FINAL ASSESSMENT ELBIT SYSTEMS LTDcompanies.defenceindex.org/pdf/elbit.pdf · ELBIT SYSTEMS LTD...

ELBIT SYSTEMS LTD 23/10/14 HTTPS://WWW.ELBITSYSTEMS.COM/ELBITMAIN/

FINAL ASSESSMENT

ELBIT SYSTEMS LTD

The following pages contain the detailed scoring for your company based on

public information.

The following table represents a summary of your scores:

Topic Number of

questions

% score based

on public

information

Leadership, Governance

and Organisation

10 40%

Risk Management 7 28.6%

Company Policy and Codes 12 70.8%

Training 5 60%

Personnel and Helplines 7 64.3%

Total 41 53.7%


A1:

Does the company publish a statement from the Chief Executive Officer or the Chair of the Board supporting the ethics and anti-corruption agenda of the company?

Score:

1

Comments:

Based on public information, there is evidence that the company’s President and Chief Executive Officer has made a statement relating to accountability, transparency, and ethical conduct in the 2012 Social Sustainability Report. The President and CEO also refers to business integrity and ethical standards in a statement in the Supplier Code of Conduct. Beyond this, TI has found no readily available evidence of a statement that supports a strong stance against corruption specifically. The company therefore scores 1.

References:

Public:

Elbit Systems Social Sustainability Report (2012), p.13:

‘We see opportunities for growth and increased contributions in many directions. Cyber-crime is becoming more prevalent, and we offer solutions to counter such threats. The homeland security industry is growing in importance, and we are well placed to support this need. Markets are demanding sustainability, accountability and transparency from companies. At Elbit Systems, we are committed to operating our business in a sustainable way and adopting best practices. We believe this not only brings us competitive advantages, it also provides a solid platform for successful operations well into the future. Recently, we also reinforced our commitment to ethical conduct by becoming a member of the International Forum on Business Ethical Conduct (IFBEC) for the Aerospace and Defense Industry. IFBEC is a joint initiative of the U.S. Aerospace Industries Association and its European counterpart, and we are pleased to be the first Israeli-headquartered company to be accepted as a member.’

[TI notes that the company website refers to this document as the Social Sustainability Report 2013 but the document itself is dated 2012].

http://elbitsystems.com/Elbitmain/files/Elbit_Social_Sustainability_2013_y.pdf

Supplier Code of Conduct (2014), p.2:



http://elbitsystems.com/Elbitmain/files/Elbit_Systems_Supplier_Code%20of_Conduct_2014.pdf




A2:

Does the company’s Chief Executive Officer or the Chair of the Board demonstrate a strong personal, external facing commitment to the ethics and anti-corruption agenda of the company?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company’s CEO demonstrates a strong personal, external facing commitment to the ethics and anti-corruption agenda of the company.

References:

Public:


‘Markets are demanding sustainability, accountability and transparency from companies. At Elbit Systems, we are committed to operating our business in a sustainable way and adopting best practices. We believe this not only brings us competitive advantages, it also provides a solid platform for successful operations well into the future. Recently, we also reinforced our commitment to ethical conduct by becoming a member of the International Forum on Business Ethical Conduct (IFBEC) for the Aerospace and Defense Industry. IFBEC is a joint initiative of the U.S. Aerospace Industries Association and its European counterpart, and we are pleased to be the first Israeli-headquartered company to be accepted as a member.’




A3:

Does the company’s Chief Executive Officer demonstrate a strong personal, internal-facing commitment to the ethics and anti-corruption agenda of the company, actively promoting the ethics and anti-corruption agenda at all levels of the company structure?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company’s CEO demonstrates a strong personal, internal-facing commitment to the ethics and anti-corruption agenda at all levels of the company structure.

References:

Public:

NA


A4:

Does the company publish a statement of values or principles representing high standards of business conduct, including honesty, trust, transparency, openness, integrity and accountability?

Score:

2

Comments:

Based on public information, there is evidence that the company has published a Code of Business Conduct and Ethics, which represents high business standards and is supplemented by other policies and procedures. The Social Sustainability Report and the company website outline the company’s values, which include accountability, honesty, integrity, respect, ethical conduct, and social responsibility.

References:

Public:

Elbit Systems Code of Business Conduct and Ethics (2013), p.1:

‘A. Importance of Ethics. Conducting our business honestly, ethically and properly is critical to Elbit Systems' continued success and growth. Elbit Systems has long had procedures relating to business ethics in order to help us maintain our good reputation and conduct our business activities in a compliant manner.

B. The Code. In furtherance of our commitment to ethical business conduct, Elbit Systems' Board of Directors has approved this Code of Business Conduct and Ethics (the "Code"). It summarizes our policy with respect to ethical business conduct. Compliance with this Code by our directors, officers and employees will help us successfully perform our business activities, maintain our good reputation and create an effective and positive working environment.

C. Other Company Procedures. This Code is supplemented by other Elbit Systems policies and procedures relating to ethics and legal compliance issues.

D. Basic Standards. This Code sets out the basic standards of ethics and conduct for our directors, officers and employees. These standards, together with other applicable company policies and procedures, are designed to promote honest and ethical conduct, but will not cover all situations. If a law conflicts with our ethics policy, you must comply with the law. On the other hand our ethics policy, as expressed in this Code and supplemented in other policies and procedures, takes precedence in the event of a conflict with a particular local


custom or practice.

3. Honest and Ethical Conduct: Each person subject to this Code has the responsibility to act honestly and ethically in conducting activities on behalf of Elbit Systems. Your responsibility applies to your interaction with our other directors, officers and employees, and to Elbit Systems itself. You are expected to act in good faith and with responsibility, due care, competence and diligence. You should use your independent judgment with respect to questionable behavior and at all times conduct yourself in a manner that meets with our ethical standards.’ http://elbitsystems.com/Elbitmain/files/2013_Code_of_Business_Conduct_and_Ethics_(Eng).pdf

Company Website:

‘Our Values: All employees are encouraged to demonstrate the Elbit Systems values in all they do and receive training and support to ensure complete understanding and alignment. The following are Elbit System’s’ core values:

Leadership, Personal Responsibility and Accountability: We are committed to the success of our company through personal responsibility and leadership.

Honesty and Ethics: Honesty, respect and integrity are the key principles that guide us.

Social Sustainability: We contribute to the enhancement of quality of life and the environment of the communities in which we live and work through a variety of educational, social welfare and green activities.’

http://elbitsystems.com/elbitmain/pages/VisionValues.asp


‘Our values: All employees are encouraged to demonstrate the Elbit Systems values in all they do and receive training and support to ensure complete understanding and alignment

The following are Elbit Systems’ core values:

-Customer Focused

-Employee Excellence

-Teamwork

-Accountability: We are committed to the success of our company and accountable in creating value for our stakeholders

-Ethical Conduct: Honesty, integrity and respect are the key principles that guide our business

-Social Responsibility: We contribute to and enhance the environment of the communities in which we live and work through various educational and community activities.’

(p.69): ‘Our Approach to Ethical Practices: We maintain a transparent approach to ethics, both internally and externally. Our Ethics Code defines our basic ethical principles and values, instills a framework for proper conduct and constitutes the guidelines for

http://elbitsystems.com/elbitmain/pages/VisionValues.asp


engagement both among employees and ‘with all stakeholders. The Code specifically includes clauses relating to Elbit Systems approach to anti-bribery, conflicts of interest and anti-competitive behavior, all of which are strictly forbidden,

Elbit Systems’ Ethics Code was initially approved by the Board of Directors in 2004 although for more than 20 years we have operated in accordance with an internal ethics procedure. We take pride in the fact that we were one of the first companies in Israel to establish and apply a culture of ethics in a comprehensive way. Our Ethics Code applies to all our operations and is posted on our website

In recent years, we have amended our Ethics Code and other applicable policies and procedures to reinforce anti-bribery and anti-corruption clauses, including in 2012 a specifically adapted Ethics Code and policies for our UK subsidiaries in line with the requirements of the UK Bribery Act.’




A5:

Does the company belong to one or more national or international initiatives that promote anti-corruption or business ethics with a significant focus on anti-corruption?

Score:

2

Comments:

Based on public information, there is evidence that the company is a member of the International Forum on Business Ethical Conduct for the Aerospace and Defense Industry (IFBEC).

References:

Public:

Company Website:

‘Recently, we also reinforced our commitment to ethical conduct by becoming a member of the International Forum on Business Ethical Conduct (IFBEC) for the Aerospace and Defense Industry. IFBEC is a joint initiative of the U.S. Aerospace Industries Association and its European counterpart, and we are pleased to be the first Israeli-headquartered company to be accepted as a member.’

http://www.elbitsystems.com/elbitmain/pages/SocialResponsibilityIntro.asp


‘Anti-Bribery: Elbit Systems is committed to conducting business with the highest ethical principles, including compliance with anti-bribery standards. We are active in numerous markets, requiring compliance with the anti-bribery laws of many jurisdictions. This includes applicable Israeli law, such as Israel's Criminal Code and Israel's ratification of the Organization for Economic Co-operation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and the U.N. Convention Against Corruption. In addition to laws applicable to Israeli companies, since Elbit Systems Ltd.'s shares are publicly traded on the Nasdaq National Marketing the U.S., we are subject to the United States Foreign Corrupt Practices Act ("FCPA"). There are also other anti- bribery laws throughout the world which apply in the countries in which we do business. Our policy regarding anti-bribery compliance, as well as business entertainment

http://www.elbitsystems.com/elbitmain/pages/SocialResponsibilityIntro.asp


and gifts, is contained in our Anti-Bribery Compliance Policy, which can be found on Elbit Systems’ website: http://www.elbitsystems.com under “About – Ethics and Conduct” or “Investor Relations – Corporate Governance – Ethics and Conduct”.’

http://elbitsystems.com/Elbitmain/files/2013_Code_of_Business_Conduct_and_Ethics_(Eng).pdf

Elbit Systems Social Sustainability Report (2012):

‘We see opportunities for growth and increased contributions in many directions. Cyber-crime is becoming more prevalent, and we offer solutions to counter such threats. The homeland security industry is growing in importance, and we are well placed to support this need. Markets are demanding sustainability, accountability and transparency from companies. At Elbit Systems, we are committed to operating our business in a sustainable way and adopting best practices. We believe this not only brings us competitive advantages, it also provides a solid platform for successful operations well into the future. Recently, we also reinforced our commitment to ethical conduct by becoming a member of the International Forum on Business Ethical Conduct (IFBEC) for the Aerospace and Defense Industry. IFBEC is a joint initiative of the U.S. Aerospace Industries Association and its European counterpart, and we are pleased to be the first Israeli-headquartered company to be accepted as a member.’


International Forum on Business Ethical Conduct website:

http://ifbec.info/our-members/

http://www.elbitsystems.com/





A6:

Has the company appointed a Board committee or individual Board member with overall corporate responsibility for its ethics and anti-corruption agenda?

Score:

0

Comments:

Based on public information, there is some evidence that internal Ethics Committees are responsible for resolving issues, facilitating the transparency of decision making and effective communications regarding ethics matters. The Committees investigate reports and, where relevant, issues are reported to the Audit Committee of the Board. However, although members of the Audit Committee are publicly named on the company website there are no terms of reference to indicate whether the Audit Committee has overall corporate responsibility for the company’s ethics and anti-corruption agenda.

References:

Public:

TI notes:

Elbit Systems Social Sustainability Report (2012), p. 70:

‘Ethics Committees: As part of our overall ethics compliance procedure, internal Ethics Committees operate both at the Corporate Headquarters and the major Company divisions and subsidiaries. They assist in resolving issues and facilitate the transparency of decision making and effective communications regarding ethics matters. Through the whistle-blower, process and other means, dozens of matters a year are brought to the attention of and reviewed by, our Ethics Committees. All matters are investigated. Matters found to be substantiated are reported to management. Where relevant (e.g. for financial discrepancies) such matters are also reported to the Audit Committee of the Board of Directors.’


Company website, Corporate Governance – Committee Composition:

http://ir.elbitsystems.com/phoenix.zhtml?c=61849&p=irol-govCommComp

Company Website, Ethics and Conduct


http://ir.elbitsystems.com/phoenix.zhtml?c=61849&p=irol-govCommComp


‘As part of our ongoing Ethics compliance program, and consistent with legal requirements applicable to publicly traded companies, we are pleased to attach our updated Code of Conduct and Business Ethics as approved by Elbit Systems Board of Directors.’

http://ir.elbitsystems.com/phoenix.zhtml?c=61849&p=irol-govconduct

http://ir.elbitsystems.com/phoenix.zhtml?c=61849&p=irol-govconduct


A7:

Has the company appointed a person at a senior level within the company to have responsibility for implementing the company’s ethics and anti-corruption agenda, and who has a direct reporting line to the Board?

Score:

2

Comments:

Based on public information, there is evidence that the company has appointed and named a Chief Compliance Officer. Although, the terms of reference are not listed in one place, evidence suggests that this is a senior level position within the company with overall responsibility for the company’s ethics and anti-corruption agenda. The individual is named as David Block Temin.

References:

Public:


‘As part of our commitment to best practice compliance measures, in 2012, we created the full-time position of Chief Compliance Officer, which was previously a part time role of our Chief Legal Officer.’

(p.67): ‘The corporate governance framework established by the Board is coordinated by the executive management team led by the Executive Vice President and Chief Compliance Officer, who reports directly to the President and CEO.’

(p.70): ‘Ethics Committees: As part of our overall ethics compliance procedure, internal Ethics Committees operate both at the Corporate Headquarters and the major Company divisions and subsidiaries. They assist in resolving issues and facilitate the transparency of decision making and effective communications regarding ethics matters. Through the whistle -blower process and other means, dozens of matters a year are brought to the attention of, and reviewed by, our Ethics Committees. All matters are investigated. Matters found to be substantiated are reported to management. Where relevant (e.g. for financial discrepancies) such matters are also reported to the Audit Committee of the Board of Directors. In many cases, disciplinary action is recommended by the Ethics Committees. In recent years, communications on ethics have been enhanced by focused communications


informing employees of decisions made by Ethics Committees.’



‘If you observe any conduct that you suspect may be illegal or in violation of the Code, you should report your concerns... You are requested to notify in writing Elbit Systems' Executive Vice President, Chief Compliance Officer and Senior Counsel, David Block Temin, with any information, complaint or concern regarding suspected legal or ethical violations by:

Telephone: (972)-(04)-8316626

Email: [email protected]

Mail: Advanced Technology Center, POB 539, Haifa 31053 Israel.

If you prefer you may instead notify in writing at the above mailing address any member of the Audit Committee of Elbit Systems' Board of Directors – Yehoshua Gleitman (Chairman), Yigal Ne'eman, Avraham Asheri, Moshe Arad or Dalia Rabin. The email address for notification to the Chairman of the Audit Committee is: [email protected].’



mailto:[email protected]




A8:

Is there regular Board level monitoring and review of the performance of the company’s ethics and anti-corruption agenda?

Score:

1

Comments:

Based on public information, there is evidence that the company’s Board conducts regular reviews of ethics-related activities. The Social Sustainability Report indicates that this takes place on an annual or semi-annual basis as part of the Board’s broader oversight function, rather than a major review of the whole ethics and compliance programme. The company therefore scores 1.

References:

Public:


‘The Board has various oversight roles relating to the sustainability activities of the Company. Sustainability activities are presented to the Board on an annual or semi- annual basis, depending on the subject. This includes presentations relating to corporate governance, ethics, environmental initiatives, community activities and other sustainability aspects. These meetings provide an opportunity for the Board to review strategy and monitor performance in line with sustainability objectives. The corporate governance framework established by the Board is coordinated by the executive management team led by the Executive Vice President and Chief Compliance Officer, who reports directly to the President and CEO. Further information on the Board, its members and committees can be found on Elbit Systems’ website and annual report to the SEC on Form 20 -F: http ://ir.el bitsystems. com/phoenix .zhtml?c=61849&p=irol- govHighlights’




A8(a):

Is there a formal, clear, written plan in place on which the review of the ethics and anti-corruption agenda by the Board or senior management is based, and evidence of improvement plans being implemented when issues are identified?

Score:

0

Comments:

Based on public information, there is no readily available evidence of a formal, clear, written plan in place on which the review of the ethics and anti-corruption agenda by the Board or senior management is based, or evidence of improvement plans being implemented when issues are identified.

References:

Public:

NA


A9:

Does the company have a formal process for review and where appropriate update its policies and practices in response to actual or alleged instances of corruption?

Score:

0

Comments:

Based on public information, there is no readily available evidence of formal processes for review of company policies and practices in response to actual or alleged instances of corruption. TI notes that the company appears to have recently updated a number of its ethics-related policies.

References:

Public:

TI notes:


‘In recent years, we have amended our Ethics Code and other applicable policies and procedures to reinforce anti-bribery and anti- corruption clauses, including in 2012 a specifical ly adapted Ethics Code and policies for our UK subsidiaries in line with the requirements of the UK Bribery Act.’


Elbit Systems Anti-bribery Compliance Policy (2013), p.3:

‘In all dealings with potential or current consultants or representatives, Company employees must be conscious of any "red flags" that may be present or arise suggesting possible violations of anti-bribery standards.

It is the responsibility of the employee who observes or suspects a red flag to report the matter to his or her supervisor as well as the Legal Department of the applicable division, the Corporate Chief Legal Officer or the CCO.’

http://elbitsystems.com/Elbitmain/files/Anti_Bribery_Compliance_Policy.pdf


‘The Board has various oversight roles relating to the sustainability activities of the




Company. Sustainability activities are presented to the Board on an annual or semi- annual basis, depending on the subject. This includes presentations relating to corporate governance, ethics, environmental initiatives, community activities and other sustainability aspects. These meetings provide an opportunity for the Board to review strategy and monitor performance in line with sustainability objectives. The corporate governance framework established by the Board is coordinated by the executive management team led by the Executive Vice President and Chief Compliance Officer, who reports directly to the President and CEO. Further information on the Board, its members and committees can be found on Elbit Systems’ website and annual report to the SEC on Form 20 -F: http ://ir.el bitsystems. com/phoenix .zhtml?c=61849&p=irol- govHighlights’




A9(a):

Does the company have a formal anti-corruption risk assessment procedure implemented enterprise-wide?

Score:

1

Comments:

Based on public information, there is evidence that the company has a formal risk management procedure. The 2013 Annual Report identifies compliance with procurement and anti-bribery rules and regulations as a risk area. In addition, the Risk Management Review Committees meet quarterly to discuss a range of risks including ethics. However, TI has found no readily available evidence of risk mitigation plans with clear ownership and timelines for implementation. The company therefore scores 1.

References:

Public:

Elbit Systems Social Sustainability Report (2012), p.69 :

‘Risk Management: Elbit Systems maintains a thorough process of risk management which assesses the nature of business risks as well as those related to general social and environmental considerations. A full range of risks is contained in our annual report to the SEC on form 20-F which can be found on the Elbit Systems’ website: http://ir.elbitsystems

com/phoenix.zhtml?c=61849&p=irol-sec. In 2012, we enhanced our risk management activities by expanding Risk Management Review Committees to include managers in all Company divisions. These Committees meet quarterly to discuss a range of risks including financial, legal, corporate governance environmental, health and safety, human resources, mergers and acquisitions, ethics and supply chain risks. Applicable senior managers are held to account for the ways in which they have addressed risks in their business units.’


Elbit Systems 2013 Annual Report (20F), p.5:

‘Risk Factors: General Risks Related to Our Business and Market: As a government contractor, we are subject to procurement and anti-bribery rules and regulations. We are required to comply with specific government contracting rules and regulations relating to cost accounting, anti-bribery, procurement integrity and others, which increase our performance and compliance costs. (See Item 4. Information on the Company –



Governmental Regulation.) If these rules and regulations change, our costs of complying with them could increase and reduce our margins. In addition, failure to comply with these rules and regulations could result in reductions of the value of contracts, contract modifications or termination, and the assessment of penalties and fines, which could negatively impact our results of operations and financial condition. We are engaged in activities in certain markets considered to be high risk from an anti-bribery compliance perspective, and investigations by government agencies in the anti-bribery area are becoming more prevalent. Failure to comply with these rules and regulations, for example in the area of anti-bribery, could also lead to suspension or debarment from government contracting or subcontracting for a period of time as well as other possible sanctions, including fines, which could have a negative impact on our results of operations, financial condition and reputation.’

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NTM2OTkzfENoaWxkSUQ9MjI3Mjc3fFR5cGU9MQ==&t=1





A10:

Does the company have a formal anti-corruption risk assessment procedure for assessing proposed business decisions, with clear requirements on the circumstances under which such a procedure should be applied?

Score:

0

Comments:

Based on public information, there is evidence that the company has a formal risk assessment procedure. However, TI has found no readily available evidence of a formal anti-corruption risk assessment procedure for assessing proposed business decisions.

References:

Public:

Elbit Systems Social Sustainability Report (2012), p.69 :

‘Risk Management: Elbit Systems maintains a thorough process of risk management which assesses the nature of business risks as well as those related to general social and environmental considerations. A full range of risks is contained in our annual report to the SEC on form 20-F which can be found on the Elbit Systems’ website: http://ir.elbitsystems

com/phoenix.zhtml?c=61849&p=irol-sec. In 2012, we enhanced our risk management activities by expanding Risk Management Review Committees to include managers in all Company divisions. These Committees meet quarterly to discuss a range of risks including financial, legal, corporate governance environmental, health and safety, human resources, mergers and acquisitions, ethics and supply chain risks. Applicable senior managers are held to account for the ways in which they have addressed risks in their business units.’


Elbit Systems 2013 Annual Report (20F), p.5:

‘Risk Factors: General Risks Related to Our Business and Market: As a government contractor, we are subject to procurement and anti-bribery rules and regulations. We are required to comply with specific government contracting rules and regulations relating to cost accounting, anti-bribery, procurement integrity and others, which increase our performance and compliance costs. (See Item 4. Information on the Company – Governmental Regulation.) If these rules and regulations change, our costs of complying with them could increase and reduce our margins. In addition, failure to comply with these



rules and regulations could result in reductions of the value of contracts, contract modifications or termination, and the assessment of penalties and fines, which could negatively impact our results of operations and financial condition. We are engaged in activities in certain markets considered to be high risk from an anti-bribery compliance perspective, and investigations by government agencies in the anti-bribery area are becoming more prevalent. Failure to comply with these rules and regulations, for example in the area of anti-bribery, could also lead to suspension or debarment from government contracting or subcontracting for a period of time as well as other possible sanctions, including fines, which could have a negative impact on our results of operations, financial condition and reputation.’






A11:

Does the company conduct due diligence that minimises corruption risk when selecting or reappointing its agents?

Score:

1

Comments:

Based on public information, there is evidence that the company conducts due diligence when selecting agents. However, TI has found no readily available evidence of the due diligence being renewed at least every three years or when there is a significant change in the business relationship. The company therefore scores 1.

References:

Public:

Elbit Systems Anti-bribery Compliance Policy (2013), pp.3-4:

‘Consultants or representatives who may interact with Government Officials in connection with Company business may only be retained following contracting processes and receipt of approvals specified in Company and division/subsidiary applicable procedures and policies. Such policies provide, among other requirements, for sufficient, documented due diligence to be performed to enable the Company to conclude with reasonable assurance that the consultant or representative understands and will fully abide by relevant anti-bribery laws applicable to the Company's business. The Company must have a written agreement with each such party, and the agreement must specifically bind such party to comply with all applicable anti-bribery laws, including, but not limited to, Israeli anti-bribery laws, the OECD Convention and the U.S. FCPA, as if such laws applied directly to such parties. Consultants will be provided training with respect to the Company’s anti-bribery compliance policy.’






Elbit Systems Annual Report 2013 (20-F):

‘Our due diligence in acquisitions may not adequately cover all risks. There may be liabilities or risks that we fail to discover in performing due diligence investigations, or that may arise following an acquisition, relating to businesses we have acquired or may acquire in the future. Examples of these liabilities include employee benefit contribution obligations, estimated costs to complete contracts, environmental liabilities, regulatory compliance liabilities or liabilities for infringement of third party intellectual property rights for which we, as a successor owner, may be responsible. Such risks may include changes in estimated costs to complete programs and estimated future revenues. In addition, there may be additional costs relating to acquisitions including, but not limited to, possible purchase price adjustments provided in the applicable acquisition agreement or impairment write downs, if the value of the acquired company were to decrease after the acquisition, or after follow-on investments in that company. Such liabilities could have a material adverse effect on our business, financial condition, results of operations or prospects. In addition, there may be situations in which our management determines, based on market conditions or other applicable considerations, to pursue an acquisition with limited due diligence or without performing any due diligence at all.’

http://ir.elbitsystems.com/phoenix.zhtml?c=61849&p=irol-reportsAnnual



A12:

Does the company have contractual rights and processes for the behaviour, monitoring, control, and audit of agents with respect to countering corruption?

Score:

1

Comments:

Based on public information, there is evidence that the company has contractual rights for monitoring and audit of agents with respect to countering corruption. However, there is no readily available evidence of disciplinary measures being taken in the event of a violation. The company therefore scores 1.

References:

Public:

Elbit Systems, Supplier Code of Conduct (2014), p.8:

‘Recordkeeping and Right to Audit: Best practices require our Supply Chain to keep appropriate records to demonstrate your compliance with this Code, as well as all applicable laws and regulations. We reserve the right to periodically review your business practices to ensure your compliance with this Code. Members of our Supply Chain are expected to comply with our reasonable inquiries related to your work for us and cooperate with audits and investigations.’



‘This Policy applies to:- Subcontractors and Suppliers – as part of Supplier Code of Conduct, subcontractors and suppliers are required to comply with applicable anti-bribery laws an regulations.’

pp.3-4:

‘Consultants or representatives who may interact with Government Officials in connection with Company business may only be retained following contracting processes and receipt of approvals specified in Company and division/subsidiary applicable procedures and policies. Such policies provide, among other requirements, for sufficient, documented due diligence




to be performed to enable the Company to conclude with reasonable assurance that the consultant or representative understands and will fully abide by relevant anti-bribery laws applicable to the Company's business. The Company must have a written agreement with each such party, and the agreement must specifically bind such party to comply with all applicable anti-bribery laws, including, but not limited to, Israeli anti-bribery laws, the OECD Convention and the U.S. FCPA, as if such laws applied directly to such parties. Consultants will be provided training with respect to the Company’s anti-bribery compliance policy.’




Elbit Systems Annual Report 2013 (20-F):

‘Our due diligence in acquisitions may not adequately cover all risks. There may be liabilities or risks that we fail to discover in performing due diligence investigations, or that may arise following an acquisition, relating to businesses we have acquired or may acquire in the future. Examples of these liabilities include employee benefit contribution obligations, estimated costs to complete contracts, environmental liabilities, regulatory compliance liabilities or liabilities for infringement of third party intellectual property rights for which we, as a successor owner, may be responsible. Such risks may include changes in estimated costs to complete programs and estimated future revenues. In addition, there may be additional costs relating to acquisitions including, but not limited to, possible purchase price adjustments provided in the applicable acquisition agreement or impairment write downs, if the value of the acquired company were to decrease after the acquisition, or after follow-on investments in that company. Such liabilities could have a material adverse effect on our business, financial condition, results of operations or prospects. In addition, there may be situations in which our management determines, based on market conditions or other applicable considerations, to pursue an acquisition with limited due diligence or without performing any due diligence at all.’






A13:

Does the company make clear to contractors, sub-contractors, and suppliers, through policy and contractual terms, its stance on bribery and corruption and the consequences of breaches to this stance?

Score:

1

Comments:

Based on public information, there is evidence that the company has a Suppliers Code of Conduct, which makes clear to contractors, sub-contractors, and suppliers through policy and contractual terms, its stance on bribery and corruption. However, it does not make clear the consequences of breaching this stance. The company therefore scores 1.

References:

Public:


‘Our policy is to purchase raw materials and parts from responsible suppliers who respect compliance, environmental, social and labor laws. Our standard purchasing terms and conditions include a Supplier Code of Conduct, which is published on our website, and which makes suppliers aware of our expectation that they will:

• Conduct business activities in a manner that is fair, ethical and fully compliant with applicable laws;

• Review our corporate Code of Conduct and observe its provisions;

• Comply with all applicable laws and regulations, including those relating to : basic human rights, fair wages and non- discrimination in employment; workplace s afety; environmental protection; fair competition and antitrust; and anti- corruption and anti-bribery (recognizing that Elbit Systems is subject to both the Organization for Economic Co - operation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, as well as the U.S. Foreign Corrupt Practices Act); and

• Self-monitor compliance with our standards of conduct.’


Elbit Systems Supplier Code of Conduct (2014), p.8:

‘Recordkeeping and Right to Audit: Best practices require our Supply Chain to keep



appropriate records to demonstrate your compliance with this Code, as well as all applicable laws and regulations. We reserve the right to periodically review your business practices to ensure your compliance with this Code. Members of our Supply Chain are expected to comply with our reasonable inquiries related to your work for us and cooperate with audits and investigations.’





A13(a):

Does the company explicitly address the corruption risks associated with offset contracting?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company explicitly addresses the corruption risks associated with offset contracting.

References:

Public:

TI notes:

Elbit Systems Anti-Bribery Compliance policy, p.3:




Elbit Systems Annual Report 2013 (20-F), p.5:

‘As a government contractor, we are subject to procurement and anti-bribery rules and regulations. We are required to comply with specific government contracting rules and regulations relating to cost accounting, anti-bribery, procurement integrity and others, which increase our performance and compliance costs. (See Item 4. Information on the Company – Governmental Regulation.) If these rules and regulations change, our costs of complying with them could increase and reduce our margins. In addition, failure to comply with these rules and regulations could result in reductions of the value of contracts, contract modifications or termination, and the assessment of penalties and fines, which could negatively impact our results of operations and financial condition. We are engaged in activities in certain markets considered to be high risk from an anti-bribery compliance perspective, and investigations by government agencies in the anti-bribery area are becoming more prevalent. Failure to comply with these rules and regulations, for example



in the area of anti-bribery, could also lead to suspension or debarment from government contracting or subcontracting for a period of time as well as other possible sanctions, including fines, which could have a negative impact on our results of operations, financial condition and reputation.’

(p.32): ‘Procurement Regulations. Solicitations for procurements by governmental purchasing agencies in Israel, the United States and other countries are governed by laws, regulations and procedures relating to procurement integrity, including avoiding conflicts of interest and corruption in the procurement process.’

(p.53): ‘In connection with projects in certain countries, Elbit Systems and some of its subsidiaries have entered and may enter in the future into “buy-back” or “offset” agreements, required by a number of the Company’s customers for these projects as a condition to the Company obtaining orders for its products and services. These agreements are customary in the Company’s industry and are designed to facilitate economic flow back (buy-back) and/or technology transfer to businesses or government agencies in the applicable country. These commitments may be satisfied by the Company’s placement of direct work or vendor orders for supplies and/or services, transfer of technology, investments or other forms of assistance in the applicable country. The buy-back rules and regulations, as well as the underlying contracts, may differ from one country to another . The ability to fulfill the buy-back obligations may depend, among other things, on the availability of local suppliers with sufficient capability to meet our requirements and which are competitive in cost, quality and schedule. In certain cases, the Company’s commitments may also be satisfied through transactions conducted by other parties.

The Company does not commit to buy-back agreements until orders for its products or services are definitive, but in some cases the orders for the Company’s products or services may become effective only after the Company’s corresponding buy-back commitments are in effect.

Buy-back programs generally extend at least over the relevant commercial contract period and may provide for penalties in the event the Company fails to perform in accordance with buy-back requirements. In some cases the Company provides guarantees in connection with the performance of its buy-back obligations.

Should the Company be unable to meet such obligations it may be subject to contractual penalties, our guarantees may be drawn upon and its chances of receiving additional business from the applicable customers could be reduced or, in certain cases, eliminated.

At December 31, 2013, the Company had outstanding buy-back obligations totaling approximately $1,014,000 that extend through 2023.’




A13(b):

Does the company conduct due diligence that minimises corruption risk when selecting its offset partners and offset brokers?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company conducts due diligence that minimises corruption risk when selecting its offset partners and offset brokers.

References:

Public:

TI notes:

Elbit Systems Anti-Bribery Compliance Policy (2013), p.3:

’Consultants or representatives who may interact with Government Officials in connection with Company business may only be retained following contracting processes and receipt of approvals specified in Company and division/subsidiary applicable procedures and policies.

Such policies provide, among other requirements, for sufficient, documented due diligence to be performed to enable the Company to conclude with reasonable assurance that the consultant or representative understands and will fully abide by relevant anti-bribery laws applicable to the Company's business.

The Company must have a written agreement with each such party, and the agreement must specifically bind such party to comply with all applicable anti-bribery laws, including, but not limited to, Israeli anti-bribery laws, the OECD Convention and the U.S. FCPA, as if such laws applied directly to such parties. Consultants will be provided training with respect to the Company’s anti-bribery compliance policy.’


Elbit Systems Annual Report 2013 Form (20-F), p.5:

‘Our due diligence in acquisitions may not adequately cover all risks. There may be liabilities or risks that we fail to discover in performing due diligence investigations, or that may arise following an acquisition, relating to businesses we have acquired or may acquire in the future. Examples of these liabilities include employee benefit contribution obligations, estimated costs to complete contracts, environmental liabilities, regulatory compliance



liabilities or liabilities for infringement of third party intellectual property rights for which we, as a successor owner, may be responsible. Such risks may include changes in estimated costs to complete programs and estimated future revenues. In addition, there may be additional costs relating to acquisitions including, but not limited to, possible purchase price adjustments provided in the applicable acquisition agreement or impairment write downs, if the value of the acquired company were to decrease after the acquisition, or after follow-on investments in that company. Such liabilities could have a material adverse effect on our business, financial condition, results of operations or prospects. In addition, there may be situations in which our management determines, based on market conditions or other applicable considerations, to pursue an acquisition with limited due diligence or without performing any due diligence at all.’

(p.53): ‘In connection with projects in certain countries, Elbit Systems and some of its subsidiaries have entered and may enter in the future into “buy-back” or “offset” agreements, required by a number of the Company’s customers for these projects as a condition to the Company obtaining orders for its products and services. These agreements are customary in the Company’s industry and are designed to facilitate economic flow back (buy-back) and/or technology transfer to businesses or government agencies in the applicable country. These commitments may be satisfied by the Company’s placement of direct work or vendor orders for supplies and/or services, transfer of technology , investments or other forms of assistance in the applicable country . The buy-back rules and regulations, as well as the underlying contracts, may differ from one country to another . The ability to fulfill the buy-back obligations may depend, among other things, on the availability of local suppliers with sufficient capability to meet our requirements and which are competitive in cost, quality and schedule. In certain cases, the Company’s commitments may also be satisfied through transactions conducted by other parties.

The Company does not commit to buy-back agreements until orders for its products or services are definitive, but in some cases the orders for the Company’s products or services may become effective only after the Company’s corresponding buy-back commitments are in effect.

Buy-back programs generally extend at least over the relevant commercial contract period and may provide for penalties in the event the Company fails to perform in accordance with buy-back requirements. In some cases the Company provides guarantees in connection with the performance of its buy-back obligations.

Should the Company be unable to meet such obligations it may be subject to contractual penalties, our guarantees may be drawn upon and its chances of receiving additional business from the applicable customers could be reduced or, in certain cases, eliminated.

At December 31, 2013, the Company had outstanding buy-back obligations totaling approximately $1,014,000 that extend through 2023.’

http://ir.elbitsystems.com/phoenix.zhtml?c=61849&p=irol-reportsannual



A15:

Does the company have an anti-corruption policy that prohibits corruption in its various forms?

Score:

1

Comments:

Based on public information, there is evidence that the company’s Code of Business Conduct and Ethics provides guidance on public disclosures, insider trading, fair dealing, conflicts of interest, (including offering and acceptance of gifts, entertainment, and other personal benefits, and other indirect violations), political activity, and reporting unethical Illegal and unethical behaviour. The Anti-Bribery Compliance Policy provides guidance on compliance with anti-bribery laws and regulations and compliance with Company policy on business entertainment and gifts. The Policy prohibits the giving, offering, or promising of a bribe, and provides detailed definitions and examples. Similarly, the company has limitations on the receipt of gifts and entertainment. However, these prohibitions and limitations only explicitly apply to government officials. The company therefore scores 1.

References:

Public:


‘Gifts, Entertainment and Other Personal Benefits. Personal gifts, entertainment or other benefits may only be offered or accepted by persons doing business with or on behalf of Elbit Systems if done in a reasonable way in the ordinary course of the business relationship. In addition, the frequency and cost of any such gifts, entertainment or personal benefits should be in nominal amounts/value only so as not to affect, or appear to affect, the ability to exercise independent business judgment. See also the business entertainment and gifts provisions in our Anti-Bribery Compliance Policy referred to in Section 7 above.’

(p.2): ‘Anti-Bribery: Elbit Systems is committed to conducting business with the highest ethical principles, including compliance with anti-bribery standards. We are active in numerous markets, requiring compliance with the anti-bribery laws of many jurisdictions. This includes applicable Israeli law, such as Israel's Criminal Code and Israel's ratification of the Organization for Economic Co-operation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and the U.N. Convention Against Corruption. In addition to laws applicable to Israeli companies, since


Elbit Systems Ltd.'s shares are publicly traded on the Nasdaq National Marketing the U.S., we are subject to the United States Foreign Corrupt Practices Act ("FCPA"). There are also other anti- bribery laws throughout the world which apply in the countries in which we do business. Our policy regarding anti-bribery compliance, as well as business entertainment and gifts, is contained in our Anti-Bribery Compliance Policy, which can be found on Elbit Systems’ website: http://www.elbitsystems.com under “About – Ethics and Conduct” or “Investor Relations – Corporate Governance – Ethics and Conduct”.’



‘1.1 General Prohibition: Company directors, officers and employees are prohibited from making a "bribe" - giving, offering or promising "anything of value" to a Government Official with the intent to obtain any "business or any other advantage". The above statement should be interpreted broadly.’

(p.3): ‘Gifts may only be given to Government Officials if they are of token or nominal value, are legal and customary in the jurisdiction in which they are given and in the jurisdiction in which the recipient of the gifts resides, and are given openly to the Government Official.

Pre-approval is not required for items with the Company logo or gifts valued at less than U.S. $100, but the expenses for such gifts must be supported by receipts and accurately recorded in the Company's books.’





A16:

Is the anti-corruption policy explicitly one of zero tolerance?

Score:

1

Comments:

Based on public information, there is no readily available evidence that the anti-corruption policy is explicitly one of zero tolerance. However, the company has a zero tolerance policy of violations of the Code of Business Ethics and Conduct, as shown by its explicit stance on disciplinary procedures in the event of a violation by any employee or director. The company therefore scores 1.

References:

Public:


‘1.1 General Prohibition: Company directors, officers and employees are prohibited from making a "bribe" - giving, offering or promising "anything of value" to a Government Official with the intent to obtain any "business or any other advantage". The above statement should be interpreted broadly.’


Elbit Systems Code of Business Conduct and Ethics (2013), pp.2-3:

‘Conflicts of interest are prohibited as a matter of policy… Use of company property or resources for political purposes is prohibited.’



‘Violations of the standards set out in this Code will be subject to disciplinary action. Compliance with Laws, Rules and Regulations You are required to comply with all applicable laws, governmental rules and regulations. This includes, but is not limited to regulations relating to the conduct of government tenders and procurement integrity. Although you are not expected to know the details of all applicable laws, rules and regulations, we expect you to be familiar with Elbit Systems published policies and procedures and to seek advice from our Legal Department if you have any questions about whether a legal requirement applies





to a particular situation or what conduct may be required to comply with any law, rule or regulation.’

(p.5): ‘Violations Will be Disciplined. Violation of any of the standards contained in this Code, or in any other policy, practice or instruction of Elbit Systems, can result in disciplinary actions, including dismissal and civil or criminal action against the violator.’





A17:

Is the company's anti-corruption policy easily accessible to Board members, employees, contracted staff and any other organisations acting with or on behalf of the company?

Score:

2

Comments:

Based on public information, there is evidence that the company’s Anti-Bribery Compliance Policy, Code of Business Conduct and Ethics, and Supplier Code of Conduct are available online. The Anti-Bribery Compliance Policy and Code of Ethics are available in English and Hebrew.

References:

Public:

Company website, Ethics and Conduct

http://www.elbitsystems.com/elbitmain/pages/CodeofConduct.asp

http://www.elbitsystems.com/elbitmain/pages/CodeofConduct.asp


A17(a):

Is the company’s anti-corruption policy easily understandable and clear to Board members, employees and third parties?

Score:

2

Comments:

Based on public information, there is evidence that the company’s Code of Business Conduct and Ethics, Anti-Bribery Compliance Policy and Supplier Code of Conduct are written in accessible, comprehensible language. The Code of Ethics provides detailed examples and all three documents provide clear definitions of key terminology.

References:

Public:

Elbit Systems Code of Business Conduct and Ethics (2013):


Elbit Systems Anti-Bribery Compliance Policy (2013):


Elbit Systems Supplier Code of Conduct (2014):








A18:

Does the anti-corruption policy explicitly apply to all employees and

members of the Board?

Score:

2

Comments:

Based on public information, there is evidence that the company’s anti-corruption policy explicitly applies to all employees and members of the Board.

References:

Public:

Elbit Systems Annual Report 2013 (F-20), p.94:

‘We have adopted a code of business conduct and ethics that is applicable to all our directors, officers and employees including our principal executive, financial and accounting officers and persons performing similar functions.’



‘This Policy applies to:-

All directors, officers and employees of Elbit Systems Ltd. and our major business divisions in Israel and our wholly-owned and/or controlled subsidiaries worldwide (collectively the Company). (Subsidiaries in the U.S. and in other countries outside Israel are required to adopt an anti-bribery policy consistent with this Policy as well as with applicable local laws and regulations relating to anti-bribery.)

Consultants and Representatives - consistent with section "Consultants and Representatives" below, compliance with anti-bribery laws will be reflected in Company agreements with consultants and representatives.

Subcontractors and Suppliers - as part of our Supplier Code of Conduct (see Subcontractors and Suppliers section below), subcontractors and suppliers are required to comply with applicable anti-bribery laws and regulations.’






‘2. Scope: You are subject to this Code if you are a director, officer or employee of Elbit Systems Ltd. or any of its wholly-owned subsidiaries (collectively referred to as "Elbit Systems"). In addition, this Code applies to your own actions as well as those you may conduct indirectly through relatives, friends or other personal relationships. We also expect our suppliers and vendors to comply with certain ethical standards as reflected in our "Supplier Code of Conduct", which may be found on Elbit Systems’ website: http://www.elbitsystems.com under “About – Ethics and Conduct” or “Investor Relations – Corporate Governance – Ethics and Conduct.’





A20:

Does the company have a policy on potential conflicts of interest, and does it apply to both employees and board members?

Score:

2

Comments:

Based on public information, there is evidence that the company has a policy on potential conflicts of interest, which includes a definition and examples.

References:

Public:

Elbit Systems Code of Business Conduct and Ethics (2013), p.2-3:

‘Conflicts of Interest: You should handle ethically any actual or apparent conflict of interest between your personal and business relationships. Conflicts of interest are prohibited as a matter of policy. A "conflict of interest" exists when a person's private interest interferes, or might reasonably be considered to interfere, in any way with the interests of Elbit Systems. A conflict situation arises if you take actions or have interests that interfere with your ability to perform your work for Elbit Systems objectively and effectively. Conflicts of interest also may arise if you, or a member of your family or other person affiliated with you as defined in Section 9.F below, receives an improper personal benefit as a result of your position with Elbit Systems. If you become aware of any transaction or relationship that reasonably could be expected to give rise to a conflict of interest, you should report it promptly to a member of the Legal Department, our Chief Compliance Officer, Elbit Systems’ President or as otherwise provided in the Whistle-blower process attached to this Code. The following are examples of standards applying to certain common situations where potential conflicts of interest may arise. These examples should also be read in light of indirect violations as described in Section 9.F below.

A. Gifts, Entertainment and Other Personal Benefits. Personal gifts, entertainment or other benefits may only be offered or accepted by persons doing business with or on behalf of Elbit Systems if done in a reasonable way in the ordinary course of the business relationship. In addition, the frequency and cost of any such gifts, entertainment or personal benefits should be in nominal amounts/value only so as not to affect, or appear to affect, the ability to exercise independent business judgment. See also the busines entertainment and gifts provisions in our Anti-Bribery Compliance Policy referred to in Section 7 above.

B. Financial Interests in Other Organizations. The determination whether any outside


investment, financial arrangement or other interest in another organization is improper depends on the facts and circumstances of each case. Your ownership of an interest in another organization may be inappropriate if the other organization has a significant business relationship with, or is a direct competitor of, Elbit Systems. In such case your financial interest would likely be inappropriate if it is of such a size that your ability to exercise independent judgment on behalf of Elbit Systems is or may appear to be compromised. As a general rule, a passive investment would not likely be considered improper if it: (1) is in publicly traded shares; (2) represents less than 1% of the outstanding equity of the organization in question; and (3) represents less than 5% of your net worth. Other interests also may not be improper, depending on the circumstances.

C. Outside Business Activities. The determination of whether any outside position an employee may hold is improper will depend on the facts and circumstances of each case. Your involvement in trade associations, professional societies, and charitable and similar organizations normally does not create a conflict of interest. However, if those activities are likely to take substantial time from or otherwise conflict with your responsibilities to Elbit Systems, you should obtain prior approval from your supervisor. For a director, employment or affiliation with an organization with which Elbit Systems does business or competes must be fully disclosed to our Board of Directors and Chief Compliance Officer and must satisfy any other standards established by applicable law, rules (including rules of any applicable stock exchange) or regulation and any other corporate governance guidelines that Elbit Systems may establish.

D. Corporate Opportunities. You are prohibited from exploiting for your personal advantage, opportunities that are discovered through the use of company resources, information or position, unless all required approvals are obtained. Similarly, you may not compete with Elbit Systems. You owe a duty to advance Elbit Systems’ legitimate interests whenever the opportunity to do so arises.

E. Hiring Process. Hiring decisions should be made solely on business rather than personal considerations. In addition, situations that could be viewed as nepotism, such as the hiring of close family members of directors, officers or employees in particular situations, should be avoided. Hiring persons previously employed by organizations that have a business affiliation with Elbit Systems should be reviewed in advance with the Human Resources and Legal Departments in order to avoid inappropriate or improper situations. Such organizations include independent auditors, other service providers, subcontractors, customers, end users and competitors.

F. Indirect Violations. You should not indirectly (such as through a spouse, family member, affiliate, friend, partner, associate or an entity with which you have an active or significant business or financial relationship) have any interest or engage in any activity that would violate this Code if you directly had the interest or engaged in the activity. Any such relationship should be fully disclosed to a member of the Legal Department, our Chief Compliance Officer or President (and in the case of a director to the Board of Directors), in order to determine whether the relationship is inappropriate based upon the standards of this Code.’





A21:

Does the company have a policy for the giving and receipt of gifts to ensure that such transactions are bona fide and not a subterfuge for bribery?

Score:

2

Comments:

Based on public information, there is evidence that the company has a policy for the giving and receiving of gifts and has set upper limits along with senior authorisation. TI notes that the provisions for the giving of gifts, as outlined in the Anti-Bribery Compliance Policy, are more detailed than those for the receipt of gifts.

References:

Public:





‘Gifts may only be given to Government Officials if they are of token or nominal value, are legal and customary in the jurisdiction in which they are given and in the jurisdiction in which the recipient of the gifts resides, and are given openly to the Government Official.

Pre-approval is not required for items with the Company logo or gifts valued at less than U.S. $100, but the expenses for such gifts must be supported by receipts and accurately recorded in the Company's books.’






A22:

Does the company’s anti-corruption policy include a statement on the giving and receipt of hospitality that ensures that such transactions are bona fide and not a subterfuge for bribery?

Score:

2

Comments:

Based on public information, there is evidence that the company has a policy which sets upper limits and procedures for senior authorisation for the giving and receipt of hospitality, under the terms of travel expenses and business entertainment. TI notes that the provisions for the giving of hospitality, as outlined in the Anti-Bribery Compliance Policy, are more detailed than those for the receipt of hospitality or other benefits.

References:

Public:


‘Company employees may only entertain Government Officials in situations where there is a valid business purpose and the entertainment is reasonable in view of such business purpose. Entertainment must provide an opportunity to address business issues and must not be lavish or otherwise prove embarrassing for the Company.

Business entertainment for Government Officials that meets the standards set forth above is permitted if it does not exceed U.S. $300 in value per person per occasion, and the employee arranging for such entertainment promptly thereafter submits documentation of the business entertainment and expense to his/her supervisor and to the finance department in accordance with applicable Company procedures for reimbursement of business expenses.

If the amount of the business entertainment is more than U.S. $300 per person per occasion, it is only permitted upon the approval of the applicable division general manager (or relevant Elbit Systems executive vice president if not related to a particular division). Amounts greater than U.S. $750 per person per occasion must also receive approval of the CCO.

Payment of travel expenses, including food and lodging, for Government Officials is permissible only if directly related to the promotion or demonstration of Company business, or related to the performance of a contract to which the Company is a party. Expenses beyond what is reasonably necessary for the business purpose, such as lavish


accommodations or expenses for spouses and children, are not permitted.’









A23:

Does the company have a policy that explicitly prohibits facilitation payments?

Score:

1

Comments:

Based on public information, there is evidence that the company explicitly prohibits facilitation payments. However, there is no readily available evidence that the company provides guidance or supplementary information on how this is to be implemented in practice. The company therefore scores 1.

References:

Public:


‘1.2 Facilitation Payments

Facilitation or "grease" payments are small payments to a low-level Government Official to expedite or secure performance of a routine, non-discretionary governmental action, such as obtaining utility services or clearing customs. Such payments are prohibited under Israeli law and are against Company policy.’




A24:

Does the company prohibit political contributions, or regulate such contributions in order to prevent undue influence or other corrupt intent? Does the company record and publicly disclose all political contributions?

Score:

1

Comments:

Based on public information, there is some evidence that the company prohibits political contributions. Specifically, the Code of Business Conduct and Ethics states that it is not the company’s policy to promote specific political affiliations, or use company property or resources for political purposes. However, the Social Sustainability Report states that the company’s general policy is not to make donations to political or politically affiliated organisations. This suggests that there may be exceptions to the general policy. The company therefore scores 1.

References:

Public:


‘Elbit Systems policy is not to promote specific political affiliations. However, you are free to engage in political activities on your personal time so long as those activities do not interfere with your work for Elbit Systems, and you do not involve or associate Elbit Systems in those activities in any way. Use of company property or resources for political purposes is prohibited.’



‘Elbit Systems’ general policy is not to make donations to political or

politically affiliated organizations.’






A25:

Does the company have a clear policy on engagement in lobbying activities, in order to prevent undue influence or other corrupt intent, and discloses the issues on which the company lobbies?

Score:

0

Comments:

Based on public information, there is evidence that the Supplier Code of Conduct prohibits members of the Supply Chain from engaging in lobbying activities designed to influence government policies. Beyond this, TI has found no readily available evidence of clear policies on engagement in lobbying activities.

References:

Public:


‘Members of our Supply Chain are not authorized, directly or through others, to engage in lobbying activites designed to influence government policies, or the award of administration of government contracts, on our behalf of our projects without prior approval by Elbit Systems' Chief Compliance Officer.’





A25(a):

Does the company prohibit charitable contributions, or regulate such contributions in order to prevent undue influence or other corrupt intent?

Score:

1

Comments:

Based on public information, there is evidence that the company makes charitable contributions and appears to regulate them. It is not clear that all contributions are publicly disclosed. The company therefore scores 1.

References:

Public:


‘We do our best to support the communities in which we operate and live, through charitable donations to social welfare and environmental causes and through encouraging our employees, wherever they are, to get involved and donate their time to improve local community well being and quality of life. We encourage employees by al lowing paid time for volunteering, providing funding for certain support activities and offering training where necessary. Globally, each of our subsidiary companies around the world determines its own level of involvement based on local needs, partnerships and employee preferences. We do not track all of these activities in a comprehensive way, though we endeavor to ensure that all our employees around the world have opportunities to get involved and make a contribution to their community. In general, we tend to focus our community support efforts in areas where we have relevant core skills that we can offer, and also, in response to a common need in the countries in which we operate: supporting technological education.

Charitable Donations and Volunteering: Our global community investment, with a focus on technological education, amounted to approximately U.S. 1$ million in 2012, including charitable donations, in-kind donations of equipment and services, and the value of employee volunteering time. Total volunteering hours for our employees around the world was close to 13,000 hours in 2012. Elbit Systems’ general policy is not to make donations to political or political ly affiliated organizations.’




A26:

Does the company provide written guidance to help Board members and

employees understand and implement the firm’s ethics and anti-corruption

agenda?

Score:

1

Comments:

Based on public information, there is evidence that the Code of Business Conduct and Ethics provides written guidance and examples to help Board members and employees understand and implement the firm’s ethics and anti-corruption agenda. The Anti-Bribery Compliance Policy provides detailed information on relevant legislation and definitions of key terminology, and the Supplier Code of Conduct also provides some clarification on relevant company policies. However, there is no further evidence of scenarios or case-studies to assist emplooyees and Board members in their understanding of the ethics and anti-corruption agenda. The company therefore scores 1.

References:

Public:




‘Summary of What You Are Expected To Know and Do

A. Be Familiar with the Code. You are expected to be familiar with this Code and other related company policies and procedures.

B. The Code is Only a General Guideline. This Code is intended as a statement of basic principles and standards and does not include specific rules that apply to every situation. The Code also should be viewed within the framework of our other policies, procedures, practices, instructions and the requirements of the law. In addition, the absence of a specific corporate policy, procedures, practice or instruction covering a particular situation does not relieve you of the responsibility for acting ethically under the circumstances.

C. Checklist of Things to Consider. In many situations it may be difficult to know the proper course of action. Because this Code does not anticipate every situation that may arise, it is important that you approach a new question or problem in a deliberate fashion: (1)



Determine if you know all the facts and identify exactly what it is that concerns you. (2) Discuss the problem with a supervisor or a member of the Legal Department, or if you are an executive officer or director, with the Chief Compliance Officer. (3) Seek help from other resources such as other management personnel. (4) Seek guidance before taking any action that you believe may be, or may appear to be, unethical or improper.

D. The Standards to Which You Will be Held. You are expected to meet the following compliance standards: (1) You are personally responsible for your own conduct and for complying with all provisions of this Code and for properly reporting known or suspected violations. (2) If you are a supervisor, manager or officer, you should use your best efforts to ensure that employees understand and comply with this Code. (3) No one has the authority or right to order, request or even influence you to violate this Code or the law. A request or order from another person will not be an excuse for your violation of this Code. (4) Any attempt by you to induce a director, officer or employee of Elbit Systems to violate this Code, whether successful or not, is itself a violation of this Code and may be a violation of law. (5) Any retaliation or threat of retaliation against any director, officer or employee of Elbit Systems for refusing to violate this Code, or for reporting in good faith the violation or suspected violation of this Code, is itself a violation of this Code and our Whistle-blower process and may be a violation of law.

E. Violations Will be Disciplined. Violation of any of the standards contained in this Code, or in any other policy, practice or instruction of Elbit Systems, can result in disciplinary actions, including dismissal and civil or criminal action against the violator.’









A27:

Does the company have a training programme that explicitly covers anti-corruption?

Score:

2

Comments:

Based on public information, there is evidence that the company provides employees with training regarding the Anti-Bribery Compliance Policy and the Code of Ethics and Business Conduct.

References:

Public:


‘Employees will be provided training regarding the Company’s anti-bribery compliance policy.’


Elbit SystemsElbit Systems Social Sustainability Report (2012), p.70:

‘Ethics Training

All our employees are required to become familiar with our Ethics Code. Ethics training is conducted both as part of the employee new hire orientation process as well as in ongoing training sessions at various levels of the organization. The Code is available in several organizational communication channels, including El bit Systems’ Employee Intranet Portal. The Code has also been translated into languages applicable to several of our worldwide subsidiaries, and ethics training is provided in the language applicable to each operating subsidiary. An updated new version of our Ethics Code training module was launched in Israel in 2012. At Elbit Systems of America (ES A), during 2011 and 2012, a special focus was made on embedding an ethical culture at the middle management level, empowering managers to have necess ary conversations about ethics issues. The program involved visible executive leadership with meetings at our U.S. sites, including specially prepared ethical dilemmas for managers to use in employee training and discussions. Attendance at the management and training sessions was tracked by ESA’s learning management system. Ethics representatives were appointed at each site



and help organize the quarterly training and discussion sessions.’




A28:

Is anti-corruption training provided in all countries where the company operates or has company sites?

Score:

2

Comments:

Based on public information, there is evidence that the company provides ethics training for all new employees. Training is available via several channels and is provided in the language applicable to each operating subsidiary. The Code of Ethics and Business Conduct has also been translated into languages applicable to several worldwide subsidiaries.

References:

Public:


‘Ethics Training: All our employees are required to become familiar with our Ethics Code. Ethics training is conducted both as part of the employee new hire orientation process as well as in ongoing training sessions at various levels of the organization. The Code is available in several organizational communication channels, including El bit Systems’ Employee Intranet Portal. The Code has also been translated into languages applicable to several of our worldwide subsidiaries, and ethics training is provided in the language applicable to each operating subsidiary. An updated new version of our Ethics Code training module was launched in Israel in 2012. At El bit Systems of America (ES A), during 2011 and 2012, a special focus was made on embedding an ethical culture at the middle management level, empowering managers to have necessary conversations about ethics issues. The program involved visible executive leadership with meetings at our U.S. sites, including specially prepared ethical dilemmas for managers to use in employee training and discussions. Attendance at the management and training sessions was tracked by ESA’s learning management system. Ethics representatives were appointed at each site and help organize the quarterly training and discussion sessions.’




A29:

Does the company provide targeted anti-corruption training to members of the Board?

Score:

1

Comments:

Based on public information, there is evidence that Board members were trained on the Code of Ethics in 2009/2010. However, it is not clear that this training has been refreshed since then. The company therefore scores 1.

References:

Public:


‘In 2009, Elbit developed and implemented a specific virtual training module in Israel covering the Ethics Code, and during 2009/2010 all Company Board members, Executive Management and over 10,000 employees undertook this training. The module provides user friend ly examples for resolving ethical dilemmas covered by our Code. The Code has also been translated into languages applicable to several of our worldwide subsidiaries, and ethics training is provided in the language applicable to each operating subsidiary.’

http://elbitsystems.com/Elbitmain/files/ElbitSystemsCRR.2011.pdf


‘At El bit Systems of America (ES A), during 2011 and 2012, a special focus was made on embedding an ethical culture at the middle management level, empowering managers to have necess ary conversations about ethics issues. The program involved visible executive leadership with meetings at our U.S. sites, including specially prepared ethical dilemmas for managers to use in employee training and discussions. Attendance at the management and training sessions was tracked by ES A’s learning management system. Ethics representatives were appointed at each site and help organize the quarterly training and discussion sessions.’


http://elbitsystems.com/Elbitmain/files/ElbitSystemsCRR.2011.pdf



A30:

Does the company provide tailored ethics and anti-corruption training for employees in sensitive positions?

Score:

0

Comments:

Based on public information, there is evidence that the company attempted to embed an ethical culture at middle management level at Elbit Systems of America in 2011 and 2012. Beyond this, TI has found no readily available evidence of tailored ethics and anti-corruption training for employees in sensitive positions.

References:

Public:

TI notes:


‘ At El bit Systems of America (ES A), during 2011 and 2012, a special focus was made on embedding an ethical culture at the middle management level, empowering managers to have necess ary conversations about ethics issues. The program involved visible executive leadership with meetings at our U.S. sites, including specially prepared ethical dilemmas for managers to use in employee training and discussions. Attendance at the management and training sessions was tracked by ES A’s learning management system. Ethics representatives were appointed at each site and help organize the quarterly training and discussion sessions.’




A31:

Does the company have a clear and formal process by which employees declare conflicts of interest?

Score:

2

Comments:

Based on public information, there is evidence that the company has a formal process by which employees declare conflicts of interest to an independent Legal department.

References:

Public:


‘If you become aware of any transaction or relationship that reasonably could be expected to give rise to a conflict of interest, you should report it promptly to a member of the Legal Department, our Chief Compliance Officer, Elbit Systems’ President or as otherwise provided in the Whistle-blower process attached to this Code.’

(p.4): ‘Code Interpretations and Approvals

If it is not clear to you whether a particular activity or relationship is improper or if an approval is required under this Code or other related policies or procedure, you should disclose it to a member of the Legal Department, our Chief Compliance Officer or President (and if you are a director to the Board of Directors). A determination will then be made as to whether there is a violation of the Code or whether an approval can be granted. You may be required to agree to conditions before receiving any required approval. Approvals granted to an executive officer or director may be subject to regulatory disclosures and other requirements.’





A32:

Is the company explicit in its commitment to apply disciplinary procedures to employees, Directors and Board members found to have engaged in corrupt activities?

Score:

2

Comments:

Based on public information, there is evidence that the company is explicit in its commitment to apply disciplinary procedures to those who violate the Code of Ethics and Business Conduct.

References:

Public:

Elbit Systems Annual Report 2013 (F-20), p.94:

‘We have adopted a code of business conduct and ethics that is applicable to all our directors, officers and employees including our principal executive, financial and accounting officers and persons performing similar functions.’



‘This Policy applies to:-

All directors, officers and employees of Elbit Systems Ltd. and our major business divisions in Israel and our wholly-owned and/or controlled subsidiaries worldwide (collectively the Company). (Subsidiaries in the U.S. and in other countries outside Israel are required to adopt an anti-bribery policy consistent with this Policy as well as with applicable local laws and regulations relating to anti-bribery.)


‘Violations of the standards set out in this Code will be subject to disciplinary action. Compliance with Laws, Rules and Regulations You are required to comply with all applicable laws, governmental rules and regulations. This includes, but is not limited to regulations relating to the conduct of government tenders and procurement integrity. Although you are not expected to know the details of all applicable laws, rules and regulations, we expect you



to be familiar with Elbit Systems published policies and procedures and to seek advice from our Legal Department if you have any questions about whether a legal requirement applies to a particular situation or what conduct may be required to comply with any law, rule or regulation.’

(p.5): ‘Violations Will be Disciplined. Violation of any of the standards contained in this Code, or in any other policy, practice or instruction of Elbit Systems, can result in disciplinary actions, including dismissal and civil or criminal action against the violator.’





A33:

Does the company have multiple, well-publicised channels that are easily accessible and secure, to guarantee confidentiality or anonymity where requested by the employee (e.g. web, phone, in person), to report concerns or instances of suspected corrupt activity?

Score:

1

Comments:

Based on public information, there is evidence that the company has multiple, well-publicised, internal channels, for employees to report concerns or suspected illegal activity. However, there is no evidence that the company provides an externally operated whistleblowing channel. The company therefore scores 1.

References:

Public:


‘Reporting Concerns or Complaints: Taking action to prevent ethical problems is a critical part of our ethics policy. If you observe any conduct that you suspect may be illegal or in violation of the Code, you should report your concerns. You are encouraged to provide relevant information relating to such suspicions, without regard to the position held by the suspected offender. This includes, among other matters described in the Code, any suspected violations of our standards for financial reporting and internal controls. You are requested to notify in writing Elbit Systems' Executive Vice President, Chief Compliance Officer and Senior Counsel, David Block Temin, with any information, complaint or concern regarding suspected legal or ethical violations by:

Telephone: (972)-(04)-8316626



If you prefer you may instead notify in writing at the above mailing address any member of the Audit Committee of Elbit Systems' Board of Directors – Yehoshua Gleitman (Chairman), Yigal Ne'eman, Avraham Asheri, Moshe Arad or Dalia Rabin. The email address for notification to the Chairman of the Audit Committee is: [email protected]. In order to be better able to respond to any information, we would prefer that you identify yourself and give us your telephone number and other contact information when you make your report.


However, we will accept anonymous reports if you so choose.”

“Confidentiality: All notices, reports and information received under this process will be treated in a confidential manner. Every reasonable effort will be made to handle the matter with discretion and to protect the identity of those who make reports as well as those who are being investigated. However, if necessary to conduct a proper review or to comply with legal requirements, our Audit Committee, independent accountants or others may become involved in the review process. Also, if it becomes apparent that there has been a violation of law notifications may be made to the appropriate authorities.’





A33(a):

Are the whistleblowing channels available to all employees in all geographies?

Score:

2

Comments:

Based on public information, there is evidence that the company’s whistleblowing channels can be accessed via post, email and phone. Employees are invited to report via the Senior Counsel or any member of the Audit Committee from any location.

References:

Public:


‘Reporting Concerns or Complaints: Taking action to prevent ethical problems is a critical part of our ethics policy. If you observe any conduct that you suspect may be illegal or in violation of the Code, you should report your concerns. You are encouraged to provide relevant information relating to such suspicions, without regard to the position held by the suspected offender. This includes, among other matters described in the Code, any suspected violations of our standards for financial reporting and internal controls. You are requested to notify in writing Elbit Systems' Executive Vice President, Chief Compliance Officer and Senior Counsel, David Block Temin, with any information, complaint or concern regarding suspected legal or ethical violations by:

Telephone: (972)-(04)-8316626



If you prefer you may instead notify in writing at the above mailing address any member of the Audit Committee of Elbit Systems' Board of Directors – Yehoshua Gleitman (Chairman), Yigal Ne'eman, Avraham Asheri, Moshe Arad or Dalia Rabin. The email address for notification to the Chairman of the Audit Committee is: [email protected]. In order to be better able to respond to any information, we would prefer that you identify yourself and give us your telephone number and other contact information when you make your report. However, we will accept anonymous reports if you so choose.’





A33(b):

Does the company have formal and comprehensive mechanisms to assure itself that whistleblowing by employees is not deterred, and that whistleblowers are treated supportively?

Score:

0

Comments:

Based on public information, there is some evidence of efforts by the company to ensure whistleblowing is not deterred. However, there is no readily available evidence of formal and comprehensive mechanisms to ensure that whistleblowers are treated supportively, such as detailed analysis of whistleblowing data or independent employee surveys.

References:

Public:

TI notes:


‘The Company will protect any person who pursuant to this Code and in good faith reports a potential ethics matter. The Company will not take any retaliatory actions against such persons.’

(p.5): ‘Any retaliation or threat of retaliation against any director, officer or employee of Elbit Systems for refusing to violate this Code or for reporting in good faith the violation or suspected violation of this Code, is itself a violation of this Code and our Whistle-blower process and may be a violation of law.’

(p.6): ‘All notices, reports and information received under this process will be treated in a confidential manner. Every reasonable effort will be made to handle the matter with discretion and to protect the identity of those who make reports as well as those who are being investigated. However, if necessary to conduct a proper review or to comply with legal requirements, our Audit Committee, independent accountants or others may become involved in the review process. Also, if it becomes apparent that there has been a violation of law notifications may be made to the appropriate authorities…


Elbit Systems policy is to protect anyone who in good faith:

(1) reports a possible violation of law or the Code,

(2) reports any other concerns regarding questionable practices, or

(3) assists in the investigation of a reported violation.

This is the case whether or not it turns out that the report is mistaken. Retaliation in any form against someone who takes such actions will not be tolerated. Any act of retaliation should be reported immediately and will be investigated.”





A34:

Does the company have well-publicised resources available to all employees where help and advice can be sought on corruption-related issues?

Score:

1

Comments:

Based on public information, there is evidence that the company has a Chief Compliance Officer from whom employees can seek guidance on corruption-related issues. However, this resource is limited in nature since it involves just one person. The company therefore scores 1.

References:

Public:


‘Where to Go With Questions.

All employees should be familiar with this Code and other applicable company policies and procedures, which are published on our internal computer network. The Code may also be found on Elbit Systems' website: http://www.elbitsystems.com under “About – Ethics and Conduct” or “Investor Relations – Corporate Governance – Ethics and Conduct”. If you have any doubts regarding whether a particular situation might violate our ethics standards, or if you have any other questions regarding ethics issues, you should contact in writing Elbit Systems' Chief Compliance Officer or otherwise through our "Whistle-blower" process as further described below. The matter will be reviewed and appropriate action will be taken consistent with this Code, other company policies and procedures and applicable law.’






A35:

Is there a commitment to non-retaliation for bona fide reporting of corruption?

Score:

1

Comments:

Based on public information, there is evidence that the company has a clear, legally-enforceable, non-retaliation policy for bona fide reporting of corruption. Although, the policy mentions investigating reported acts of retaliation, there is no readily available evidence that disciplinary measures are applied to employees who breach the policy. The company therefore scores 1.

References:

Public:


‘The Company will protect any person who pursuant to this Code and in good faith reports a potential ethics matter. The Company will not take any retaliatory actions against such persons.’

(p.5): ‘Any retaliation or threat of retaliation against any director, officer or employee of Elbit Systems for refusing to violate this Code or for reporting in good faith the violation or suspected violation of this Code, is itself a violation of this Code and our Whistle-blower process and may be a violation of law.’

(p.6): ‘All notices, reports and information received under this process will be treated in a confidential manner. Every reasonable effort will be made to handle the matter with discretion and to protect the identity of those who make reports as well as those who are being investigated. However, if necessary to conduct a proper review or to comply with legal requirements, our Audit Committee, independent accountants or others may become involved in the review process. Also, if it becomes apparent that there has been a violation of law notifications may be made to the appropriate authorities… Elbit Systems policy is to protect anyone who in good faith:

(1) reports a possible violation of law or the Code,

(2) reports any other concerns regarding questionable practices, or


(3) assists in the investigation of a reported violation.

This is the case whether or not it turns out that the report is mistaken. Retaliation in any form against someone who takes such actions will not be tolerated. Any act of retaliation should be reported immediately and will be investigated.’





Information Sources:

Company website:

https://www.elbitsystems.com/elbitmain/







Social Sustainability Report (2012):


2013 Annual Report:


https://www.elbitsystems.com/elbitmain/












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