Copyright © 2011 Raytheon Company. All rights reserved. Customer Success Is Our Mission is a registered trademark of Raytheon Company. Driving a Culture of Integrity With Leadership Commitment and Education: NCMA Presentation Ellen McIntire March 14, 2012

Page 28/25/2015 Agenda Background Raytheon Evolution of Ethics Programs Driving a Culture of Integrity Leadership and Education initiativesVideo at Raytheon

Page 38/25/2015 Raytheon: Who We Are A technology and innovation leader specializing in defense, homeland security and other government markets throughout the world 2011 net sales: $25 billion 71,000 employees worldwide Headquarters: Waltham, Massachusetts A global leader in technology and innovation

Page 48/25/2015 Our Vision To be the most admired defense and aerospace systems supplier through world-class people and technology Ensuring the success of our customers

Page 58/25/2015 Our Strategy Protect and grow our position in our four core defense markets: – Sensing: Technologies that acquire data and create accurate, reliable information for effective battlespace decisions. – Effects: Technologies that achieve specific military actions or outcomes from striking targets to disabling hostile information systems. – C3I: Integrated real-time systems that optimize operational planning and execution – Mission Support: Lifecycle solutions including Product support, engineering services and training. Homeland Security and Cybersecurity Expand international business by broadening focus and expanding in growth markets A technology-driven growth strategy

Page 6 Our Values People Treat people with respect and dignity. Welcome diversity and diverse opinions. Help our fellow employees improve their skills. Recognize and reward accomplishment. Integrity Be honest, forthright and trustworthy. Use straight talk; no hidden agendas. Respect ethics, law and regulation. Commitment Honor commitments to customers, shareholders, the community and each other. Accept personal responsibility to meet commitments; be accountable. Excellence Improve performance continually. Achieve innovation in all that we do. Stress quality, productivity, growth, best practices and measurement. Always strive to be the best. 8/25/2015 A culture of performance

Page 78/25/2015 Ethics Programs Yesterday The companies in the defense industry pioneered ethics programs in response to the contracting scandals of the 1980’s (i.e. the $600 hammer) The Defense Industry Initiative was established (1986) The focus was on Fraud, Waste and Abuse (labor reporting, conflicts of interest, proprietary information and quality, etc) Hotlines meant whistle-blowing Ethics programs were a cost of doing business Ethics linked to bottom-line through risk mitigation and management Focus on compliance - rules

Page 88/25/2015 Ethics Program Today World class ethics programs – Understand the role of values as a competitive advantage – Senior Leadership is committed and link values to the behaviors that achieve company goals; “How” things are done Regulators have zeroed in on culture and reinforced emphasis on ethics and compliance programs (i.e. S-OX, SEC, DoJ, FSGO, FAR ) Culture is as critical as the rules

Page 98/25/2015 A New Model Recognition that the culture is as critical as the rules; decision making in the gray areas Talking about ethics now means talking about company values; at Raytheon (for example) – People………….Respect, recognition, diversity, team – Integrity……......Honesty, straight talk, trust – Commitment…..Accountability; do as you say – Excellence……..Continuous improvement, innovation, quality A fundamental shift

Page 108/25/2015 Eight Elements of an Effective Ethics and Compliance Program A Code of Conduct Executive leadership and ownership Ongoing education and communication processes A reporting mechanism – a “safe haven” for advice/reporting of wrongdoing A system for corporate internal investigations and taking relevant corrective actions Self-evaluation, auditing and internal control processes Responsibility and accountability by all employees Disclosure when there is credible evidence of a violation of criminal law Integrity standards, reinforcement & accountability

Page 118/25/2015 Driving a Culture of Integrity Focus on two elements – Leadership Commitment – Strategic Education and Communications messaging Employee Awareness A long term initiative; more than program maintenance

Page 128/25/2015 Governance Structure & Ethics RTN Ethics Office reports to Office of General Counsel Quarterly reports shared with CEO, GC & Senior Leaders CEO Operating Reviews include Ethics 2x/year Annual briefing with Public Affairs Committee. Quarterly reports of program metrics submitted to PAC as well Case reports provided throughout the year on a regular basis to the Audit Committee Selected compliance topic briefings Engagement at the highest levels

Page 138/25/2015 Engaging Leaders Leaders: – Focus on data & processes using Ethics program metrics – Serve on Ethics Review Committees in the major businesses – Contribute topics and ideas to support Ethics education initiatives – Facilitate and join employees in Ethics education sessions – Experience Ethics education programs tailored to their roles The Ethics Office supports leaders with counseling, investigations, and education Leadership challenges and supports the program

Page 148/25/2015 Data for Leaders Employee Opinion Survey. – All employee surveys issued every other year since Off-year surveys sent to 15% sample of workforce. – 10 of 90 questions (plus 18 sub-questions on nature of observed misconduct, reasons for not reporting, etc.) are included in “Ethics Index.” – EOS analysis by business, locations identifies trends, areas for improvement and permits comparative assessments. Ethics Program Metrics Integrated with “Ops Reviews” of 6 Major Businesses. Robust Ethics Education program developed centrally and deployed enterprise-wide. Leaders responsible for implementation. Leaders own building an ethical culture

Page 158/25/2015 Ethics measures incorporated in business financial and operating results presentations given by Company Business Presidents to CEO. Ethics reported 2x /yr. in business performance reviews. Encourages sharing of best practices across the Company, plus competition to show best results. Keeps Leadership focused on ethical health of business. What gets measured gets done Business Performance Reviews

Page 168/25/2015 Education Metrics: – # of Employees attending Awareness sessions. – # of Compliance modules delivered (& identify key topic areas). Ethics Program Metrics: – Contacts with Ethics Office. Nature of issues raised. # Seeking advice. # Reporting misconduct. – Investigation Activity # Investigations in process. # Investigations closed/substantiated. Corrective action summary. Ethics: Another driver of performance Business Performance Reviews

Page 178/25/2015 Ethics Messaging: – Leadership communications, webcasts, etc. Other Ethics Initiatives: – Outside speakers, Integrity Awards, etc. Employee Opinion Survey – Ethics index data. – Action plans. Underscoring Leadership accountability Business Performance Reviews

Page 188/25/2015 Fundamental element in Ethics education The Ethics Foundation

Page 198/25/2015 Subject Matter Experts EMPLOYEE OPINION SURVEY COMPANY STRATEGY CODE OF CONDUCT EMERGING ISSUES INDUSTRY RISK VALUES ETHICS EDUCATION SHARING BEST PRACTICES CASE EXPERIENCE Ethics Education: Key Drivers Rich variety of inputs to Ethics education offerings

Page 208/25/2015 ETHICAL BEHAVIORS REPORTING CONCERNS SEEKING ADVICE BEING ACCOUNTABLE SUPPORTING OTHERS MAINTAINING STANDARDS REASONING & DECISION MAKING LEARNING COMMUNICATING ISSUE SPOTTING KEEPING COMMITMENTS Putting values into action Ethics Education Behavioral Outcomes

Page 218/25/2015 AudienceEducation ElementOutcome Board/SLTFacilitated DiscussionInspiring a culture of integrity. All LeadersOnline ModuleUnderstanding ethical leadership behaviors & skills. Salaried EmployeesOnline Compliance ModulesFamiliarity with issues; aware of and reporting concerns; seeking ethics advice. All EmployeesAwareness/Live DiscussionsEthical reasoning and of Case Scenariosdecision making. All EmployeesCode of ConductSetting fundamental expectations of ethical conduct. All Employees EthicSpace mini-seriesContinuous reinforcement. Ethics Education Differentiated by Level Format and content tailored for audience

Page 228/25/2015 Ethics Education 2011 Annual All Employee Awareness – “Ethics Checkpoint” Online Compliance Modules – 40+ in Library “Fraud in the Workplace” – Emphasizes obligation to report misconduct – Aligns with new FAR Mandatory Disclosure Requirement “Basic Labor Reporting” – Addresses routine caseload in this area “Understanding the FCPA” – International growth risk EthicSpace – a message multiplier Ethical Leadership programs Solid offerings in classroom, online, via

Page 238/25/2015 Ethics Checkpoint 2011 Pause, take an Ethics check, then proceed

Page 248/25/2015 Ethics Checkpoint 2011 Vignettes cover several topics: “Conflicted” – Conflicts of Interest “Courtesy to the Customer” – Gift Giving, Acceptable Expenses “Reporting Under Pressure” – Reporting Concerns, Product Substitution Format designed to be “facilitator proof” Vignettes followed by model discussion, “Checkpoint with Leaders” One hour classroom setting preferred, but online, CD, DVD and paper formats available Pause, take an Ethics check, then proceed

Page 258/25/2015 EthicSpace mini-series “Once Upon a Text” – Social Media “Making the Right Call” – Reporting Concerns, Retaliation “ It Doesn’t Add Up” – Labor Mischarging “ A Good Way to Win” – Use & Misuse of Competitor Info Getting leaders & employees to talk about Ethics Ethics Education - A Tool for Cultural Change Ethics Education – 2011

Page 268/25/2015 Ethics Education – 2010 & 2012 FCPA Aware program Target audience of 13.5K employees in Business Development, Supply Chain Management, Program Management Office, Contracts, Finance, HR, Legal & RSL (United Kingdom), RAUS (Australia) Due Diligence Books & Records Gifts & Gratuities Offsets (2010 only) Vignettes & key learning points in memorable format FCPA Aware addresses a key international risk area

Page 278/25/2015 Take 5 for Ethics was delivered to 10,000+ Leaders via . It follows spaced learning model (short, frequent bursts) and runs minutes. 7 Ethical Leadership Skills include: Listen to others and encourage bad news Act according to values Communicate expectations & explain decisions Hold yourself and others accountable Treat everyone with respect Keep promises and commitments Talk about Ethics with your employees Leaders set the tone Ethics Education – Ethical Leadership

Page 28 Questions? 8/25/2015