Abstract:
In recent years, the global defence market has changed, shifting from a seller’s market,
with limited suppliers facing a high demand, to a buyer’s market, in which growing numbers
of suppliers compete for limited sales. In this intensely competitive environment, exporters
sell arms not only on the basis of price and quality, but also on the attractiveness of
the parallel offset package. Offset, crudely defined as ‘reciprocal investment’, is allegedly
prone to corruption. This debate has sparked a global controversy, and likely changed European
offset policy, albeit that no hard data exists to support the case that offset is tainted
with corruption. A 2010 Transparency International Report argued that corruption is endemic
in offset programmes, but the evidence advanced by the report confuses defence
procurement with offset. Thus, the jury is still out as to whether corruption practices
are part and parcel of offset arrangements. Accordingly, the purpose of this study is to
determine the nature and extent of corruption in UK defence offset programmes. Due
to the sensitivity of the topic, it was felt appropriate to focus attention on ethical compliance
as the primary research objective, and its application to offset as the secondary
goal. Senior representatives from three of the UK’s top aerospace and defence companies
were interviewed to establish the nature and degree of corporate ethical compliance at the
corporate, national and international levels. Analysis of the interview data was framed
against the 2008 Woolf Report recommendations. The overall research findings suggest
that the UK companies operate a rigorous and robust set of ethical compliance measures,
covering commercial activities, including offset. This supports a conclusion that broad-based
UK defence-related ethical compliance procedures are some of the most stringent
in the world. Whilst corruption allegations still surface, they are rooted in historical arms
deals contracted before implementation of the Woolf Reports recommendations.
