2015 Corporate Responsibility Report

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Governance

Ethics and Integrity

We at Northrop Grumman are committed to a values-based ethics program. Values-based ethics go beyond the minimum standards to create and sustain an open environment that fosters trust, helps employees achieve their goals and improves our performance. By making the right decisions based on values, Northrop Grumman employees maximize individual and company success.

Ethics Vision To foster a workforce that takes ownership of our ethical culture, operates with integrity and lives our company values.

Ethics Mission To promote an ethical culture where leaders create and encourage an open and ethical work climate, foster trust and lead by example. These guiding tenets enable employees to act with integrity and in compliance with all ethical and legal responsibilities by providing necessary tools and knowledge.

We pledge to conduct ourselves with integrity to encourage and support an internal environment of innovation and trust. Our ethical obligations extend to all employees and those who represent the interests of Northrop Grumman anywhere in the world.

2015 Highlights

New Ethics Branding We rebranded our ethics program with "Ethics: Own It, Live It, Lead It" messaging and refreshed our existing ethics training, communications, brochures and publications. Leadership and employee response to the re-branding was positive and enthusiastic.

Manager-led Discussions We successfully piloted Integrity Talks, a toolkit to encourage and facilitate manager-led ethics discussions. Managers provided favorable feedback, and we will broaden the program moving forward.

Investigation Training All OpenLine and reported allegations of fraud, waste and abuse are investigated. We provided training to employees including ethics investigators, business conduct officers and subject matter experts.

Global Training In 2015, we translated our global training in several languages and established a new eLearning system in Australia and Europe to enhance our annual ethics and compliance training globally.

Common Training Platform We consolidated annual ethics and compliance training for all Northrop Grumman sectors into a common learning management platform for more comprehensive, consistent and accurate reporting.

"Know Your BCO" Campaign Our Business Conduct Officer network is an integral part of establishing and maintaining a strong ethical culture at Northrop Grumman. In 2015, we worked to enhance visibility of these individuals with Ethics Awareness Week activities, company communications and newsletter articles and by including images of business conduct officers on our OpenLine posters.

Ethics Awareness Week Held the third week in September, this global event included more than 60 leadership Meet-and-Greet sessions, 570 Manager-led Integrity Talks discussions, 35,000 ethics-branded giveaways and 14,000 employee prizes for ethics-related quizzes, games and interactive events.

Ethics Website and International Corporate Intranet As part of an enterprise initiative, the ethics organization reviewed and redesigned both the U.S. and international ethics websites to include updated guidance and resources to assist with ethical dilemmas and decision making.

External Partnerships Ethics staff and the business conduct officers community are encouraged to lead, partner, participate and support external ethics and compliance organizations for professional development and industry best practices. This effort includes memberships with the Defense Industry Initiative, Ethics and Compliance Initiative, Society of Corporate Compliance and Ethics, Institute of Business Ethics (UK), International Forum on Business Ethical Conduct and Aerospace Industries Association of America.

Training Focus 100% Worldwide

Ethics and compliance training is a requirement for all Northrop Grumman employees. In 2015, we enhanced global training by translating training content into Dutch, German, French and Italian. We also launched a new international eLearning system, for use in Europe and Australia, to improve tracking and reporting capabilities. Training modules in the system included information on our Standards of Business Conduct, mandatory disclosure rule, retaliation, import compliance, anti-corruption, bullying and harassment, human trafficking, conflicts of interest, protecting personal information, information security, quality and various key corporate procedures.

Feedback from an internal training survey showed positive responses to improvements in content, format and structure. The Ethics organization piloted a manager-led Integrity Talks initiative that provided manager toolkits with ethics resources to initiate discussions at staff and team meetings. Additionally, we supplemented training and discussions with the quarterly enterprise High Road newsletter highlighting important ethics topics and current issues.

GOAL Strategic evaluation and assessments of the efficacy of, and ongoing compliance with, the policies and procedures related to the standards of business conduct and ethics awareness programs.

PERFORMANCE Conducted a company-wide audit of the Ethics and Business Conduct program that concluded with the assessment that, overall, our program is effective. Recommendations for process improvements centered on consistency in our OpenLine tracking system including tracking voluntary and involuntary terminations as a result of an OpenLine investigation.

Business conduct officers provide ethics leadership to management and employees, implement enterprise ethics and compliance initiatives, raise concerns and potential risks and respond to questions and concerns raised by employees about the company values, ethics and business conduct.

In March 2015, the Ethics organization hosted a combined U.S. and international two-day Business Conduct Officers workshop in Reston, Virginia. Our executive leaders shared their views on ethics and integrity, and the business conduct officers had the opportunity to discuss challenges, share best practices and lessons learned and develop strategic plans for program enhancements. Business conduct officer development continued with monthly training webinars on compliance topics, trends and current issues, external alliances with ethics organizations and professional certifications.

Leadership Engagement Ethics and integrity messaging is a consistent and essential component of corporate and sector communications. The 2015 ethics message from our CEO, Wes Bush, focused on our re-branded messaging. The message went across the company, underscoring the absolute importance of maintaining the highest levels of ethics and integrity at all times. All levels of our leadership support this commitment, and the message is reinforced throughout the company using email, the ethics website, videos and announcements.

Ethics OpenLine Our Northrop Grumman OpenLine provides an additional resource where employees, business partners, and other stakeholders can seek guidance on ethics questions and report suspected violations of laws, regulations and company policy. The toll-free, 24/7 number, administered by a third-party service provider, is communicated on brochures, posters, the company intranet and internet sites. Callers may choose to remain anonymous. In addition, an online reporting system is available to employees with international contacts for Europe and Asia. In 2015, the ethics organization dedicated OpenLine numbers in the U.K., Australia, Switzerland, Saudi Arabia and United Arab Emirates. OpenLine posters with phone numbers and business conduct officer contact information are located throughout all Northrop Grumman facilities.

Contacts We actively encourage our employees to raise ethics concerns or questions, including through our confidential OpenLine. We monitor trends and potential hot spots, track and report aggregated data on issue type and review actions taken. This tracking enables us to assess training needs to develop targeted training and communications to employees. Allegations are investigated and addressed in a manner that respects the individual who has reported a concern and the trust they have placed with us.

Protecting Our Employees We are committed to non-retaliation. We have a clear, enforceable policy prohibiting retaliation for reporting and have disciplinary measures for employees who breach the policy. The company’s non-retaliation policy is prominently posted online and in brochures and clearly states zero tolerance of direct or indirect retaliation against any individual who reports a concern in good faith. Another way we protect employees is by maintaining necessary confidentiality of personal information during OpenLine investigations.