Martin Marietta: Managing Corporate Ethics

Part (A)

Synopsis:
Established in September 1985, the ethics program of Martin Marietta which was touted as one of the
best ethics programs in the defense industry had become an integral part of the corporation’s
comprehensive approach to self-governance. Martin Marietta played a crucial role to create the Defense
Industry Initiative on Business Ethics and Conduct (DII) at a time when the defense industry was facing
serious attacks from the government and the public for fraud and mismanagement.

The voluntary disclosure provision of the DII’s requirement was the most controversial because the
government made it clear that voluntary disclosure would not lead to amnesty which made companies
hesitant. However, Martin Marietta took a clear stance on voluntary disclosure by advising employees
that misconducted would be disclosed.

Problem Statement:
The ethics committee of Martin Marietta faced the following two major issues –

1. Employees’ fear of retribution for raising concerns with the corporation’s ethic offices.
2. Assessment of the ethics program’s effectiveness

Fear of retribution would make employees hesitate to raise issues to the ethics committee which will
increase the likelihood of serious misconducts going unnoticed. Several measures were taken to
eliminate it. Employees trainings included specific modules and discussion on retribution. The issue was
also addressed in the company magazine.

The committee was also searching for ways to assess the effectiveness of the ethics program. They
relied on indicators such as compliance with the DII benchmarks, other outside studies, the perception
and comments of government officials, case statistics, employee feedback.

Part(B)

Case Dilemma:
Nick Lanzi, president of one of Martin Marietta’s four main operating companies, came to know about
procurement irregularities in his company after a meeting with Tim reidel, the corporation’s associate
general counsel for compliance. Lanzi had to decide whether the matter should be disclosed to the
Department of Defense Inspector general under DoD’s voluntary disclosure program. The decision was
difficult as Lanzi could not be sure whether his procurement people had just been slopy or whether
there was intentional wrongdoing with criminal motive.
Proposed Solution:
In our group’s opinion, Lanzi should voluntarily disclose the procurement irregularity. This would be in
line with the Martin Marietta Corporate operating instructions on voluntary disclosures and its
philosophy of “there is no substitute for doing what is right”. According to Department of Justice
Guidelines Regarding DoD Voluntary Disclosure Program, a candid and complete disclosure will be a
factor in the prosecutive decision and consideration would be given to the corporation. Normally, a
disclosure of misconduct would not by itself trigger suspension or debarment actions. If the company
were found civilly liable, the government could recover double the damages if the corporation disclosed
compared to treble damages in case of non-disclosure.

SUBMITTED BY - GROUP 8
ABHINAV ANAND (PGP18092)
BIKASH PRAJAPAT(PGP18111)
RACHIT GOVILA(PGP18131)
SUBHAM SEKHAR(PGP18153)
VIVEK KUMAR SINGH(PGP18166)