BUSINESS DILEMMA

THE COMPANY: Aerodyne Corporation

YOUR POSITION: Vice President of Ethics

THE PLACE: Bethesda, Maryland

Aerodyne Corporation is the 4^th largest aircraft manufacturer in the U.S. Nearly 50% of Aerodyne's sales come from government contracts and the remainder from commercial airlines. Over the past 10 years, airline have experienced intense scrutiny as a result of labor problems, bankruptcies, consolidation, and plane crashes. Aerodyne has been the subject of 2 investigations that examined the use of defective parts and lack of quality control in certain aspects of the production process. In addition, Aerodyne has come under scrutiny because of expense padding on government contracts. These incidents probably occurred as a result of the company ignoring the potential impact of ethics training and control systems.

Tracy Reynolds was hired 2 years ago to head an ethics department, with the goal of establishing training systems for the entire company. Tracy's first step was to develop a comprehensive code of ethics, a formal statement of what the company expects in terms of ethical behavior from its employees. Following the development of the code of ethics, employees were provided training on the code's requirements. Additionally, employees were encouraged to report violations without any fear of retribution. A special 24-hour, 800-number, ethics hotline was installed to allow employees to ask anonymous questions about any issue or policy.

Tracy also helped establish system to monitor compliance with federal procurement laws and installed procedures for the voluntary disclosure of violations to the appropriate authorities. Once these systems were in place, training was done on a region-by-region basis, with Tracy and her four assistants conducting three-hour seminars. Part of each seminar involved discussing ethical issues in the industry, situations that have plagued the company in the past, and procedures for avoiding unethical decisions. Many who reviewed the content of the ethics training seminars felt the frank group discussions of issues and dilemmas were perhaps the strongest part of the training. They helped employees recognize ethical issues and gave them outlets through which to obtain additional information to assist them in making ethical decisions.

1.How does the ethical program provide control for Aerodyne?

2.Defend the investment in training and development required by an ethics program.

3.What are the potential benefits of this program?