Our board of directors and senior leadership team promote — and exemplify — integrity, accountability, transparency and the highest ethical standards. The board’s public policy and corporate responsibility committee reviews environmental stewardship and sustainability, employee health and safety, ethics, charitable contributions and community relations. The committee identifies and brings to the attention of the board current and emerging environmental, social and political trends and public policy issues that may affect Raytheon’s business operations, performance or public image. In 2018, the committee reviewed and reported to the board on a number of issues, including the public policy implications of certain advanced technologies that are likely to shape the future. Importantly, the committee also provides oversight on a comprehensive program that teaches employees about ethical decision-making — and that provides them with accessible resources when they have questions or need advice.
The approach of our board and its committees has continued to evolve in line with the company’s long-term strategy and ever-changing environment. With the support of the public policy and corporate responsibility committee, the company has established a world-class compliance organization and robust compliance programs in key areas that enable us to grow our international business while adhering fully to the laws of the United States and each of the countries where we do business. Raytheon has developed industry-leading export control and anti-corruption compliance programs, employing robust controls and monitoring systems embedded into the company’s operations and innovative training. And the company is leveraging these capabilities to enhance other compliance programs, such as privacy.
Over the last five years, the board has undergone significant refreshment guided by the governance and nominating committee. The committee identified critical attributes, experiences, qualifications and skills essential to furthering Raytheon’s long-term growth strategy with its emphasis on international growth, technological innovation, cybersecurity and the capacity to address emerging customer needs. Central to these efforts has been a recognition of the special value of diversity in providing a broad range of perspectives and insights. Over the last five years, the board has added nine new members who bring many of the attributes and skills identified by the governance and nominating committee, and five directors have departed. Of the nine new directors, five are women and three represent ethnic diversity. At the end of 2018, 36 percent of our directors were women and 50 percent represent ethnic and/or gender diversity.
Raytheon’s commitment to promoting transparency and shareholder access is long-standing. For the last nine years, we have communicated actively with Raytheon shareholders outside of proxy season to solicit their views on governance, executive compensation and topics related to corporate responsibility. Shareholder views solicited during our outreach efforts have contributed significantly to shaping a number of forward-leaning initiatives in these areas.
Based on shareholder input over time, the board has proactively adopted a number of measures that reflect responsiveness to shareholders. Underscoring the performance-driven dimension of the company’s executive compensation program, beginning in 2019, the board’s management development and compensation committee implemented changes to the mix of long-term equity incentive awards to increase the percentage that are performance-based. Beginning in 2018, all equity awards became subject to more stringent “double trigger” conditions that must be satisfied before vesting can be accelerated in the event of a change-in-control of the company. In 2016, the board implemented a proxy access bylaw that establishes a process, subject to certain conditions, by which shareholders may include nominees in the company’s annual meeting proxy materials. Prior to introducing proxy access, the board had already significantly expanded shareholder rights through measures permitting shareholders to initiate a special meeting and act by written consent. The board has also endorsed greater transparency and improved shareholder communications, most notably with the introduction in recent years of an integrated reporting strategy that makes key disclosure materials more inviting, engaging and useful for all stakeholders. The board’s support for enhanced disclosure is also evidenced in our voluntary website reporting of political contribution and lobbying expenditure practices.
ETHICS AND ACCOUNTABILITY
Across Raytheon, transparency means holding each other, and ourselves, accountable. This commitment to ethics begins with our board and senior leadership team and extends to every employee.
We expect full adherence to our code of conduct and give employees the training and resources to understand compliance risks and regulations and to use our protected phone and online channels to speak up when they have a question or notice a problem. In support of the company’s comprehensive diversity and inclusion initiatives, the Ethics program reinforced the importance of our Respect value and focused on workplace harassment prevention in 2018. Ethics produced a video, “Dinner Reservations,” designed for classroom discussion about a sexual harassment situation. The video was based on a case where a bystander employee anonymously notified the Ethics office about harassment concerns using our new online reporting channel. This program was supplemented with online training modules raising workplace harassment awareness and through further messaging about the company’s harassment and retaliation prevention policies.
A series of award-winning videos delivered by email to all employees.
Annual in-person ethics awareness education program that presents employees with actual Raytheon cases and asks them to determine the proper course of action.
An education program to ensure employees are aware of anti-corruption issues, have the tools to identify problems and can respond in ways that protect themselves and the company.
Employees and others may contact the Ethics office at any time and may remain anonymous. They also may consult our code of conduct and our anti-corruption policy for guidance. In 2018, we finished migrating our ethics helpline/hotline to a third-party service provider and also created a new, two-way online reporting channel employees can use to report suspected misconduct anonymously. As a result, Raytheon’s Ethics office has fielded an increased number of contacts. In 2018, nearly 12,000 employees used one of these channels to seek policy advice or express concern about suspected misconduct. According to our 2018 Employee Connect survey, the number of employees who reported misconduct increased by 4.9 percent since the previous survey in 2016. This finding reflects the increased confidence employees feel in speaking up and reporting concerns.
A Culture of Compliance
The highly sensitive work Raytheon does for governments requires strict adherence to a variety of laws and regulations, including the U.S. Foreign Corrupt Practices Act and export/import regulations such as the U.S. Department of State’s International Traffic in Arms Regulations and the Department of Commerce’s Export Administration Regulations.
At Raytheon, compliance is everyone’s responsibility. It’s at the core of our corporate reputation, embedded in the work we do to protect members of the military and critical to our growth strategy.
The Foreign Corrupt Practices Act requires strict internal controls to ensure employees, suppliers, consultants, representatives and agents comply with all applicable laws governing international business practices. This includes vetting of potential business partners and using accounting procedures to prevent concealment of bribery or other unlawful financial transactions.
Raytheon combines these controls with proactive outreach to employees in the form of required educational modules. Employees learn the ethical principles that underpin these guidelines and where to find guidance.
Raytheon shares anti-corruption best practices through its leadership of the International Forum on Business Ethical Conduct. Raytheon and IFBEC are ongoing partners with NATO’s Building Integrity (BI) program. We have helped NATO BI develop its program curriculum, shared our FCPA Aware videos and provided guest faculty speakers.
Raytheon takes seriously its strict responsibility to protect the nation’s most sensitive information.
We have among the largest international footprints of major U.S. defense contractors, with international orders comprising 40 percent of our backlog. This makes full compliance with international export and import control laws an important strategic concern.
Importantly, Raytheon’s long-term success as a leading U.S. defense contractor relies on all 67,000 of our employees to properly manage and protect all export-controlled defense articles and services required to defend and protect the United States’ warfighters and those of its allies. We’ve built a robust corporate ethos that mandates and enforces adherence to all laws and regulations that are necessary to safeguard these critical national resources. As of May 14, 2018, the United States Department of State, Directorate of Defense Trade Controls concluded that Raytheon fulfilled the terms of its April 2013 Consent Agreement. Our board and senior leadership team and all managers remain committed to sustaining our robust compliance program into the future.
Corporate Responsibility Report
This year’s report provides an expansive review of our corporate responsibility content, and highlights our efforts to enrich the lives of people, strengthen our performance, and reduce our footprint on the planet.