Reputation Risk – BAE

The Woof report was never going to judge past actions of BAE, the committee always intended to focus on the ethical standards required in doing business globally, where customers in foreign markets sometimes operate under different rules of engagement.

The Woolf report was expected by many to be a whitewash as it explicitly excluded an investigation of past behaviour and was directed to look at current practices and policies. Surprisingly the report was fairly critical of the current culture at BAE and did not exactly give the company a clean bill of health.

While the committee accepted that improvements had been made in some areas, it felt these were not going fast or far enough. The four key recommendations in the report summary are anything but a whitewash –

1. The rate of progress must be accelerated, sustained and embedded within the Company’s culture;
2. Internal and external assurance of higher standards of ethical business conduct is required;
3. This must be demonstrated through greater openness and transparency, internally and externally; and
4. The Company needs to raise its sights above that of becoming a leader in its sector to match the benchmarks set by global companies in other sectors.

The company invited Woolf to look at its ethical behaviour to challenge ‘widely-held perceptions that it was involved in inappropriate behaviour’, however the criticism of the company made by the report committee has done nothing to improve the reputation of BAE and has in fact brought the company back into the media spotlight.

The Woolf report notes in the executive summary that: ‘In the global economy, corporate reputation has become an essential part of an enterprise’s value and the effective management of ethical and reputational risks has become a critical element of corporate governance’. Given the nature of the findings, the Woolf report has not been as kind to BAE as those who commissioned it might have hoped.