to internal policies and procedures, is only a starting point. We continue to work to promote a culture of ethical behavior that further reduces the risk of corrupt behavior’





A11:

Does the company conduct due diligence that minimises corruption risk when selecting or reappointing its agents?

Score:

1

Comments:

Based on public information, there is evidence that the company conducts due diligence that minimises corruption risk when selecting agents. However, TI found no readily available evidence that this is refreshed at least every 3 years or when there is a significant change in the business relationship. The company therefore scores 1.

References:

Public:


‘At Northrop Grumman, we regularly evaluate the breadth and strength of our internal anti-corruption program. We assess our program and performance against standards and benchmarks set by the U.S. government in Foreign Corrupt Practices Act (FCPA) settlement actions, the U.S. Federal Sentencing Commission, the Organization for Economic Cooperation and Development, and the U.K. Ministry of Justice, among others.

Our company standards cover a wide variety of governance matters including internal policies and procedures; business risk assessments; business courtesy restrictions; due diligence of subcontractors, suppliers, and partners; training and communication; international controls enforcement, and continual process improvement.’

‘We maintain a robust compliance program that includes an internal system of reviews and approvals governing the retention of third parties that support the company’s business operations.’


Company Website –Capabilities – Seeking Global Services:

‘Northrop Grumman conforms to high standards of fairness and honesty in international business, such as are defined in US and UK law under the US Foreign Corrupt Practices Act and the UK Anti-Bribery Act. To ensure that our prospective local business partners also have high standards, Northrop Grumman performs a “due diligence” review of candidate



partners.’

http://www.northropgrumman.com/Capabilities/SeekingGlobalServices/Pages/default.aspx


A12:

Does the company have contractual rights and processes for the behaviour, monitoring, control, and audit of agents with respect to countering corruption?

Score:

1

Comments:

Based on public information, there is evidence that all employees, consultants, agents, contract labour, employees of limited liability companies, joint ventures, and anyone who represents the company in any capacity are required to adhere to the Values and Standards of Business Conduct, as well as U.S. and foreign laws and regulations. The wording of these policies is strict but TI has found no readily available evidence relating to contractual rights and formal processes to prevent or deal with violations. The company therefore scores 1.

References:

Public:


‘Every Northrop Grumman supplier receives an annual letter outlining our ethics policies and code of conduct. Additionally, our employees with procurement authority are required to annually complete additional specialized ethics training and complete the C-196 Disclosure of Conflicts of Interest Certificate of Standards of Business Conduct certifying to their compliance and disclosing possible conflicts of interest.’



‘Northrop Grumman considers adherence to our company Values and Standards of Business Conduct, as well as strict observance of all U.S. and foreign laws and regulations, to be not only a legal requirement but an ethical obligation for all. Everyone associated with Northrop Grumman is expected to make this commitment his/her own. This includes non-employees, such as consultants, agents, contract labor, employees of limited liability companies, joint ventures, and anyone who represents the company in any capacity – regardless of their position. Individuals are responsible for the integrity and consequences of any actions that are taken on behalf of Northrop Grumman.’



‘Anyone acting on the company’s behalf is strictly prohibited from circumventing the company’s system of internal controls or providing misleading information on company documents. International Consultants, agents, or others representing the company abroad or working on international business in the United States should be aware that our company’s Values and Standards of Conduct apply to them anywhere in the world.’





A13:

Does the company make clear to contractors, sub-contractors, and suppliers, through policy and contractual terms, its stance on bribery and corruption and the consequences of breaches to this stance?

Score:

2

Comments:

Based on public information, there is evidence that the company communicates its ethics and anti-corruption agenda down the supply chain. Anyone who represents the company in any capacity must adhere to the company’s Values and Standards of Business Conduct, as well as all U.S. and foreign laws and regulations. This document also makes clear the consequences of a contractor, sub-contractor or supplier breaching the company’s ethics standards.

References:

Public:


‘Collaborating with suppliers on better environmental and social performance is an important element of our responsibility efforts. A key starting point is the “One Northrop Grumman” charter we instill throughout the company and the procurement organization. The goal: to establish a single, consistent operational focus with the supplier base and customers. Our On-line Automated Supplier Information System (OASIS) supplier portal is one means of providing this focus… Every Northrop Grumman supplier receives an annual letter outlining our ethics policies and code of conduct.’


Values, Ethics, and Business Conduct for Northrop Grumman Business Associates (2008):

‘Responsibility and Consequences:

Our company standards apply to anyone who represents or is affiliated with Northrop Grumman. Violating rules relating to our relationships with the U.S. Government or to our commercial customers may result in serious consequences up to and including termination of one’s relationship with the company.’

http://www.northropgrumman.com/CorporateResponsibility/ Ethics/Documents/pdfs/values_ethics_v3b.pdf


http://www.northropgrumman.com/CorporateResponsibility/Ethics/Documents/pdfs/values_ethics_v3b.pdf

http://www.northropgrumman.com/CorporateResponsibility/Ethics/Documents/pdfs/values_ethics_v3b.pdf


A13(a):

Does the company explicitly address the corruption risks associated with offset contracting?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company explicitly addresses the corruption risks associated with offset contracting.

References:

Public:

TI notes:

The New York Times website: A Well-Kept Military Secret

‘''It's an essential part of doing business overseas,'' said Kent Kresa, chief executive of Northrop Grumman. ''I'm not negative on it.''’

http://www.nytimes.com/2003/02/16/business/a-well-kept-military-secret.html

GOCA website: Regular Member Directory

‘Northrop Grumman Corporation’.

http://www.globaloffset.org/regularmembers.php

http://www.nytimes.com/2003/02/16/business/a-well-kept-military-secret.html

http://www.globaloffset.org/regularmembers.php


A13(b):

Does the company conduct due diligence that minimises corruption risk when selecting its offset partners and offset brokers?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company conducts due diligence that minimises corruption risk when selecting its offset partners and offset brokers.

References:

Public:

See references for A13a.


A15:

Does the company have an anti-corruption policy that prohibits corruption in its various forms?

Score:

2

Comments:

Based on public information, there is evidence that the company has an anti-corruption policy that prohibits corruption in its various forms. TI notes that the company prohibits the “offering or making of any improper payments of money or anything of value to any of our business associates” for anyone conducting business on behalf of the company. Facilitation payments are prohibited and it is a requirement that all employees complete an annual conflict of interest disclosure form. The company website states a commitment to “comply with anti-corruption laws in every country in which we operate” as well as a “zero tolerance for corruption”. Guidance on the Foreign Corrupt Practices Act provides a number of examples to help individuals to identify corrupt behaviour.

References:

Public:


‘We prohibit anyone conducting business on behalf of Northrop Grumman, including directors, officers, employees, consultants, representatives, distributors, suppliers and other third parties, from offering or making any improper payments of money or anything of value to any of our business associates including government officials, political parties, party officials, candidates for public office and commercial suppliers and customers… We prohibit facilitating payments (those made to expedite or secure performance of a routine governmental action such as obtaining a visa or customs clearance), except in cases where there is an imminent threat to an individual’s life, health or safety. We remind our employees to avoid situations that would result in, or give the appearance of, a conflict between personal interests and the interests of the company. Employees are required to complete an annual conflict of interest disclosure form to ensure job performance is not improperly influenced by outside factors.’


Northrop Grumman website, 2013 Corporate Responsibility Report, p.7:



‘We are fully committed to complying with anti-corruption laws in every country in which we operate. We maintain a zero tolerance for corruption. We have long been committed to responsible corporate citizenship. At Northrop Grumman, we regularly evaluate the breadth and strength of our internal anti-corruption program using external experts. We assess our program and performance against standards and benchmarks set by the U.S. government in Foreign Corrupt Practices Act (FCPA) settlement actions, the U.S. Federal Sentencing Commission, the Organization for Economic Cooperation and Development and the U.K. Ministry of Justice.’


Northrop Grumman website, Global Principles of Business Ethics for the Aerospace and Defense Industry, October 2009 (IFBEC):

‘Zero Tolerance to Corruption

• Companies will comply fully with all anti-bribery laws applicable to the conduct of their business, such as the U.S. Foreign Corrupt Practices Act (“FCPA”) and those laws enacted pursuant to International Conventions (including, but not limited to, the 1997 OECD Convention and the 2003 United Nations Convention Against Corruption (“UNCAC”)).

• Companies will not offer, promise, or provide any undue pecuniary or other advantage (e.g. payments, gifts, hospitality, as well as political contributions or charitable donations), to public officials, political parties or political candidates, or to any private party, in order to obtain or retain business or gain any other improper advantage in the conduct of their business (hereafter "Improper Advantage"). Companies shall duly account for payments, gifts, hospitality, political contributions or charitable donations in their books and records in compliance with applicable regulations and in a manner which permits reasonable traceability.

• Companies will establish and enforce policies and internal control procedures that prohibit the company and their employees, directors and officers from offering, promising or providing - directly or indirectly - any Improper Advantage, and will conduct training on such policies and procedures.

• Companies will make their business partners, which term is defined to mean Advisors, majority-owned joint venture entities, subcontractors and suppliers, aware of the integrity policies of the company, and require them to refrain from offering, promising or providing (directly or indirectly) any Improper Advantage.

• Many countries and companies prohibit facilitation payments. In recognition that such payments undermine the integrity of industry, even where such payments are not prohibited by law, companies will seek to eliminate facilitation payments.’


Foreign Corrupt Practices Act, Test yourself:

http://www.northropgrumman.com/CorporateResponsibility/Ethics/Documents/international/europe/FCPA.pdf







A16:

Is the anti-corruption policy explicitly one of zero tolerance?

Score:

2

Comments:

Based on public information, there is evidence that the company has a zero tolerance policy towards corruption. The company also subscribes to the Global Principles of Business Ethics for the Aerospace and Defense Industry, which includes zero tolerance to corruption amongst its principles.

References:

Public:


‘We are fully committed to complying with anti-corruption laws in every country in which we operate. We maintain a zero tolerance for corruption. We have long been committed to responsible corporate citizenship.’




A17:

Is the company's anti-corruption policy easily accessible to Board members, employees, contracted staff and any other organisations acting with or on behalf of the company?

Score:

2

Comments:

Based on public information, there is evidence that the company’s ethics and anti-corruption policies are easily accessible. The materials are publicly available in a variety of foreign languages on the company website. Employees also receive regular ethics communications and suppliers receive resources, including the ‘One Northrop Grumman Charter’ and an annual letter outlining the company’s ethics policies and code of conduct.

References:

Public:

Northrop Grumman website, Corporate Responsibility, International Materials (Belgium, China, the Netherlands, England, France, Germany, Italy, Japan, Malaysia, Norway, Spain, and Taiwan):

http://www.northropgrumman.com/CorporateResponsibility/Ethics/Pages/International.aspx


‘Suppliers

A key starting point is the “One Northrop Grumman” charter we instil throughout the company and the procurement organization. The goal: to establish a single, consistent operational focus with the supplier base and customers. Our On-line Automated Supplier Information System (OASIS) supplier portal is one means of providing this focus... Every Northrop Grumman supplier receives an annual letter outlining our ethics policies and code of conduct.’

‘During 2013, Northrop Grumman employees received ongoing ethics communications from managers and company leaders, including

messages from Chairman, CEO and President Wes Bush highlighting our 2013 theme, “Ethics: The Foundation of Performance”.’







A17(a):

Is the company’s anti-corruption policy easily understandable and clear to Board members, employees and third parties?

Score:

2

Comments:

Based on public information, there is evidence that the company’s ethics and anti-corruption policies are written in accessible and comprehensible language.

References:

Public:

Corporate Responsibility Report (2013):


Standards of Business Conduct:

http://www.northropgrumman.com/CorporateResponsibility/Ethics/Documents/pdfs/noc_standards_conduct.pdf



2013 Annual Report:













A18:

Does the anti-corruption policy explicitly apply to all employees and

members of the Board?

Score:

2

Comments:

Based on public information, there is evidence that the company’s ethics policies, which include policies on corruption and bribery, vision, values, and behaviour, explicitly apply to all employees and members of the Board.

References:

Public:


‘All Board members are expected to act with integrity and to maintain high ethical standards at all times. The company’s Standards of Business Conduct apply to all directors.’



‘Northrop Grumman considers adherence to our company Values and Standards of Business Conduct, as well as strict observance of all U.S. and foreign laws and regulations, to be not only a legal requirement but an ethical obligation for all. Everyone associated with Northrop Grumman is expected to make this commitment his/her own. This includes non-employees, such as consultants, agents, contract labor, employees of limited liability companies, joint ventures, and anyone who represents the company in any capacity – regardless of their position. Individuals are responsible for the integrity and consequences of any actions that are taken on behalf of Northrop Grumman… International Consultants, agents, or others representing the company abroad or working on international business in the United States should be aware that our company’s Values and Standards of Conduct apply to them anywhere in the world.’





A20:

Does the company have a policy on potential conflicts of interest, and does it apply to both employees and board members?

Score:

2

Comments:

Based on public information, there is evidence that all employees are required to disclose potential conflicts of interests on an annual basis. The designated disclosure form and associated conflict of interest notice provide clarification on potential conflicts of interest and confirm that these policies apply to board members as well as employees. Guidance for business associates indicates that any individual associated with the company is required to disclose potential conflicts of interest and obtain management approval.

References:

Public:


‘our employees with procurement authority are required to annually complete additional specialized ethics training and complete the C-196 Disclosure of Conflicts of Interest Certificate of Standards of Business Conduct certifying to their compliance and disclosing possible conflicts of interest.’



‘Conflict of Interest:

Any situation that could impair objectivity, impartiality or ability to make good business decisions in the best interest of Northrop Grumman is a conflict of interest… Any individual associated with Northrop Grumman who serves in any capacity in a company, organization or government agency that competes with Northrop Grumman is required to disclose such information and obtain management approval.’


Conflict of Interest Notice:





http://www.northropgrumman.com/CorporateResponsibility/Ethics/Documents/international/europe/COINotice.doc

Conflict of Interest C196 form:

http://www.northropgrumman.com/CorporateResponsibility/Ethics/Documents/international/c-196europe.doc






A21:

Does the company have a policy for the giving and receipt of gifts to ensure that such transactions are bona fide and not a subterfuge for bribery?

Score:

1

Comments:

Based on public information, there is evidence that the company has a policy for the giving and receipt of gifts. TI notes that the giving or receipt of gifts, entertainment, services or favours to actual or potential government representatives is prohibited. Anyone conducting business on behalf of the company is prohibited from offering or making improper payments of “anything of value” to business associates. All individuals associated with the company are prohibited from soliciting or accepting gifts, payments or gratuities from suppliers. Exceptions must be approved in writing by a “company officer”. Further, the Standards of Business Conduct indicates that business courtesies offered to commercial customers must “demonstrate good business judgement and be reasonable (for example not frequent or lavish)”. However, TI has found no readily available evidence of clear upper limits for gift exchange, audit procedures or authorisation processes. The company therefore scores 1.

References:

Public:


‘As a general rule, business courtesies such as gifts, entertainment, services or favors should not be offered to any actual or potential government customer or representative. Similar restrictions apply to non-government personnel in connection with government contracts or subcontracts… No one associated with Northrop Grumman or members of his/her immediate family may solicit or accept gifts, payments or gratuities from our suppliers. Exceptions to this policy must be approved in writing by a company officer.’



‘We prohibit anyone conducting business on behalf of Northrop Grumman, including directors, officers, employees, consultants, representatives, distributors, suppliers and other




third parties, from offering or making any improper payments of money or anything of value to any of our business associates including government officials, political parties, party officials, candidates for public office and commercial suppliers and customers’



‘Companies will not offer, promise, or provide any undue pecuniary or other advantage (e.g. payments, gifts, hospitality, as well as political contributions or charitable donations), to public officials, political parties or political candidates, or to any private party, in order to obtain or retain business or gain any other improper advantage in the conduct of their business (hereafter "Improper Advantage"). Companies shall duly account for payments, gifts, hospitality, political contributions or charitable donations in their books and records in compliance with applicable regulations and in a manner which permits reasonable traceability.’


Standards of Business Conduct, pp.5-6:

‘As a general rule, business courtesies, such as gifts, entertainment, services or favors should not be offered to any actual or potential government customer or representative… offering, providing, soliciting or accepting anything of value to or from anyone in return for favourable consideration on a government contract or subcontract is called a kickback and is a crime. Finally, business courtesies offered to commercial, non-government customers must demonstrate good business judgement and be reasonable (for example not frequent or lavish), legal and offered in a manner that could not hurt Northrop Grumman’s reputation for impartiality and fair dealing… Northrop Grumman employees and members of their immediate families may not solicit or accept gifts, payment or gratuities from our suppliers. (Promotional items of nominal value may be accepted.)’

http://www.northropgrumman.com/CorporateResponsibility/Ethics/Documents/international/europe/standardsenglish.pdf







A22:

Does the company’s anti-corruption policy include a statement on the giving and receipt of hospitality that ensures that such transactions are bona fide and not a subterfuge for bribery?

Score:

1

Comments:

Based on public information, there is evidence that the company has a policy for the giving and receipt of hospitality. TI notes that the company prohibits the giving or receiving of services or favours to actual or potential government representatives. Anyone conducting business on behalf of the company is prohibited from offering or making improper payments of “anything of value” to business associates. All individuals associated with the company are prohibited from soliciting or accepting gifts or gratuities from suppliers. Exceptions must be approved in writing by a “company officer”. Further, the Standards of Business Conduct indicates that business courtesies offered to commercial customers must “demonstrate good business judgement and be reasonable (for example not frequent or lavish)”. However, TI has found no readily available evidence of clear upper limits for gift exchange, audit procedures or authorisation processes. The company therefore scores 1.

References:

Public:


‘As a general rule, business courtesies such as gifts, entertainment, services or favors should not be offered to any actual or potential government customer or representative. Similar restrictions apply to non-government personnel in connection with government contracts or subcontracts… No one associated with Northrop Grumman or members of his/her immediate family may solicit or accept gifts, payments or gratuities from our suppliers. Exceptions to this policy must be approved in writing by a company officer.’



‘We prohibit anyone conducting business on behalf of Northrop Grumman, including




directors, officers, employees, consultants, representatives, distributors, suppliers and other third parties, from offering or making any improper payments of money or anything of value to any of our business associates including government officials, political parties, party officials, candidates for public office and commercial suppliers and customers’





Standards of Business Conduct, pp.5-6:

‘As a general rule, business courtesies, such as gifts, entertainment, services or favors should not be offered to any actual or potential government customer or representative… offering, providing, soliciting or accepting anything of value to or from anyone in return for favourable consideration on a government contract or subcontract is called a kickback and is a crime. Finally, business courtesies offered to commercial, non-government customers must demonstrate good business judgement and be reasonable (for example not frequent or lavish), legal and offered in a manner that could not hurt Northrop Grumman’s reputation for impartiality and fair dealing… Northrop Grumman employees and members of their immediate families may not solicit or accept gifts, payment or gratuities from our suppliers. (Promotional items of nominal value may be accepted.)’








A23:

Does the company have a policy that explicitly prohibits facilitation payments?

Score:

2

Comments:

Based on public information, there is a clear policy that explicitly prohibits facilitation payments except in cases where there is an imminent threat to an individual’s life, health or safety. Supplementary information is provided in ‘Foreign Practices Act, Test yourself’.

References:

Public:


‘We prohibit facilitating payments (those made to expedite or secure performance of a routine governmental action such as obtaining a visa or customs clearance), except in cases where there is an imminent threat to an individual’s life, health or safety.’



‘Many countries and companies prohibit facilitation payments. In recognition that such payments undermine the integrity of industry, even where such payments are not prohibited by law, companies will seek to eliminate facilitation payments.’



‘Facilitation payments are small expediting or “grease” payments made to foreign government officials to facilitate or expedite the performance of a routine, non-discretionary governmental action that a Government foreign official is already obligated to perform… Northrop Grumman highly discourages facilitation payments and employees must avoid them to the maximum extent possible. No facilitation payment may be made by





anyone in the company without prior written approval from the Law department, except in cases involving the health and safety of the employee. Even in cases involving health and safety, employees are required to notify their BCO and Law department as soon as practical afterwards. For more information, consult Corporate Procedure No. A312.’





A24:

Does the company prohibit political contributions, or regulate such contributions in order to prevent undue influence or other corrupt intent? Does the company record and publicly disclose all political contributions?

Score:

2

Comments:

Based on public information, there is evidence that the company regulates political contributions. The company engages in a number of political processes, including providing corporate political contributions to two national gubernatorial associations, and supporting public policy issues in-line with the company's objectives. These processes are transparent and accountable. The Policy Committee of the Board provides oversight of government relations strategy and activities. Management of participation in the political process is the responsibility of the Corporate Vice President of Government Relations who reports directly to the CEO. The company publishes annual spending reports for its political action committee, corporate contributions and trade association memberships on its website. Direct political contributions to candidates or their political action committees are prohibited.

References:

Public:


“Companies will not offer, promise, or provide any undue pecuniary or other advantage (e.g. payments, gifts, hospitality, as well as political contributions or charitable donations), to public officials, political parties or political candidates, or to any private party, in order to obtain or retain business or gain any other improper advantage in the conduct of their business (hereafter "Improper Advantage"). Companies shall duly account for payments, gifts, hospitality, political contributions or charitable donations in their books and records in compliance with applicable regulations and in a manner which permits reasonable traceability.





Northrop Grumman website, Investor Relations, Political Contributions:

‘Northrop Grumman Corporation… is engaged in the democratic process to support leaders and participate in the political environment at the federal and state level. All of the company's activities are in keeping with our principles of good governance and the highest standard of ethics. The company engages in the following activities: educates elected officials on key public policy issues related to its business, administers a political action committee that enables our employees to support candidates for office, provides limited direct corporate political contributions to national-level gubernatorial associations and is a member of several trade associations which support its business objectives. The company engages on public policy issues in support of the company's objectives, including in the areas of national defense and aerospace, STEM (science, technology, engineering and mathematics), tax and international trade policy. The company's policy with respect to independent expenditures that advocate the election or defeat of federal candidates is provided below.

Governance and Reporting

The Policy Committee of the Northrop Grumman Board of Directors provides oversight of the company's government relations strategy and the manner in which the company conducts its government relations activities, including the governance and compliance of the political action committee, the company's policies and practices with respect to political contributions, and the company's lobbying activities. The Policy Committee receives regular reports on government relations activities. Management of the company's participation in the political process is the responsibility of the Corporate Vice President of Government Relations and this position reports directly to the CEO. Northrop Grumman publishes annual spending reports for its political action committee, corporate contributions and trade association memberships on its corporate website.

Employee Political Action Committee

Employees of Northrop Grumman Corporation meeting certain FEC eligibility requirements can voluntarily join the company's political action committee, Employees of Northrop Grumman Political Action Committee ("ENGPAC" or "the PAC"). In addition to supporting the federal election campaigns of congressional candidates, ENGPAC supports national political organizations and leadership Political Action Committees. Participation in ENGPAC offers our employees the opportunity to pool their resources to support candidates for office who are supportive of national security. ENGPAC contributions are made on a bi-cameral and bipartisan basis. PAC membership is both voluntary and disclosed inside the corporation only to those involved in PAC administration.

ENGPAC’s federal contributions to candidates and political organizations (PDF)

There are two levels of governance for the company's political action committee. The Steering Committee, comprised of Corporate Vice Presidents, reviews ENGPAC activity and votes to make changes to ENGPAC policies and procedures. The Advisory Committee, comprised of representatives from each sector, meets every other month to provide


support for ENGPAC activities within the sectors. The PAC is administered by the corporation's Government Relations department. All PAC expenditures and contributions are made following an internal review process in our corporate Government Relations office. To ensure compliance with all applicable election laws and regulations, robust internal controls are in place and an external firm acts as a final review before any contribution is made using ENGPAC funds.

Direct Political Contributions

At the state and local level, the Company has concluded that as a matter of policy, it will not make any direct contributions to candidates or their political action committees. The Company makes contributions to national-level gubernatorial associations to help ensure that its perspective is represented on matters of state and local policy. In 2013, Northrop Grumman contributed to two organizations that are classified under the Internal Revenue Code as section 527 organizations, giving $20,000 to the National Governors Association and $25,000 to the Democratic Governors Association.

Policy Regarding Independent Expenditures that Advocate the Election or Defeat of Federal Candidates

The U.S. Supreme Court determined in 2010 that corporations may make unlimited expenditures for independent communications to the general public that expressly advocate the election or defeat of a clearly identified federal candidate.

Northrop Grumman has no plans to spend corporate funds directly on such communications.

Should a future situation warrant Northrop Grumman's participation in independent expenditures that expressly advocate the election or defeat of a clearly identified federal candidate, the decision would require approval of the Policy Committee of the Northrop Grumman Board of Directors; would have to be consistent with the interests of Northrop Grumman’s shareowners; and would have to conform to applicable laws.

Northrop Grumman would be transparent with its disclosure of these expenditures, as it is with other political expenditures. This includes making all legally required filings, including with the Federal Election Commission, as well as disclosing various expenditures on our external website. Such independent expenditures would receive the same scrutiny as all of Northrop Grumman's other corporate political expenditures, which includes an annual update with the Policy Committee of the Board of Directors.’

http://www.northropgrumman.com/InvestorRelations/PoliticalContributions/Pages/default.aspx




A25:

Does the company have a clear policy on engagement in lobbying activities, in order to prevent undue influence or other corrupt intent, and discloses the issues on which the company lobbies?

Score:

2

Comments:

Based on public information, the company actively engages in lobbying activities and these activities are regulated by the Policy Committee of the Board. Details of the company’s lobbying activities are publicly available through the Lobbying Disclosure Act Report online.

References:

Public:

Northrop Grumman website, Investor Relations, Political Contributions:

‘Northrop Grumman Corporation… is engaged in the democratic process to support leaders and participate in the political environment at the federal and state level. All of the company's activities are in keeping with our principles of good governance and the highest standard of ethics. The company engages in the following activities: educates elected officials on key public policy issues related to its business, administers a political action committee that enables our employees to support candidates for office, provides limited direct corporate political contributions to national-level gubernatorial associations and is a member of several trade associations which support its business objectives. The company engages on public policy issues in support of the company's objectives, including in the areas of national defense and aerospace, STEM (science, technology, engineering and mathematics), tax and international trade policy. The company's policy with respect to independent expenditures that advocate the election or defeat of federal candidates is provided below.

Governance and Reporting

The Policy Committee of the Northrop Grumman Board of Directors provides oversight of the company's government relations strategy and the manner in which the company conducts its government relations activities, including the governance and compliance of the political action committee, the company's policies and practices with respect to political contributions, and the company's lobbying activities. The Policy Committee receives regular reports on government relations activities. Management of the company's participation in


the political process is the responsibility of the Corporate Vice President of Government Relations and this position reports directly to the CEO. Northrop Grumman publishes annual spending reports for its political action committee, corporate contributions and trade association memberships on its corporate website.’


Lobbying Disclosure Act Database:

http://soprweb.senate.gov/index.cfm?event=selectfields



http://soprweb.senate.gov/index.cfm?event=selectfields


A25(a):

Does the company prohibit charitable contributions, or regulate such contributions in order to prevent undue influence or other corrupt intent?

Score:

2

Comments:

Based on public information, there is evidence that the company makes charitable contributions through the ‘Contributions Program’. The company also discloses detailed information about charitable contributions in its 2013 Corporate Responsibility Report.

References:

Public:

Northrop Grumman website, Corporate Contributions Guidelines:

‘Through the Contributions Program, the Company seeks to address critical issues and needs by providing financial assistance to accredited schools and 501(c)(3) nonprofit organizations… The company focuses a substantial portion of its contributions on programs which address education, services for veterans and the military, health and human services, as well as the environment. As a rule, we do not provide grants to: religious organizations; political groups; fraternal organizations; individuals; athletic groups or activities, including charity-benefit sporting events; charter schools*; bands or choirs; capital campaigns; organizations providing services primarily to animals; communities outside of the United States, organizations whose programs discriminate based on race/ethnicity, color, national origin, ancestry, sex/gender, gender identity/expression, sexual orientation, marital/parental status, pregnancy/childbirth or related conditions, religion, creed, age, disability, genetic information, military service/veteran status, disabled veteran, recently separated veteran, other protected veteran, Armed Forces service medal veteran, or any other characteristic protected by law. Requests for funding are generally reviewed twice annually.’

http://www.northropgrumman.com/CorporateResponsibility/CorporateCitizenship/Philanthropy/Pages/ContributionGuidelines.aspx

Corporate Responsibility Report (2013), ‘Our Community Investment’, pp.31-36:












A26:

Does the company provide written guidance to help Board members and

employees understand and implement the firm’s ethics and anti-corruption

agenda?

Score:

2

Comments:

Based on public information, there is evidence that the company provides written guidance to clarify and elaborate on its ethics and anti-corruption policies. These documents are publicly available in a number of foreign languages and they include illustrative scenarios and examples.

References:

Public:

Foreign Corrupt Practices Act, Test Yourself:

‘This pamphlet is designed to familiarize you with the FCPA and the company’s related policies and procedures. Any questions regarding the FCPA or the information in this pamphlet should be directed to your business conduct officer (BCO) or to the Law department.’


Ethics, take the high road. Living the Northrop Grumman Values:

http://www.northropgrumman.com/CorporateResponsibility/Ethics/Documents/international/europe/wtc.pdf






A27:

Does the company have a training programme that explicitly covers anti-corruption?

Score:

2

Comments:

Based on public information, there is evidence that the company provides training on its ethics and compliance programme. Corruption is explicitly identified as a key component of this training.

References:

Public:

Corporate Responsibility Report (2013), p. 5:

‘We also stay apprised of regulatory changes and leading-edge ethical considerations, and deploy focused and timely training to our employees on critical ethics and compliance obligations. We continually reinforce our belief that ethics and integrity are integral to all we do.

Key Elements of Our Ethics and Compliance Program Include:

• Ongoing training and communication

• Comprehensive compliance policies and procedures

• Business conduct officers

• OpenLine

• Strong enforcement of our policy against retaliation.

2013 Major Goals

GOAL

Maintain an effective and well-functioning ethics program.

PERFORMANCE

We conducted an internal review of our ethics program during 2013 and confirmed that it was effective and well-fuctioning.

GOAL

Train 100 percent of our employee population on ethics and compliance topics.

PERFORMANCE


Globally, more than 99 percent of Northrop Grumman employees completed our 2013 ethics and compliance training. We conduct various risk assessments throughout the year related to our ethics and compliance programs, which helps us provide our employees with compliance training tailored to the risks of their respective roles. Our compliance training

spans a wide range of substantive areas.

In 2013, our employees received ethics and compliance training through in-person sessions, computer-based tutorials, and printed material. Training in 2013 included programs targeted to employee job responsibilities in the following critical areas:

• Global Trade Compliance

• Information Security

• Insider Trading

• Protecting Personal Information

• Preventing Workplace Violence

• Social Media

Employees also received “The High Road,” a company-wide ethics newsletter featuring articles about the Northrop Grumman OpenLine, business courtesies, secondary employment, retaliation, and human trafficking. The newsletter also reports and highlights

our OpenLine statistics and aspects of corrective actions to provide transparency to our employees.’

(p.6): ‘We encourage our employees to participate in a variety of on-site and online awareness activities and contests to ensure ethical values are an integral part of our everyday behaviour and culture… We organize workshops for both our U.S. and international business conduct officers. These workshops include sharing best practices, program updates, compliance and skill training and networking. We hold a monthly webinar series to ensure our business conduct officers are knowledgeable on key topics such as quality, business courtesies, root cause analysis of ethics and compliance issues, and anti-corruption.’




A28:

Is anti-corruption training provided in all countries where the company operates or has company sites?

Score:

2

Comments:

Based on public information, there is evidence that ethics and compliance training is provided globally to Northrop Grumman employees. The 2013 Corporate Responsibility Report notes that “more than 99%” of the company’s global workforce was trained in 2013.

References:

Public:







• OpenLine


2013 Major Goals

GOAL


PERFORMANCE

We conducted an internal review of our ethics program during 2013 and confirmed that it was effective and well-functioning.

GOAL


PERFORMANCE







• Insider Trading



• Social Media







A29:

Does the company provide targeted anti-corruption training to members of the Board?

Score:

0

Comments:

Based on public information, there is no readily available evidence that targeted training is provided to Board members, or that training is refreshed regularly.

References:

Public:

TI notes:







• OpenLine


2013 Major Goals

GOAL


PERFORMANCE


GOAL


PERFORMANCE







• Insider Trading



• Social Media







A30:

Does the company provide tailored ethics and anti-corruption training for employees in sensitive positions?

Score:

2

Comments:

Based on public information, there is evidence that training for employees is tailored to their roles, responsibilities and associated risks. Business conduct officers, who are responsible for implementing the company’s ethics and anti-corruption policies, attend annual workshops which include sharing best practices, program updates, compliance and skill training and networking. Furthermore, the company holds monthly webinars to ensure that business conduct officers are knowledgeable on key topics.

References:

Public:







• OpenLine


2013 Major Goals

GOAL


PERFORMANCE


GOAL



PERFORMANCE






• Insider Trading



• Social Media







A31:

Does the company have a clear and formal process by which employees declare conflicts of interest?

Score:

1

Comments:

Based on public information, all employees are required to disclose potential conflicts of interests on an annual basis. The designated disclosure form and associated conflict of interest notice provide clarification on potential conflicts of interest and confirm that these policies apply to board members as well as employees. However, TI notes that the disclosure form is submitted to ‘immediate management’, rather than an independent department. The company therefore scores 1.

References:

Public:


‘our employees with procurement authority are required to annually complete additional specialized ethics training and complete the C-196 Disclosure of Conflicts of Interest Certificate of Standards of Business Conduct certifying to their compliance and disclosing possible conflicts of interest.’


Conflict of Interest Notice:


Conflict of Interest C196 form:








A32: Is the company explicit in its commitment to apply disciplinary procedures to employees, Directors and Board members found to have engaged in corrupt activities?

Score:

2

Comments:

Based on public information, there is evidence that the company explicitly states that it will apply disciplinary procedures to employees, Directors and Board members that violate its ethics and compliance policies.

References:

Public:


‘Penalties for FCPA violations are severe for both companies and the employees involved. A company can be fined up to $2 million per violation. Individuals can be fined up to $100,000 per violation and imprisoned for up to five years per FCPA violation. Violations of the FCPA may also result in loss of export licenses, suspension from doing business with the U.S. government, shareholder lawsuits, and long-term damage to a company’s reputation both in U.S. and overseas. For Northrop Grumman employees, violations of the FCPA will also result in a prompt corporate response up to and including termination of employment.’


Standards of Business Practice, p.13:

‘Employees who violate company standards of conduct, especially those relating to our relationships with the U.S. Government but also those related to commercial customers, will be subject to disciplinary action up to and including termination of employment. Violations may also result in civil or criminal penalties. An employee who witnesses such a violation and fails to report it may be subject to discipline. Also, a supervisor or manager may be subject to discipline to the extent that the violation reflects inadequate supervision or lack of diligence.’








‘All Board members are expected to act with integrity and to maintain high ethical standards at all times. The company’s Standards of Business Conduct apply to all directors.’




A33:

Does the company have multiple, well-publicised channels that are easily accessible and secure, to guarantee confidentiality or anonymity where requested by the employee (e.g. web, phone, in person), to report concerns or instances of suspected corrupt activity?

Score:

2

Comments:

Based on public information, there is evidence that the company provides multiple different channels for reporting suspected corrupt activity, as well as clear and appropriate reporting lines. Internal reporting includes local Business Conduct Officers, legal counsel, and human resources. In addition, employees can file anonymous reports via OpenLine.

References:

Public:

Standards of Business Practice, pp.13-15:

‘Employees are encouraged to raise such issues with their manager first. In the event that is not possible, contact the local Business Conduct Officer, legal counsel, human resources or the Corporate or sector OpenLine. You may make an anonymous report if you desire. In any case, company policy prohibits director indirect retaliation on anyone reporting a violation of the Standards of Business Conduct.’



‘The Northrop Grumman OpenLine offers a confidential way to ask questions, voice concerns, or report a suspected violation of our Standards of Business Conduct. OpenLine — (800) 247-4952. The Northrop Grumman Corporate Office of Ethics and Business Conduct provides a nationwide 800 number for anyone who would like to seek guidance on an ethics or compliance issue or concern or would like to report a violation. That number is (800) 247-4952. It is a toll-free number answered 24 hours a day, 7 days a week by an independent third party. Web reporting is also available at: http://www.northropgrumman.ethicspoint.com. International employees can access the following OpenLines: Europe: 0041 43 300 6805, Taiwan: 00801-10-4175, Japan: 00531-11-




2025 or 0066-33-830278 or 0034-800-900365, China: 10-800-711-1007 or 10-800-110-0935, South Korea: 00308-13-2323.OpenLine callers may identify themselves openly, remain anonymous or request confidentiality. Retaliation against any individual who in good faith reports a concern will not be tolerated. The Corporate Ethics and Business Conduct Office, with reporting requirements to the Compliance, Public Issues and Policy Committee of the Board of Directors, is responsible for the Northrop Grumman ethics program. The program is administered in each sector by a lead Business Conduct Officer (BCO) working with a Sector Ethics Committee and local BCOs.’


Corporate Responsibility Report (2013), p.6

‘Employees and third parties can seek guidance on ethics questions and report suspected violations of laws, regulations, or company policy by contacting, among others, a BCO, emailing or calling the ethics office, submitting a Web report, or calling our toll-free OpenLine. OpenLine is administered by a third-party service provider to permit anonymous, 24/7 reporting. In addition, an online reporting system is available to employees along with OpenLine phone numbers in Europe and Asia.’


Northrop Grumman Web Reporting Site:

‘We currently are not accepting reports from our International employees through the OpenLine system, but we will be operational in the future. In the meantime, please re-direct your concern(s) to your Business Conduct Officer (BCO), your Human Resources Representative, the Law Department or your immediate Supervisor.’

http://www.northropgrumman.ethicspoint.com



http://www.northropgrumman.ethicspoint.com/


A33(a):

Are the whistleblowing channels available to all employees in all geographies?

Score:

2

Comments:

Based on public information, there is evidence that employees from all geographies have access to multiple reporting and whistleblowing channels. Employees can raise concerns with their manager, local Business Conduct Officer, legal counsel, or human resources. In theory, employees can raise concerns via telephone (OpenLine) or online (ethicspoint). TI notes the ethicspoint website currently indicates that the company is not accepting reports from International employees through the OpenLine system.

References:

Public:


‘Employees are encouraged to raise such issues with their manager first. In the event that is not possible, contact the local Business Conduct Officer, legal counsel, human resources or the Corporate or sector OpenLine. You may make an anonymous report if you desire.’



‘OpenLine - (800) 247-4952. The Northrop Grumman Corporate Office of Ethics and Business Conduct provides a nationwide 800 number for anyone who would like to seek guidance on an ethics or compliance issue or concern or would like to report a violation. That number is (800) 247-4952. It is a toll-free number answered 24 hours a day, 7 days a week by an independent third party. Web reporting is also available at: http://www.northropgrumman.ethicspoint.com. International employees can access the following OpenLines: Europe: 0041 43 300 6805, Taiwan: 00801-10-4175, Japan: 00531-11-2025 or 0066-33-830278 or 0034-800-900365, China: 10-800-711-1007 or 10-800-110-0935, South Korea: 00308-13-2323. OpenLine callers may identify themselves openly, remain anonymous or request confidentiality.’











A33(b):

Does the company have formal and comprehensive mechanisms to assure itself that whistleblowing by employees is not deterred, and that whistleblowers are treated supportively?

Score:

2

Comments:

Based on public information, there is evidence of a range of practices to ensure that whistleblowing is supported. In 2012, the company participated in the Defense Industry Benchmark survey, which indicated that fewer employees were observing misconduct and those who did were more likely to report actions. Employees also appeared to have gained confidence in reporting processes and reported less fear of retaliation. Usage of the OpenLine system is monitored and data is published in the internal employee ethics newsletter. Data relating to reports, investigations and outcomes from OpenLine is also published in the Corporate Responsibility Report. However, this data is limited to the OpenLine system and, as previously mentioned, this facility is not available to international employees.

References:

Public:


‘In any case, company policy prohibits director indirect retaliation on anyone reporting a violation of the Standards of Business Conduct.’

(p.15): ‘Retaliation is strictly prohibited against any person who, in good faith, reports a concern. If you feel that you were retaliated against please talk to your manager, Human Resources, your BCO or call the OpenLine.’


Corporate Responsibility Report (2013), Introduction:

‘We had a total of 2,332 OpenLine contacts in 2013, including 1,087 questions on policies and procedures, and 1,245 raising potential compliance and ethics concerns. We took




various disciplinary actions including termination of 60 employees for their ethical and business conduct violations.’

(p.5): ‘Employees also received “The High Road,” a company-wide ethics newsletter featuring articles about the Northrop Grumman OpenLine, business courtesies, secondary employment, retaliation, and human trafficking. The newsletter also reports and highlights


(p.6): ‘The OpenLine system allows us to track calls by total number and type of contacts, by sector, by allegations (with and without merit), and by disciplinary action rendered. Reports and metrics provide trending data to help us target training and communications to employees to strengthen ethics. We publish ongoing results in our “The High Road” newsletter.’




A34:

Does the company have well-publicised resources available to all employees where help and advice can be sought on corruption-related issues?

Score:

2

Comments:

Based on public information, there is evidence that employees have access to resources such as trained Business Conduct Officers, legal counsel, and telephone and online helplines (Openline), to provide them with guidance on anti-corruption policy.

References:

Public:


‘Employees are encouraged to raise such issues with their manager first. In the event that is not possible, contact the local Business Conduct Officer, legal counsel, human resources or the Corporate or sector OpenLine. You may make an anonymous report if you desire.’



‘The Northrop Grumman Corporate Office of Ethics and Business Conduct provides a nationwide 800 number for anyone who would like to seek guidance on an ethics or compliance issue or concern or would like to report a violation... OpenLine callers may identify themselves openly, remain anonymous or request confidentiality. Retaliation against any individual who in good faith reports a concern will not be tolerated. The Corporate Ethics and Business Conduct Office, with reporting requirements to the Compliance, Public Issues and Policy Committee of the Board of Directors, is responsible for the Northrop Grumman ethics program. The program is administered in each sector by a lead Business Conduct Officer (BCO) working with a Sector Ethics Committee and local BCOs.’



‘Employees and third parties can seek guidance on ethics questions and report suspected





violations of laws, regulations, or company policy by contacting, among others, a BCO, emailing or calling the ethics office, submitting a Web report, or calling our toll-free OpenLine. OpenLine is administered by a third-party service provider to permit anonymous, 24/7 reporting. In addition, an online reporting system is available to employees along with OpenLine phone numbers in Europe and Asia.’








A35:

Is there a commitment to non-retaliation for bona fide reporting of corruption?

Score:

1

Comments:

Based on public information, there is evidence of a clear, enforceable, non-retaliation policy for bona fide reporting of corruption. However, the evidence that disciplinary measures are applied to employees who breach this policy is not assessed to be explicit in relation to the non-retaliation commitment. The company therefore scores 1.

References:

Public:


‘Key Elements of Our Ethics and Compliance Program Include:




• OpenLine

• Strong enforcement of our policy against retaliation’



‘In any case, company policy prohibits direct or indirect retaliation on anyone reporting a violation of the Standards of Business Conduct… Employees who violate company standards of conduct, especially those relating to our relationships with the U.S. Government but also those related to commercial customers, will be subject to disciplinary action up to and including termination of employment.’

(p.16): ‘Retaliation is strictly prohibited against any person who, in good faith, reports a concern. If you feel that you were retaliated against please talk to your manager, Human Resources, your BCO or call the OpenLine.’







Information Sources:

Company website:

www.northropgrumman.com

Standards of Business Practice (August 2011):


Values, Ethics, and Business Conduct for Northrop Grumman Business Associates (September 2013):


Annual Report (2013):


Corporate Responsibility Report (2013): http://crreport.northropgrumman.com/public/pdfs/2013CorporateResponsibilityReport.pdf

Corporate Responsibility Report (2012):


http://www.northropgrumman.com/







