(00:00:00) Mr. Augustine join the Martin Marietta Corporation in 1977 and was named chairman and chief executive officer in April of 1988. The formerly served as the undersecretary of the army from 1975 to 77 and prior to that time held key positions in both the armies and the defense Department's research and Engineering world. Mr. Augustine served as chairman of the president's advisory committee on the future of the u.s. Space program for NASA and the National Space Council. He also recently chaired the research and development plan review panel for the Federal Aviation Administration. He's a member of the board of directors of the ethics Resource Center a trustee of Johns Hopkins University, the Board of Governors of the American Red Cross and the board of directors for both Procter Gamble and the Phillips petroleum company. Mr. Augustine is a four-time recipient of the Department of defense's highest civilian award the distinguished service medal. It is now my great personal pleasure to present to you. Mr. Augustine, Norm. (00:01:14) Well, thank you and good afternoon. It's a very great pleasure to for me to be able to participate in the Minnesota meeting and especially to be in your city on this great weekend of the Final Four. As you may know I've been very much involved in the savings bond campaign and want to say a few words about that at the outset savings bonds have truly become the Great American Investment not only in terms of their value and the volume sold some nine billion dollars last year alone their safety, but also in terms of the yield which makes them one of the finest investments in America today. I can say from my own experience having bought savings bonds during World War II and having them help me get through college that they truly can change people's lives and your support of the savings bond campaign is very much appreciated. I'm sure not only by your government, but by the people who will benefit from that saving, I also appreciate the kind introduction. I feel a little bit like my friend David Roderick the former chairman of us steel who was given a very generous introduction once and it was said by the introducer that he was perhaps the most gifted businessman in the country evidenced by the fact that he had made a million dollars in California oil. When Dave went to the podium, he was a bit embarrassed and these facts he said were essentially accurate but it wasn't oil it was cold and it wasn't Pennsylvania or it wasn't California. It was, Pennsylvania. It wasn't a million dollars. It was a hundred thousand dollars. That wasn't healed with his brother. And he didn't make it he lost it. It's been suggested that I speak on the subject of Ethics this afternoon the business of ethics and the ethics of business. I'd like to begin with two stories. Both of which are true. The first has to do with what is going on right now in the universities across the country more than 87 percent of business majors that were recently surveyed admitted to cheating at least once in college and the pole included 15,000 juniors in 31 different universities Donald McCabe a professor at Rutgers University who conducted the survey speculated that business courses attract students looking to make a quick Buck willing to cut Corners to do it. Those who never attended business school have no reason to be smug students in my own profession of engineering ranked second in the cheating league with 74% Next came science students 67% Even those least likely to cheat the humanities Majors came in at 63 percent and one wonders if that might not in Part B because of the format of humanities examinations, which lend themselves less well to cheating perhaps The second story that I'd like to share with you took place more than 30 years ago and 1959 when Ted Williams was 40 years old and was closing out his career with the Boston Red Sox. He was suffering from a pinched nerve in his neck That season. The thing was so bad. He later explained that I could hardly turn my head to look at the pitcher for the first time in Ted Williams career. He batted under 300. He hit just to 54 and 10 home runs. He was at the time the highest salaried player in sports making a hundred and twenty-five thousand dollars a year. The following year the Red Sox sent him the same contract that he had had during his disappointing season. When he received the proposal Williams Senate back with a note saying that he would not sign it until they gave him a fair pay including the full cut allowed. He said I was always treated fairly by the Red Sox when it came to contracts. Now. They were offering me a contract I didn't deserve and I only wanted what I deserve and the upshot was that Williams cut his own salary by 25% by the way the next year he had a great season. There was a time when ethics and personal standards were simple to explain. When a young schoolgirl who had been assigned a term paper on the subject. Went to her father for help on the meaning of Ethics her father who had happened owned a dry cleaning establishment told her that he had settled an ethical question that very day. He said he'd found a hundred dollars in the pocket of a sport coat that someone had brought to be clean and pressed at his establishment. Now. He explained ethics is do I tell my partner We all remember that Dodge nice Lantern and hand-rolled ancient Greece looking for an honest man today, if he roomed roamed New York City, he might well be looking for a policeman to report that his Lantern had been stolen a news clipping tells of a bookstore and Washington DC or shoes me a bookstore in Boston Calling its affiliate in Washington DC in search of the book some honest men inquiring whether or not they had some honest men in Washington. The clerk was taken aback then answered. Perhaps two or three at the most. I commend to you a recent novel by John Grisham called The Firm. It's been a best-seller the book describes how young 25 year old attorneys fresh out of law school are recruited by a fictional Memphis law firm into what appears to be a dream job a base salary of $80,000 plus such incidentals is a BMW and frequent trips to the Caymans. The only drawback drawback for the rookie lawyers is that they lose their souls? They're gradually and inextricably trapped in a crossing the ethical line aligned which they discover is incredibly difficult to walk back across in the other direction. And just as in the Watergate and Iran-Contra scandals, these were people with no record of wrongdoing who would seldom set out deliberately with the intent of breaking the law. They're drawn into it almost as a boa constrictor consumes its prey. I labored in the past under the impression that the boa constrictor drops out of a tree onto its victims and quickly crushes them in the powerful folds of its body a quick look at the encyclopedia revealed to me instead that the snake places two or three coils of its body around the chest of its prey then each time the victim exhales its breath the boa simply takes up the slack after 3 or 4 breast. There's no more slack the prey quickly suffocates and dies then swallowed by the boa. This deadly phenomenon of a victim being the unwitting accomplice to its own destruction is not confined to the world of reptiles. It's also around in the business world the world of Politics the world of Athletics the world of research on almost any other world one might think of the bowl we have to face and sometimes fail to face is to follow our ethical values because each laps is just another coil of the snake. In the world of politics, we have the Keating five in which US senators on both sides of the political aisle were accused of ethical violations of their office in the world of Athletics. We find that Pete Rose was involved in gambling that Rosie Ruiz took a shortcut on the subway when she ran in the Boston Marathon. The numerous professional Olympic and Olympic athletes of taking steroids to boost their performance in the academic world. We find distinguished University professors falsifying their research to win new grants and fleeting prestige. In the world of religious broadcasting we have Jim and Tammy Bakker and Jimmy Swaggart. In the world of hotel management, we have Leona Helmsley casually dismissed her tax violation charges with a statement that only little people pay taxes. And my own industry we have ill wind a government investigation of wrongdoing that is put several formerly very senior government officials in jail, one of whom had been my friend. On Wall Street, we have Ivan boesky who spoke at UCLA business school six years ago and told the students greed is a good thing. He ended up spending three years in federal prison, where greed turned out not to be so good as thing. In the movie Wall Street, Gordon. Gekko says that greed is good greed is all right greed works and in the Broadway play serious money the American arbitrageur Marylou Baines says Rita's. All right greed is healthy. You can be greedy and still feel good about yourself as is often the case art imitates life. But if we reach the point in the words of the Washington Post or common decency can no longer be described as common You go into the book stores and you see bestsellers with such titles is looking out for number one winning through intimidation and the book that came out this past January cheating 101 the benefits and fundamentals of earning the easy a recently. I saw on the Today Show a manufacturer of sports trading cards to adjust introduced a new line of trading material a set featuring famous serial murderers. I can't really say if ethical lapses or collapses as the case may be are worse now than they were in the past at our firm Martin Marietta. We keep track of the number of phone calls to our Ethics Hotline. When the number goes down our board of directors always ask me if we've lost interest in ethics when the number goes up the board asked me if we're less ethical. On the other hand the considerable public discussion about ethics could imply that more people are concerned about doing the right thing and that's what ethics is all about. It's been said that if Rascals knew the value of honesty, they would be honest because of their rascality. Potter Stewart, the former US Supreme Court, Justice defines ethics is knowing the difference between what you have a right to do and the right thing to do. There are people who believe that if it's legal its ethical Justice Stewart obviously doesn't agree with that. Neither. Do I you have a legal right to burn the flag. I don't think that's the right thing to do racial discrimination was legal at one time, but it clearly was wrong all these in business hostile takeovers or legal. I happen to think they're the wrong thing to do others have stated it less elegantly, but perhaps equally insightfully. Ethics is being unafraid to give your pet parrot to the town gossip. At the University of Virginia, I'm told that when a violation of the ethics code occurs at a small announcement surrounded by a black border is placed in the student newspaper simply stating that a student unnamed has left the University. In sharp contrast at ancient Olympia in Greece where the original Olympic Games took place the athletes entrance to the remains of the Arena. The athletes entrance is lined with statues not statues to those who participated in great victories but statues of those who have cheated. to this day one gets an empty feeling in your stomach when you see that even after 27 centuries have gone by Pro football teams Labor All Season to get into the playoffs and to get the home field advantage. Assuming this is what it was all about. I was quite surprised just prior to this year's playoffs to see in the Washington Post editor letter to the editor challenging the Redskins coach who I view to be a highly ethical man. For being unethical in encouraging the crowd to make noise in the upcoming playoff game so that it would be difficult for the opposition to hear their signals. They've probably never occurred the 55,000 people in the stands that what they were doing might be considered by anyone to be unethical was it? People sometimes adjust their ethical values to meet the pressures of the moment. I'm reminded of one of my favorite cartoon characters Charlie Brown. Charlie was doing some bow and arrow shooting one day. He pulled a string back as far as he could. He'd let the arrow fly into the fence. That was nearby then he'd run over the fence with a piece of chalk and he draw Target around the arrows. And as you might guess it wasn't long before Lucy showed up. She saw what he was doing and immediately became hysterical. That's not the way you're supposed to have target practice. She shouted you're supposed to draw the Target and then shoot at it. But unrepentant Charlie Brown dismissed the matter of marking. I know that Lucy, but if you do it my way you never miss at the same time. We must find it ethics has to do with hitting the target the hard way. We have to recognize the Enigma that ethical values aren't absolute that they hopefully our absolute for any given individual but they vary from country to Country time to time country's spy on other countries. We apparently think there's nothing wrong with that. But because it's regarded as acceptable behavior for countries to spy on other countries doesn't imply that it's acceptable for anyone else whether it's spying for your neighbor on your neighbor or industrial espionage. There is I think a great irony that we hold our governments to a lesser standard than individuals in this regard. Those who do spy on others, of course do so at their own risk and sometimes punishment is Swift. This is painstakingly true of government spies who may be revered in their own country, but despised in other lands. On a lesser scale Frank bait Brady in his biography of Aristotle Onassis tells the story about the Greek shipping magnate who Brady says once installed luxurious private bathroom, and it's adjoining his office, but the door was a one-way mirror so he could observe unsuspecting visitors from the privacy of his bathroom. During a business meeting one afternoon. It seemed it on Asus is excused himself and entered the bathroom comfortably comfortably enthroned. He was horrified to see his own reflection back him in in the mirror and the door. It turned out that the workmen making repairs had earlier in the day. They had replaced the mirror the wrong way around reflecting badly. Not only upon their workmanship, but also upon an Asus is ethical standards. Similarly, I once read a of a man who wants a broad on a mountain climbing Expedition and the very first night in Camp. He put a sweater outside to dry upon Awakening in the morning to his Chagrin is sweater was gone and he assumed it had been stolen until he noticed one of the local mountain Porter's in his party proudly wearing the sweater. The punk complaining to the Head guide. The climber was told that it was a presumption of the mountain people the whenever you left something behind it was presumed that had been discarded and thereby became the property of whomever took possession of it. It could be your sweater your knapsack or even your shoes. In some countries the practice of presenting gifts to smooth the conduct of business is perfectly legal ethical even encouraged by custom in our country. They're often called bribes at least in the case of our government. Not only the ethical standards differ from country to Country. They may also vary over the dimension of time the great Daniel Webster the leading American political figure in the 19th century was what we would Now call on the take From Nicholas Biddle and biddle's Second Bank of the United States Webster while he was holding public office once wrote to be able to complain. I quote. My retainer is not been renewed or refreshed as usual what was perfectly acceptable in the last century is of course not acceptable in this one. On the other hand this century. It's ethical for British members of parliament to serve on the boards of British Industries, but in our country is not only unethical it's illegal. Foreign governments often give extravagant gifts to us diplomats diplomats, but in our country it's illegal for the diplomats to keep them. I can think of no commitment more important to a corporation or fundamental to assert its survival than its commitment to ethics. We in our company like any company like to win a lot we like to win new business, but even more intensely, we like to compete fairly and ethically for the business we do win and that means not only conducting our business matters according to our ethical standards. But also within the letter of the law sometimes the ethical choices we Face are easy such was the case some time ago when we were in a competition for a major contract the day before we were to submit our proposal we received in the mail a copy of our competitors price sheet. It presumably came to us from a disgruntled employee. We opened the package not knowing what was inside of it was realizing what we had. The package was promptly handed over to our attorneys who informed the government and gave the package back to our competitors. We did not change our bid prize. Incidentally, we lost the competition and some of our employees lost their jobs because of lack of work. And that brings me to another facet of business ethics and perhaps ethics in general and that would be that I wish I could say that ethical Behavior always pays off. I believe that in the short-term doesn't necessarily but in the long term it absolutely always does. Let me give you an example from my own life of an ethical dilemma some time ago. My wife and I had dinner one weekend with a business associate who happened to be one of our companies suppliers at the end of the dinner is a thoughtful gesture. He presented gifts to my wife and me attractive watches that have been made by his Corporation. The following Monday on my way to work as I went out the door. I asked my wife for her watch explaining that since it came from a supplier. Our company's rules required that I turned both gifts into the company, which would then turn them over to charity. But my wife liked her watch. She said it was a gift to her not to the company that she didn't work for the company. I did and furthermore that our friend would be genuinely offended if he knew that the company had taken away from her what was intended purely and most assuredly is a thoughtful gift to her. Therefore she said that I could do whatever I wanted with my watch, but she was keeping her. what to do After a long and undoubtedly expensive conversation with our general counsel. He suggested I write a check to the corporation for the value of the watch that the corporation would then turn the check over to charity. So together the attorney and I looked up in a catalog we had found watches and we found one that looked pretty much like the one that my wife had been given. The price was $120. So I wrote a check for a hundred twenty dollars to the corporation which in turn gave the money to charity. A few weeks later when I happen to run across our legal counsel. He said he had bad news. He said he'd seen exactly the same watch which had been given to my wife and a jewelry store. I owed another 1500 dollars. I had the worst of all worlds. I was now out $1,620 to buy my wife a watch. My wife was mad at me for trying to take her gift away. And to this day she thinks of that watch as a gift for my associate rather than from me. My wife is one of the most ethical people I know. It's not easy. Let me give you a hard example of an ethical decision. When I was managing Martin Marietta astronautics company our space launch vehicle contract with your Force included a clause that provided that the company would be rewarded with several million dollars every time we successfully launched the spacecraft. One day a representative in our insurance department called to my attention that we could ensure our launches at that time for a very low premium. In other words. The Air Force would give us the incentive compensation. We exceeded if we succeeded an insurance company would give it to us if we fail the best of all worlds. Now I should point out that I'm absolutely certain that nobody in our company. No one would try one iota harder for successful space launches because there was a bonus for Success nor do I believe that anyone for a moment would do less than their best if the launch were insured against failure, but still we seem to have an ethical question before us clearly undermine the idea of an incentive intended by our customer if we merely went out and ensure the incentive but the same time our lawyers were quick to remind me that we also have a fiduciary responsibility to our shareholders to conduct our business on their behalf in a prudent fashion and wasn't it sound business practice to buy insurance. If you could buy insurance that would essentially guarantee most of the reward to our shareholders. How would you decide frankly I struggled with that one. I eventually called a responsible Air Force General explain the dilemma and noted that I wasn't seeking guidance. I was merely seeking some advice. I did tell him that if the Air Force was indifferent to our buying the insurance we intended to do so on the other hand. I said if the Air Force felt that the existence of that insurance would undermine their intent. I would certainly way that in my decision after having thought about the matter for a couple of days. He called me back to say that he felt that anything that would weaken the intended purpose the incentive would in fact undermine the government's purpose. So I eventually decided against purchasing the insurance to cover the future launch failures that might occur certain one could argue whether or not that was the proper resolution of the matter, but it seemed equitable. Let me offer a couple of other scenarios which I often used to illustrate the point to my colleagues in the Aerospace industry. It's fairly common in our business that when you're in competition to build a new airplane, you take out an ad in the newspaper is to illustrate your product but the pictures always an artist concept and never reveals the airplane quite as it really is particularly in the important aspects now suppose your competitors make a mistake and they published the real design and their news in the newspaper and you learned that that indeed was the case. Is it ethical to do some reverse engineering of their illustration from the newspaper and use our mistake to your advantage? Most people I've asked that say that that would be ethical. But what if we change the situation just slightly supposing you're at the airport and you find the competitors design laying on the top of the wastebasket where it perhaps had been accidentally thrown is it ethical to dig it out of the garbage and use it to your advantage? We're told at some newspaper reporters go through discarded refuse to get leads for stories told the government investigators. Is it ethical for one profession? Say the newspaper profession to follow a fairly common practice and the same time unhackable unethical for the engineering profession to do the same thing. Now supposing you're on an airplane and two of your competitors Engineers are seated in the seat in front of you and her casually discussing their design and rather loud voices. Is it acceptable for you to hear them? Or supposing you're on the same airplane and by chance or seated next to the competitors chief engineer who's openly studying drawings of the new airplane. Or suppose the drawings casually and carelessly remain on the engineers tray while he gets up to use the telephone in front of the airplane. Is it ethical to look at those drawings perhaps without even touching them certainly the competition was grossly negligent or supposing the plane lands and your competitor accidentally leaves the drawings on his seat as he makes a Mad Dash to catch a connecting flight. Are you then obligated to run and catch him to return the drawings or would it be okay to take a look at the drawings or perhaps even make a photocopy of them since he was so careless. Or how about going to the local bar outside your competitors plant where their employees hang out after work and just listening to their conversations or perhaps going one step further and buying everyone in the bar drinks. How about breaking into their plant and blowing up there safe? in this Continuum of choices, I found that large numbers of people who deem themselves ethical and whom I would consider to be very ethical disagree at the point where the boundary of ethics An ethical comportment is transgressed where the boa is lying in wait. and the medical profession the famous Oh that's been taken for centuries has been a lighthouse to ethical Behavior. But what happens when that old comes into conflict with 20th century medicine the recent case in Florida certainly tragically illustrates the problem the case when a baby was born without a brain and the parents wanted to donate the child's vital organs before she died. The state law forbids declaring the baby drink brain-dead because she does have the stem of stem of a brain which kept her breathing in her heart beating but her organs could have saved other babies lives the quartz block donating the organs until her brainstem would stop functioning which time her organs would not be usable for transplants. But incredibly difficult ethical question or at least in part an ethical question. Turning to the legal profession. What about the case of a few years ago when a we're in a court appointed attorney? Meets with his client accused of murder meets with a client in the local Jail jail only to be told in confidence of two other murders in the locations of the bodies. finding bodies at those two locations The tourney later learns of the agony of too distraught families in the community whose loved ones are missing but their fate is unknown should the lawyer reveal the location of the bodies but in so doing violate a professional confidence and possibly implicate the client is sworn to defend or what about the psychiatrist who's told convincingly by a patient of a plan to murder his spouse and soon thereafter. The spouse is found dead or suppose the patient indicates a pattern of murders a pattern on the intent to continue that pattern but indicates no specific individual as a future Target. I mentioned some moments ago that newspaper reporters on occasion have been known to dig through people's garbage as part of getting a story. Let me give you another example a recent one from the journalistic profession the March 1992 issue of spy magazine contains an article describing how the Magazine's editor posing as an executive recruiter. Claiming to have a client who might be interested in offering former white house chief of staff John sununu a job. speaks to Governor sununu over the telephone the editor inquires about the salary range that the government is interested in as well as a Litany of other relatively personal questions after publishing a story the magazine represents its phone call which tape recorded without sununu's knowledge a simply a hoax a harmless prank they characterized it as was it ethical for the editor to lie about his name his occupation as intent in order to get a story was a ethical seek only to tape record the conversation. Was it ethical to publish the article when the governor obviously was under the impression. He was having a private conversation. Even better question is was it ethical for the Washington Post to carry a separate article reporting the incident without even questioning the ethics of spy magazine and how they obtained the story in the first place the post and its story did address one question of Ethics overtly. The question was whether or not governor sununu was himself behaving ethically and discussing a job in the private sector. So soon after leaving government. That was it. A few years ago, the one own reporter Peter Jennings was presented with a hypothetical scenario where he was told that the era was the Vietnam War era that he was traveling with a group of Vietcong who agreed to take him with them on some of their travels through the jungle so that he could see how that they live how they lived. He was told that he could report anything he wished but only after the fact and that he was not to interfere with anything while he was with them. Well does the group travels through the Jungle the hypothetical story poses that the Viet Cong unexpectedly observe a group of unsuspecting American soldiers whom they prepare to Ambush if Jennings worn two American soldiers. He violates his ethical commitment to the Viet Cong if he doesn't the soldiers died. What Jennings is asked what he do? Without a moment's hesitation Peter Jennings answered that he would warn the soldiers. I'm an American he explained before I'm a reporter. Well, we all face ethical dilemmas from time to time in our lives. Hopefully less consequential than Peter Jennings hypothetical predicament, but still critical on our own scale of Affairs such great decision, of course is sometimes been described as Crossing the Rubicon. Praise coming from Julius Caesar's crossing of the river over 2,000 years ago committing himself a revocable to war the die is cast in the words of Caesar. For most of us there is a personal Rubicon in our personal lives. Our corporate lives. Our professional lives that sooner or later. We have to cross. I always feel uncomfortable discussing the subject of Ethics because I don't for a moment believe my standards are any better than anyone elses, but it is important to have standards to give us a Hitching Post when we Face such challenging issues. WC Fields, the occasionally rude relatively heavy drinking comedian of the 30s and 40s once was deeply immersed in a book just before he was about to begin a performance. And a friend saw him and to his amazement saw that feels was reading the Bible. Bill what are you doing reading? The Bible the friend asked to which feels is said to have replied. I'm looking for loopholes. When it comes to ethics, there are no loopholes. There are no compromises. There are no back doors, but to be viewed as an ethical person or an ethical Corporation is probably the ultimate reward. Thank you very much. (00:35:39) Thank you. Mr. Augustine. We have a first question here from Bob Froakie. Norm I have two questions you are a leader in business and you were a leader in government. I appreciate your view as to the ethics among the uniform military the bureaucrats the politician and a businessman and my second question is you have a very good program on ethics for your people is your primary mission to make an unethical person ethical or is it to make sure that an ethical person doesn't unknowingly make a mistake (00:36:18) Bob great questions as I would have expected with with respect to the first. I'm not sure I'm a good one to make a judgment but let me give you at least a smattering of opinion. I like secretary Froakie you spend a good deal of time with the military both of us in civilian capacities. My sensing is that the military people I've dealt with have about as high ethical standards as Organization I've dealt with part of that. I think stems from the West Point indoctrination duty honor country that goes with those who have been through West Point and often lead to military or the Air Force Academy are Annapolis. I should say I found that the military frequently of had to face life or death questions and I think helped put that in perspective. Some of the Lesser issues. They have to face with along the way. I also realize that's probably not an image that may be widely held among the public but having lived in the Pentagon myself for 10 years, that would be my view. With regard to politicians, I guess I would leave that to your judgment rather than my own I have a lot of friends who are politicians that I consider to be great Patriots and decent people. I also know of some that I guess I would question I suspect the same would be true in business the people I've worked with in my life. I've considered the overwhelming majority to be basically good ethical people. As I said, I have one friend as I mentioned who is in jail Dad a former assistant Secretary of the Navy who I would have always thought was an ethical person who became entangled in a situation that I suspect to this day. He didn't realize he was doing until he had done it and then he was in too deep if there's such a thing. Sad cases, but unusual cases by and large most firms that I deal with. I find to that one can count on their word the turning to the second question of our Ethics program in our company. We have a major program. We have hotlines we have ethics officers who are will take Anonymous phone calls or Anonymous letters investigate them. We have trained all 60,000 plus of our employees in an ethics course. I took it we're now going through for the second time through and I think your question perfectly stated the issue. I don't think we for a moment believe we can teach adults by and large to change their ethical standards, but I think what we can do is to teach people who are basically ethical people to be more mindful of the fact that you are confronted more often that we may realize with issues that really are ethical issues and to let them be sensitive to that to stop and think about the consequences of their decisions and also to know That there are places they can go for help if they want to discuss it that's outside of the maiden command structure within our company where they can talk to people and get (00:39:37) advice. Thank you. Mr. Augustine. We have a question now from David Andreas. (00:39:44) Yes, CEO of your company. What do you think the real shareholder value is of your Ethics program? that is a question that's very difficult to address in quantitative terms in terms of Gut feeling in the vernacular. I've got to think it's been one of the greatest things that's happened to us. I can cite one example a recent example where the ethical standards of another company with which I'm familiar had a major impact on them. This was a case where we happen to find a major business opportunity that could be very profitable to ourselves and some other company and we had the opportunity to pick a partner to enter this business arrangement with us and the company we picked was one we picked based on one thing and that was that we knew we could absolutely trust them and it's my belief that their ethical standards are going to produce a great deal of profit for them over the years simply because we thought we could trust them. (00:40:54) Thank you. Mr. Augustine a question from Bill Weir. Mr. Augustine. I realized that you're confronting a wide variety of (00:41:02) ethical issues and I'm wondering if you'd comment particularly on some of the those that relate to our global environment the (00:41:10) impact of your (00:41:12) business decisions on matters such as global warming (00:41:16) acid rain and other environmental problems that can (00:41:22) eliminate the (00:41:24) Earth the planet Earth as a habitable planet. (00:41:28) I'd be happy to comment on that in the way of administrative and administrative answer. I would tell you that in our company we've set up an independent group the reports directly to our president that has one responsibility and only one and that is to be sure that we comport ourselves not only in an environmentally legal manner but in an environmentally responsible manner, it's had a I think a major positive impact on us and we keep track of how well we do. It reducing waste to could be hazardous to the environment in one way or the other clearly companies have a responsibility to the environment our employees breathed the same air that we breathe drink the same water. It's a responsibility that goes along with other responsibilities. We have In fairness. I would say to you that we also view that we have a responsibility to preserve our employees jobs and sometimes the trade may have to be made between minor. Actually environment and preserving jobs. And sometimes we make that trade but when it comes to anything that clearly is producing measurable serious harm the environment I think any responsible company knows how to come out on that and not only because of the pressures of the law, but just because of the ethical standards that I think manager should hold themselves to (00:42:51) Thank you. We have a question now from David teslo. I guess one has to be very concerned about the statistics that (00:42:58) you quoted early on in your speech were majority of college students are (00:43:02) cheating one (00:43:05) also has to wonder if that data is changing over a period of years. In other words. There is that percentage growing or is it stable? I guess the thing that concerns me is if we have 65 70 percent of our college students cheating today, where do they learn to cheat? Where are their their morals? One of the parents taught these kids? What are the schools taught these kids and really what does it mean for our country in the future if we're living on it in a cheating unethical world? Yeah. I found it very disconcerting to see that on the order of two thirds or so. The college students would admit they had cheated at least once and the important word. There also are an important word is that they would admit it didn't say how many would not admit it that perhaps had cheated. Now moving into a realm very far from where I have any expertise, but you said what is the root of this? What what's happening? My belief is that the route has a great deal to do with the gradual erosion of the family in America. And I think it's very difficult for companies or universities to teach people ethics. I think they need to learn it on the when they're young and on the way up and I think strong family ties at emphasize ethics and ethical behavior is important or more important more important than teaching young people mathematics or history or to speak a foreign language or whatever one might might have (00:44:35) Thank you. You are listening to Norm Augustine chairman and CEO of Martin Marietta Corporation speaking to the Minnesota meeting on the station's of Minnesota Public Radio. We have a next question from dr. Raymond Smith. This would be a follow-up to the comment you just made but would you (00:44:51) comment a little bit of what you believe the responsibility of Elementary and secondary education might be to develop ethical standards and ethical Behavior. I'd be very happy to do that. Once again, I think the schools. Have the privilege of being with children grades K through 12 for a great part of their day and it'd be in a position to influence those children greatly and so in my mind, it's worthwhile for a part of the educational program to deal with ethics and indeed. There's an organization called the ethics Resource Center, which I happen to be on their board that produces a video tapes to be used grades K through 12 to help emphasize the importance of Ethics in everyday life among young people. If one Let me just say that I think it's a subject that deserves considerably more emphasis that has had in the past. I would also say in comparing the time spent in school as many of you know, the average high school graduate spends more time watching television by the time they graduate then they will have spent in the classroom television must have some responsibility to I read recently that the average high school graduate will seen over a hundred thousand major crimes committed on television up to that point in their life one must ask the question what that means on the other hand. I think all is not lost. I go back to my own experience when I was in college. If I might to combine your question without of the previous gentleman, I went to a school that had an honor System and our freshman. It was it was treated. It was revered and our freshman year. I could remember everyone was afraid to even lift their eyes from an examination paper for fear. They would thought be thought to be By sophomore year everyone was so proud of the fact that we didn't cheat that no one would have they would have dreamed of cheating because they were because of this great pride by the time they were upper-class years. It never occurred to them that cheating was a possibility that wasn't within the realm of things that occurred to one and I can say that in four years. I never saw Soul cheat for years, not once so it can't happen, but it takes emphasis. (00:47:19) Thank you question from Bernard to E. Mr. Augustine in your comments are suggesting that in (00:47:25) Prior periods party eras. There was more ethical standards than perhaps the most today. Could you elaborate a little bit further about what has changed since then from (00:47:34) now hence what we can do now to change that. (00:47:38) I'm not certain that I'm the person to give the right historical perspective of Trends and ethics but as one looks at things that Most the simplest form of comporting oneself. Ethically in most cases would be do you just obey the law and where they do keep evidence of of people's willingness to obey the law one seems to see trends that are disconcerting and the city I live in we have about two people murdered a couple miles from the White House. Each evening gets coupled to drugs. What causes this if there is a deterioration of Ethics over time, I think television is clearly had an impact. I think the deterioration and breaking up of the family has had an impact and I think at 80s the desire to make the fast Buck particularly in the business Community had a devastating effect and hopefully most of that is behind us. (00:48:41) Thank you. We have a question now from Jack Gorman. (00:48:45) Sir, your issue of the ethics and materialism. I think you touched on that just as you were finishing. Could you elaborate a bit more on our society's Trend towards individual gain an individual materialism and ethics and how that might relate to the leadership of our business community and their salary compensation level as it's been criticized around the world. I'd be happy to do that. The I think in terms of the leadership of the nation one is seeing some encouraging trends at least. I view them as concerned encouraging and that is that the public is applying ethical standards to people seeking positions of great responsibility in our government. They're insisting on a personal behavior that satisfies the demands of the General Public. Whatever that might be that is something that probably was less. So 20 years ago some deplore that Trend. I personally think it's a reasonable thing to expect high level government people to abide by very rigid standards as the second part of your question the same as obviously equally true of people in industry and the private sector with respect to the ethics of the salary levels of senior officials and Industry. I would first say that there have been in my mind some clear violations of reasonableness, which is about as polite as I can say it just extravagant exorbitant improprieties in the way. Some are paid by and large I would say otherwise that salaries tend to be commensurate with what the marketplace determines is. The value of people is a second baseman worth five million dollars a year who fails two-thirds of the time to do what he was expected to do. That's a question one could ask but that's what the marketplace values second baseman at. Is it right that I should make more than the president United States. It's absolutely wrong on the other hand. Is it right that the Hulk Hogan makes four times? What I do at bothers me is kind of wrong. So I think the marketplace is is answering that question. But I do think that steps need to be taken to get rid of these cases that are current clearly in violation of any degree of reasonableness. And I think we're going to see the marketplace do that in the next year or two. (00:51:38) Thank you. Mr. Augustine. We have time for a couple more questions. I'm Sandra Hale. Mr. Augustine, would you go back a little bit to your answer to secretary for Opie's question. If your focus has in the company in your ethical training is not on the people who are not ethical or if I understood correctly. You do not think necessarily that's would provide much help. Are there ways indeed in which you could address that whole Arena, assuming or understanding now that many young people are not having the family input to their ethical standards. I'm not sure I'd agree that changes couldn't be made with more introduction to the subject. (00:52:19) Okay, that's a very good point and I would I would hope that we have very few employees who basically would be viewed as unethical but this is a matter of gray obviously and to those who might be more liberal in their standards of what ethical good ethical comportment might comprise to those. I would think that our program could also be helpful. One of the things we find is it from time to time an employee does something thinking that's what the company wanted them to do when it isn't at all what the company would have expected them to do. We have that happen where someone does something clearly unethical thinking that's what we wanted and the least we can do in our training is to tell that person what's expected of them that we don't expect them to do things that are improper by and large in our Ethics program. I think just making people conscious of the issues and we use case studies. We're now coming out with Game to try to attract people's interest to it a board game where you have to face ethical questions and give answers and to create discussion some might view that as kind of rather Cavalier on the other hand. It's a way to sensitize people to the fact they do face these issues. And so I really would share your view that you can obviously help those who might have some standards or lower standards, but by and large we still focus on those people that we have which the great majority of our employees are basically ethical people. They just need to be reminded occasionally.