Our Performance

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Objective

Foster a workplace environment in which employees speak up when they see workplace ethical misconduct and do not fear retaliation for reporting it.

Ethics Helpline
Reporting observed misconduct is a top priority of our ethics program. We maintain a confidential toll-free ethics helpline accessible to all Lockheed Martin employees and others who need to raise concerns or seek advice. Our helpline accommodates the hearing impaired, and we also offer a confidential e-mail address monitored by our ethics staff. Reported concerns that involve accounting, internal control or audit issues, or allegations of fraud involving management or other employees in significant roles are reported directly to the Audit Committee of our Board of Directors.

Our ethics office received 4,611contacts in 2012 through sources including our helpline, corporate e-mail and our anonymous online reporting tool, Ask Us. Queries and concerns raised in 2012 rose by 8.1 percent over 2011 when normalized for 1,000 employees. The increase (see table at top right) coincides with an increase in employee requests for guidance on ethics matters, which we view as a positive trend.

Our Ethics Officers delivered an efficient investigatory process in 2012, taking an average of 33 days to close cases, an 8.3 percent decrease from 2011.

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New Ethics Officer Training Program
We implemented a comprehensive new training program in 2012 for our Ethics Officers to improve core job skills, such as active listening and specialized investigations, and to achieve consistent implementation of our ethics program company-wide. Internal experts conduct the training using distance learning technology to accommodate employees deployed around the world. The training program consists of 15 courses, and 79 people completed 707 courses during the year. All Ethics Officers also passed a skills and knowledge test.

Mentoring Suppliers
Working with suppliers is an increasing focus of our ethics program. Currently more than 29,000 suppliers have access to our Code of Conduct, our helpline and resources to help them establish and improve their own ethics program. In 2012, we piloted a new supplier mentoring program, matching six suppliers with the ethics office of the relevant Lockheed Martin business area. These suppliers work on a diverse set of programs including the F-35, C-130, PAC-3, Hellfire, MH-60, ACE-IT and Orion programs. In each case, we helped strengthen the supplier’s in-house ethics program. Lessons learned from the pilot are being applied as we extend the program in 2013.

Partnerships
Our ethics program leadership acts as ambassadors of our vision and values through internal engagement and external presentations at industry conferences and universities. In 2012, we participated in more than 200 employee engagement activities and shared the success of our practices with industry partners. One key outreach effort involves the Defense Industry Initiative on Business Ethics and Conduct (DII), an association of U.S. defense companies committed to conducting business affairs at the highest ethical level. Lockheed Martin is leading this organization from 2012 through 2014 with our CEO as the steering committee chair and our Vice President of Ethics & Sustainability as the working group chair. We have strengthened DII’s focus on supply chain engagement.

International Expansion
In 2012, we established a new ethics office in Australia, joining our ethics offices in the United Kingdom (UK) and Canada to create a strong international ethics presence. We also provide leadership to the International Forum on Business Ethical Conduct (IFBEC), which focuses on promoting responsible ethical business behavior around the world. Member organizations agree to follow IFBEC’s global principles on business ethics, which include zero tolerance for corruption.

We also participated in Transparency International UK’s new Defence Company Anti-Corruption Index. Defense companies are ranked on their anticorruption practices, and participating companies received an initial score based on publicly available information and a second score based on both publicly available and nonpublic information. We received a C and an A rating, respectively. Based on feedback from Transparency International, we are looking to further increase our transparency in the public domain.

Board Operations
In recent years, we have amended the Corporate Governance Guidelines to implement formally best governance practices and to enhance the efficient and effective operation of the Board. For example, in 2011, we raised the mandatory retirement age for directors from 72 to 75 in recognition of the contributions that experienced directors, with knowledge of the Corporation, bring to effective board oversight.

Since the beginning of 2012, our Board has amended Lockheed Martin’s by laws to enhance and clarify the authority of our Lead Director to include the power to call a special meeting of the Board at any time, at any place, and for any purpose; to approve all Board committee agendas, as well as the topics and schedules of Board meetings; to approve information sent to the Board; and to call a special meeting of the independent directors.

The Nominating and Corporate Governance Committee of the Board has created a process by which parties may communicate directly and confidentially with the Lead Director or with the non-management directors as a group. An individual or entity wishing to raise a question or concern may do so by contacting: Douglas H. McCorkindale, Lead Director, or non-management directors at Lockheed Martin Corporation 6801 Rockledge Drive, Bethesda, Md., 20817.

For more information about our Board committees, composition and oversight, please see our Proxy Statement and Corporate Governance Guidelines.

Conflict of Interest Controls
In 2012, we introduced a mandatory conflict of interest (COI) certification for all salaried, non-exempt employees, allowing us to more effectively identify and mitigate any potential COI, including those arising from prior government employment, third-party employment and relationships, family and other significant relationships, personal work on particular U.S. government contracts and working with people with organizational COI interest restrictions. One of the scenarios offered in our annual Ethics Awareness Training program addressed personal conflicts of interest in procurement activities.


Where We Are Going

Doing what’s right, respecting others and performing with excellence will continue to drive our efforts to implement governance best practices across our business.

Since we rely on our employees to maintain our high standards we also are evaluating ways to build employees’ awareness of the long-term business benefits that can flow from ethical and sustainable conduct. In addition, we are introducing processes and programs that assess and build capacity for robust ethics programs in our supply chain, as well as support international business development.

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Employees receive thousands of hours of training covering a variety of topics on an annual basis: our culture, integrity, ethical behavior and treating all people fairly and with respect and dignity.


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Transparency International

Transparency International UK awarded Lockheed Martin an “A” in its Defence Companies Anti-Corruption Index based on a combination of public and company-provided information.

Washington Business Journal

Gwendolyn S. King, Lockheed Martin Corporate Director, was honored by the Washington Business Journal with the Outstanding Directors Award for her commitment to the highest standards of corporate business ethics and accountability to stockholders.