Dr. London FEI Monthly Dinner Speech, 4/21/09

Executive Chairman and Chairman of the Board, Dr. Jack London spoke about the company's successes and challenges at the District of Columbia chapter of Financial Executives International (FEI) monthly dinner meeting. FEI is the preeminent association for CFOs and other senior finance executives. Over 50 FEI members attended the April 21 meeting at the Tower Club, where Dr. London spoke about the principles of accountability, CACI values driven culture and the role they played in dealing with the Abu Ghraib crisis. The following are Dr. London's remarks:

Thank you for having me here tonight. In particular, I would like to thank Vern McHargue for his invitation.

Irresponsibility. Ignorance. Negligence. Greed. Just a few of the reasons why we're in such a big mess today. As senior financial executives, no one better understands the challenges we face as our nation tries to move from economic crisis to economic recovery.

The U.S. federal budget deficit is set to be $1.75T in FY 2009 and $1.17T FY 2010. We have amassed over $11T in national debt – that's over $36,000 per American. Unemployment currently stands at 8.5% – that's over 13 million jobless Americans.

From Enron, to AIG, to Detroit auto makers – and even companies of smaller size – there were way too many corporate leaders who took way too many risks and took way too much for granted. At the consumer level, Americans over borrowed and overspent. One might say they did so recklessly – even without regard for accountability.

While our country faces a number of truly significant challenges – financial, energy, environment and national security, there is one challenge we have ignored for far too long. In my view, it's the challenge of accountability. And I'm talking about the accountability of individuals, and of organizations – both in government and in commerce.

Scottish writer Robert Louis Stevenson once said, "Everyone sooner or later sits down to a banquet of consequences." But no one seems to want to take responsibility for these consequences – no one wants to be accountable. For example, it was sadly amusing to see home buyers and lenders blame each other for the bad mortgages – that both sides surely knew were unaffordable. And how many more corporate executives will come to Washington looking to the government for a bailout, a hand out, for their failing companies? You'd think that the doors to the U.S. Treasury had been thrown wide open!

And we also suffer from an irrational semblance of accountability. So what do I mean by semblance? Well, let's look at it. First, the court of public opinion – and the media – quickly assign blame and guilt, often despite a lack of evidence – it's the rush to judgment fallacy. Second, accountability only seems to be of importance during times of crisis. And then the attention is usually to fault and blame someone, rather than praise someone's good efforts.

But don't we usually get it right? Doesn't everything work out in the end? Well, the answer is no! But, let me give you some examples why the answer is no.

Do you remember a man by the name of Richard Jewell? He was accused of the 1996 Atlanta Olympic plaza bombings. It turned out, of course, that the FBI was hasty with its profiling and the media jumped on Jewell for the crime. And Richard Jewell was still in litigation against an Atlanta paper to clear his name when he died in 2007.

How about the rape accusations against the Duke lacrosse players? It turned out, of course, that an overzealous DA (by the name of Mike Nifong) decided to make a name for himself, even though the alleged victim's fabricated story quickly fell apart. But the media thrived on the story. The team had to forfeit its season. Players had to transfer schools. The coach lost his job. None of it was true.

Do you remember the accusations of Korans being flushed down toilets at Guantanamo Bay? The media had a field day taking the military to task. But, of course, none of it was true! And at least 17 people died in anti-American protests in Afghanistan as a result.

With tragic consequences like these I ask, where is the accountability?

Clearly, our society needs to improve its sense of responsibility. We need a serious turnaround here. We need to reinstall, recognize and reward the virtues of good behavior – even when no one is looking. It has been said that the measure of virtue is how one behaves when no one is looking. Today, it seems, the challenge is extraordinary indeed.

So, what's a company to do? As financial leaders, you are certainly aware of fiduciary responsibilities. But as industry and company leaders, you can also be a part of meeting this greater challenge. It's actually easier than you think: Just "do the right thing"!

If I have learned anything in my nearly four decades in business, it is this: Without a solid, ethical and accountable corporate culture, you will not succeed. And by succeed, I mean to continue to grow profitably, deliver quality and be respected by clients and peers alike – year after year.

By the way, just so we are all on the same page, Webster's dictionary defines accountability as "an obligation or willingness to accept responsibility, or to account for one's actions." And to make the point crystal clear: Just look at Enron and WorldCom. What would the employees, the former employees, of Lehman Brothers or Bear Sterns tell us now? How about their shareholders, creditors and business associates? I believe they would tell you the same thing I am telling you now – culture counts. Whether it's a culture of doing the right thing… or just a culture of making a fast buck.

Over the past 47 years CACI has grown based on a strong corporate culture and a steadfast commitment to "doing the right thing." As a publicly traded company, CACI has a fiduciary responsibility to its shareholders. But even before CACI was listed on a stock exchange we felt a strong obligation to seek the best interests of our military customers. We also felt an obligation to do the right thing by the American people, and the American tax payer, which, let's not forget, includes each one of us.

So, why is culture so important? Culture defines shared values, goals and behavior. It sustains focus both on what to do and how to do it. And culture positions every member of the team in the values they need to get the job done successfully. For example, it's about

  • how you will conduct yourself representing your organization
  • how bold you will be in seizing new opportunities
  • how you will tackle challenges and behave in the face of adversity
  • and it's about how you will lead your teams to achieve their best, for your company and for your clients.

Throughout all the many changes in our industry we have always relied on our culture to tell us how to respond. In fact, I remember reading Tom Peters' and Robert Waterman's renowned book, In Search of Excellence in the 1980s. One of their eight main themes was to be "hands-on and value-driven." They believed that the right values, clearly expressed by leaders, defined the organization. And that action, and not just organizational policies, is what creates a culture of shared values. And why did they think this was so important? Because, "The top companies make meaning, not just money."

Today at CACI, CEO Paul Cofoni continues to set the example. His motto, seen and spoken in each of his employee communications is "Be the very best." Not only do we believe our culture is our competitive advantage, we believe CACI's culture is our road map for success!

A strong corporate culture can create an ethical, accountable environment. But ethical behavior comes down to individual choices. As PricewaterhouseCoopers CEO, Sam DiPiazza, once said, "It has become dramatically clear that the foundation of corporate integrity is personal integrity." I totally agree with Sam.

And here's a story from antiquity that proves the point. The ancient Romans had a tradition. Whenever one of their engineers constructed an arch, as the capstone was hoisted into place, the engineer assumed accountability for his work in the most profound way possible: he stood under the arch. We might say that's putting your whole "heart and soul" into the issue of accountability!

Personal integrity starts with the leaders of the organization. As leaders, you must

  • Align your company's culture and its strategy
  • Clearly communicate your culture and values.
  • Set an example, and
  • Reward those employees who best represent your values in their behavior and achievements.

Even as members of FEI, you have a code of ethics. It begins by stating, "Act with honesty and integrity…" and ends with reminding members to "Be accountable for adhering to this code."

But as we all know, businesses operate in a broader environment. There are many players and forces at play; the government, the media and the public, just to name a few. You've got to remain aware of these stakeholders, as their behavior and perceptions will affect you, often more than what you do or say. So while an ethical corporate culture is a strong foundation, the true measure of a successful company is how it responds when that foundation is tested… when the barbarians are at the gate! And BIG TIME!

The importance of our culture became evident in 2004 with Abu Ghraib when who we are and everything we had accomplished was tested. And talk about BIG TIME! Friends and colleagues… it doesn't come any BIGGER!

In April 2004 CACI was thrust into the international spotlight when an illegally leaked army investigative report, given to Seymour Hersh of the New Yorker magazine, cast "suspicion" on one of our employees for being "either directly or indirectly responsible" for the mistreatment of detainees at Abu Ghraib prison. And that's a really big accusation! At the same time, photos from that dismal and overcrowded prison, depicting the abuses, were shown on national television by CBS and tarnished anyone associated with Abu Ghraib – including CACI. And overnight the whole world knew about it too!

What followed was a salacious feeding frenzy rarely seen by any company in recent decades. A rampaging media and a hodgepodge of pundits twisted the unsupported and unfounded allegations of torture and abuse into a guilty verdict without regard for the facts or the truth. The distorted (and exaggerated) reports created a damning public perception of CACI at the time. We faced wide-ranging government investigations and scrutiny by our shareholders. Abu Ghraib also made CACI a target for misplaced anger and politically driven criticism that put our company's dedicated employees and excellent reputation – even our future – at risk.

We had always relied on our values to guide us to do the right thing, and this time it provided the moral compass we needed to navigate through the crisis. I might add, CACI has had very few contractor performance issues in our 47-year history and none of any real consequence – a fact about which our people are quite proud. So, the basic value structure of wanting to "do the right thing" wasn't slapped together on the fly.

In addition to everything else, our responsibility was to protect and sustain the livelihoods of our then 10,000 employees, the investments of our shareholders and – most importantly – the vital work we performed for our valued military and government clients. Our culture was the foundation for doing so.

The first of CACI's Ten Business Values is to "Place integrity and honesty above all else." So, we quickly resolved to acknowledge the Abu Ghraib allegations, but we would not comment on anything that wasn't fact. We also made it very clear that we would not condone or tolerate illegal or inappropriate behavior by any employee engaged in any CACI business. Period! If someone was shown to have broken the law, we would respond accordingly to "do the right thing."

We had an obligation to inform our clients, employees and our investors about what was happening. So getting the facts – as best as we could – and setting the record straight was paramount. (By the way: These corporate value statements were all in writing and published in the company in the mid-1980s… and have been part of our value system since the beginning.)

As our initial crisis response guide, we used the lessons learned from the Tylenol poisoning crisis in 1982 to frame our actions. In this medicine bottle tampering crisis where seven people were killed, one of Johnson & Johnson's corporate guidelines was to put people first – to put their customers first. They cooperated with authorities and kept the public informed. And this is exactly what CACI did, too.

We developed an overall hyper-crisis management strategy that addressed the various challenges and stakeholders in the crisis.

We first reached out to our employees and clients. Our employees needed to be reassured that we were working on the case. Moreover, CACI employees needed to be equipped with the facts so they could brief our clients when and where needed.

We also assigned key CACI executives to talk individually to some 100 clients with our major contracts. We wanted to keep them updated on our crisis response efforts, and to answer questions about any potential impact on their projects. It was also important to reach out to our Army clients in Iraq so we could get the facts from the people on the ground who were familiar with the events at Abu Ghraib.

Our strategy also included keeping our investors and industry analysts up to date, pushing back against the many errors, distortions and misinformation in the media. We launched an aggressive response campaign and brought in crisis response specialists (consultants) to augment our efforts in areas where we did not have the experience. We put out many detailed news releases. We set up a FAQ section on our website. And we sent email clarifications to all the reporters who were getting their facts wrong.

CACI was included in nine probing government investigations in all. But our response policy was simple – cooperate, cooperate and cooperate. CACI had absolutely nothing whatsoever to hide and we were as eager to get to the truth about the allegations concerning our employee as were the government investigators. We also tasked our outside legal counsel with conducting a vigorous internal investigation. And we kept our Board of Directors fully informed.

In the end, none of these government investigations found CACI or any of its employees culpable for the terrible abuses that had occurred at Abu Ghraib. And this was supported over and over again with sworn testimony before Congress. Furthermore, CACI was never even implicated as a contributor during the courts-martial of the Army soldiers who were found guilty of committing the abuses. In fact, today – five years later, not one current or former CACI employee has ever been charged by the U.S. government with any wrongdoing.

As for the business side, we lost one minor contract in the UK. Our stock price fell some at first, but soon rebounded. We continued with our strategic and technology initiatives and have become twice the size we were in 2004. We should close this year (June 30) somewhere around $2.5B in sales.

No doubt about it, CACI's long standing corporate culture and ethos provided the moral compass that guided us through this crisis. Our commitment to providing quality service to our clients…with honesty, accountability and reliability – and remembering our clients' trust in us – were always at the core of our decisions. And those same clients and industry colleagues later praised our work in Iraq and praised the company's response and fortitude throughout the scandal. Feedback like this let us know that we had "done the right thing."

This support also led me to conclude that CACI needed to speak out one more time. In April 2008 CACI published a book about our experiences. It's entitled Our Good Name, A Company's Fight to Defend its Honor and Get the Truth Told About Abu Ghraib. Using evidence from official investigations, sworn testimony and other thoroughly vetted facts, we detailed and documented every challenge the company had faced. And we proved how the allegations made against us were simply not true.

I have always believed that doing good is good business. In fact, that is one of the main lessons we teach as the foundation of our corporate culture. And there are plenty of bad examples out there. Cheaters will cheat. Liars will lie. And crooks will find ways to be crooks. As a result of recent economic and corporate turmoil, we have seen renewed interest in corporate governance and market regulation. While a sound legal framework for business is essential and should be continuingly improved, we should remember that integrity and ethical behavior cannot be legislated.

But if each one of us sets a good example – to serve as role models, we can start to restore accountability in our society. Ironically though, an Australian media mogul by the name of Kerry Stokes, seemed to have summed it up best. He said:

"Ethics or simple honesty is the building blocks upon which our whole society is based, and business is a part of our society, and it's integral to the practice of being able to conduct business, that you have a set of honest standards. And it's much easier to do business with someone when you look them in the eye and say, ‘This is what we're going to do,' and you understand what you each mean, and you can go away and get it done."

And Jack London agrees completely. Simply put: The future of our country and our society depends on our integrity and behavior as individuals, and how we show respect for one another. We have to get our society and our culture back on the right path.

Thank you!