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Breakout Session #302

Michael Zazaian,

Contracts Director, Oracle USA, Inc.April 23, 2007

1:40 2:40

The Business of Ethics

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Mark Twains Perspective on

Ethics: February 16, 1901

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What is Ethics?

Merriam-Webster Definition The principles of conduct governing an individual

or a group; a guiding philosophy.

Developing need to better define and regulateethics Laws

Statutes

Codes

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Recent and Continuing Erosion of

Ethical Standards

BUSINESS WorldCom

$11Billion Accounting Fraud

Enron Loss of thousands of jobs $60 Billion in market value

$2 Billion in pension plans

Tyco International

CEO and CFO convicted of Grand Larceny and Fraud,total losses of $550 Million.

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Ex-WorldCom CEO Checks in for

Prison Term

Bernard Ebbers Former WorldCom

CEO

Sentenced to 25years: Securities Fraud

Conspiracy

Filing False

Documents withregulators

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Sarbanes-Oxley Act of 2002:

Key Ethics Legislation

Prompted by Corporate Ethics and AccountingScandals

Amends U.S. Securities and other laws significantly

Section 406 Implemented guidelines and standards

Requires companies to disclose whether they have an ethicscode

Code of ethics should be designed to deter wrongdoing

Accountability for adherence to the code

Promote honest and ethical conduct, including ethicalhandling of actual or apparent conflicts of interest.

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Recent and Continuing Erosion of

Ethics Standards

GOVERNMENT Rep. Randy Duke Cunningham (R-CA)

Collected $2.4M in homes, yachts, bribes, antiques

Sentenced March 3, 2006 to 8 years., 4 months Defense Contractor Mitchell Wade

Plied Cunningham with >$1 Million in Bribes

Made $80 thousand in illegal campaign contributions

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Ethics in Government

Principles of Ethical Conduct for GovernmentOfficers and Employees

Presidential Executive Order 12674, April 1989

Federal Govt. has host of laws andregulations governing: Govt. employees

Contractors

United States Office of Government Ethics Compilation of Federal Ethics laws - 100 Pages of

Statutes

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Executive Order 12674 of April12, 1989 (as modified by E.O.12731)

PRINCIPLES OF ETHICAL CONDUCT FORGOVERNMENT OFFICERS ANDEMPLOYEES By virtue of the authority

vested in me as President by theConstitution and the laws of the UnitedStates of America, and in order toestablish fair and exacting standards ofethical conduct for all executive branchemployees, it is hereby ordered asfollows: Part I Principles of EthicalConduct .

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Government Contractors

Defense Federal Acquisition RegulationSupplement, subpart 203.70: Contractors shouldhave:

1. Written code of ethical conduct2. Ethics training for all employees

3. Periodic reviews of compliance with its ethics code

4. Systems to detect improper conduct

5. Processes to ensure corrective action is taken

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Boeing, USAF Case Study:

A Violation of Ethics Laws

Darleen DruyanSecond most senior U. S.Air Force procurement official

Leveraged negotiations for

a $20 Billion Contract withBoeing for her employmentat Boeing

Sentenced: Nine months inprison, $5,000 fine and 150hours of community service;

illegal conflict of interest.

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United States of America v. Darleen

A. Druyan

Criminal Case No. 04-150-A,Supplemental Statement of Facts: The defendant [Darleen Druyan], since

July 28,2004, now acknowledges that shedid favor the Boeing Company in certainnegotiations as a result of her employmentnegotiations and other favors provided by

Boeing to the defendant.

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Boeing, USAF Case Study:

A Violation of Ethics Laws

Michael Sears, Boeing Aerospace, Chief FinancialOfficer Sentenced to four months in prison

Sears met with Darlene Druyan to discuss

employment opportunity during Contract negotiations Advised Boeing Sr. Officers in email:

Had a non-meeting[with Darlene]

Court Documents state Boeing Sr. Mgt. did notconfront the obvious legal and ethical issuespresented in the employment negotiations.

Congress cancelled the $20 Billion Contract Award

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Elements of an Ethical Organization

Lessons from the Druyan / Boeing scenario:

An ethical organization: Does more than merely avoid illegal practices

Fosters and encourages exemplary conduct

Sunlight is the best disinfectant

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The Milgram Experiment

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The Milgram Experiment

Yale Univ. research from 1961-1962 Psychology experiment investigating memory

and learning

The teacher is instructed to read a list of two-word pairs and ask the learner to read themback

If the answer is incorrect, the teacher issupposed to shock the learner with 15 volts

The learner is an actor Generator labeled to 450 volts

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A Case Study:

Bay of Pigs Case Study

Failed military plan

Publicly acknowledged

President Kennedy took full responsibility

Per Gallup poll, Kennedy's popularity wentup

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Ethics in Business

Code of Ethics and Business Conduct Symbolizes an organizations regard for adherence to a

prescribed code of business ethics

Compliance and Ethics Helpline and Website An avenue to report concerns relating to:

Conflicts of Interest

Unauthorized use of Confidential Information

Violations of Commercial or Government Contracting

Any activities that may violate the Code of Conduct

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Ethics at Acme, Inc.

Code of Ethics and Business Conduct Financial Integrity: Accurate and reliable

financial and business records are of critical

importance in meeting Acmes financial,legal, and business obligations. No falseentries shall be made on the books orrecords for any reason.

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Ethics at Acme, Inc.

Ethics challenges for Contracts Professionals: Requested to sign documents on customers

behalf: We have an email stating that theyll sign the contract,

isnt that sufficient?

Advised to disregard corporate / business policy Prompted to be creativeto expedite contract

completion (implying to bypass approved

processes)

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Ethics Issues to Consider

Not merely common sense Common Sense is not too common, Voltaire

The New York Times Test

Presume that the action and associatedcommunications will be reported on the front pageof the New York Times

Unethical Behavior, Stress Appear Linked

Emotionally healthy executives tend to scorehigher on ethics tests; Wall Street Journal, April1991

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AQ&Q U E S T I O N SQ U E S T I O N SA N S W E R SA N S W E R S