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Sanctions on Raytheon CEO Deemed Fitting

Anyone expecting cries of outrage from ethics experts over how Raytheon’s board of directors responded to the discovery that its CEO, William Swanson, had plagiarized several pithy management rules will just have to be disappointed.

May 26, 2006
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Anyone expecting cries of outrage from ethics experts over how Raytheon’s board of directors responded to the discovery that its CEO, William Swanson, had plagiarized several pithy management rules will just have to be disappointed.

For the most part, academics and ethics consultants applauded the board’s decision to impose financial sanctions against William Swanson rather than force him to step down.

At issue was a revelation made by an engineer that 16 of the 33 rules found in Swanson’s Unwritten Rules of Management—a 76-page booklet that, while not formally published, was distributed to hundreds of thousands of admirers and employees of the Waltham, Massachusetts, defense contractor—had been taken word for word from the 1944 book The Unwritten Rules of Engineering, by California engineering professor W.J. King.

After the appropriation was disclosed by a fan of the original work, Swanson issued an apology April 24, saying it was unintentional. In separate comments at the annual shareholders meeting May 3, Swanson explained that in 2001 he had given his staff notes he compiled over the past several years to create a presentation, which later became the booklet.

At that meeting, Raytheon’s board announced that it decided to freeze Swanson’s salary at the $1.1 million he was paid last year and reduce the amount of restricted stock he was eligible for in the coming year by 20 percent.

Ethics experts say that even though the financial penalty is more symbolic than anything, considering that Swanson’s total compensation amounted to more than $7 million last year, it is an effective and appropriate response.

Given that he took responsibility for his actions, and that he has a reputation of being an "ethical leader" and a strong-performing CEO, the board’s response was entirely appropriate, says Linda Trevino, a professor and director of the Shoemaker Program in business ethics at Pennsylvania State University.

"What he did was a mistake, and that was wrong, but he didn’t profit from it and it wasn’t intentional," says Trevino, who, before the scandal broke, had asked Swanson to be a speaker about ethics because of his reputation in this area. The offer stands and she is waiting to hear back from him.

If Swanson had lied about some piece of core work that Raytheon was doing, that would be a different story, says David Gebler, president of Working Values, an ethics and compliance consultancy in Hawthorne, New York.

"This is not like giving false credentials," he says. "It wasn’t a contract or any type of work project that if it was plagiarized would warrant his dismissal."

But some experts believe that Ray­theon is letting Swanson off easy because he is the CEO.

"If any of Raytheon’s military customers did this when they were in school, they would have been thrown out," says Jeff Sonnenfeld, senior associate dean at the Yale School of Management.

Michael Connor, executive editor of Business Ethics magazine, says the bigger question that the board should be asking is not whether their response was appropriate, but whether they are doing everything they can to make sure that it doesn’t happen again.

"To me, it is more troubling how something like this could happen and then he simply blames his subordinates," he says.

Jessica Marquez

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