How We Manage

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Code of Conduct
Doing the right thing often means leading the way. We have a proud history of ethical conduct and anti-corruption controls, beginning with our Code of Conduct, which we have had in place since we were formed in 1995, well before it was required for stock exchange listing.

Our Code of Ethics and Business Conduct, “Setting the Standard,” applies to all employees and to our Board of Directors. It sets out clear policies and expectations in areas that include: our commitment to good citizenship including human rights; preventing corruption; promoting a positive and safe work environment; ensuring transparency in our public disclosures; avoiding conflicts of interest; protecting sensitive information, properly using company assets; complying with all laws; competing fairly; and operating with integrity in all that we do.

We devote significant resources to our business conduct compliance training program. All employees participate in annual ethics and compliance training, including an annual live training session for our Board of Directors. Relevant employees also undergo specific anticorruption training.

Lockheed Martin maintains compliance with applicable labor and employment laws including any associated reporting obligations. We report fines or penalties in our SEC filings and in our submittals and certifications regarding responsibility matters in connection with U.S. government contracts, as required by law. There were no such reports in 2012. We had no legal actions for anti-competitive behavior or anti-trust and monopoly practices. We analyze all our businesses for risks related to corruption. We regularly assess publicly reported incidents of corruption involving businesses and countries around the world, and adjust our risk analyses, policies and procedures and training accordingly. We do not tolerate any corruption, and we aggressively investigate any allegation of such incidents involving our employees.

To promote good governance and excellent performance, we actively engage our largest stockholders, seeking their views on Lockheed Martin’s governance and our executive compensation program. This outreach program is separate from our Investor Relations function. Stockholders have the right to submit proposals for consideration by stockholders at our annual meeting. When we receive a proposal, we seek to work with the stockholder-proponent to address their concern other than through a stockholder vote. Past proposals have covered topics such as appointing an independent director to serve as chairman of the board and amending our governance documents to allow stockholders to act by written consent. Stockholder proposals for the 2013 annual meeting are contained in our 2013 proxy statement.

Advocacy
We disclose extensive information about our advocacy efforts and associated expenditures, and we subject our activities to comprehensive Board oversight. We provide a Political Disclosure report on our website and comply fully with all state and federal laws concerning the disclosure of our lobbying expenses. Our federal and state lobbying disclosure reports are publicly available and provide extensive detail regarding our lobbying expenses and the nature of our lobbying activities. As described in the Political Disclosure report provided on our website, the Ethics & Sustainability Committee of our Board, which is composed entirely of independent directors, monitors our advocacy efforts, government affairs activities and political spending, receives reports from management on these matters, supervises the policies and reviews the purposes and benefits of these activities.

Business Case
Doing the right thing is good for business. Employee productivity, recruitment and retention are improved when we operate an open, transparent and collaborative workplace. Our customers and other stakeholders also hold us to high standards of accountability for ethical behavior. We know that maintaining such standards contributes positively to our reputation and, ultimately, our bottom line. Our Ethics policy fosters a workplace environment across our global locations in which employees speak up when they observe misconduct without fear of retaliation for reporting it.

Companies, including their supply chains, are increasingly under public scrutiny. We recognize the importance of an ethical culture across our entire value chain and include our ethics policy statement on each purchase order we issue. We comply with U.S. government regulation on trafficking in persons (including FAR 52.222-50) and child labor, and ensure our employees and suppliers take appropriate steps to avoid the risk of human trafficking and slavery anywhere in our supply chain. We comply with Executive Order 11246 which prohibits federal contractors and subcontractors who satisfy certain thresholds from discriminating in employment decisions and requires them to take affirmative action to ensure that equal opportunity is provided in all aspects of their employment. With respect to collective bargaining in the U.S., we also include FAR 52.222-40 Notification of Employee Rights under the National Labor Relations Act in our corporate terms and conditions.

Office of Ethics & Sustainability
Ethics and sustainability are closely linked in our daily business conduct. In 2012, we formalized this link by creating an Office of Corporate Sustainability led by the Vice President of Ethics & Sustainability, who reports directly to the CEO and the Ethics & Sustainability Committee of the Lockheed Martin Board of Directors. Our Corporate Sustainability Council governs and directs our corporate-wide sustainability efforts to generate long-term environmental and social benefits for all our stakeholders. We consolidated by year-end the Ethics Steering Committee and the Executive Diversity Council to form into the Corporate Sustainability Council, which meets three times a year.

Additionally, each business area and each international region assigned to a full-time Ethics Officer operates a steering committee to oversee its ethics and business conduct program. The business area and international steering committees are chaired by the senior executive of the business element and includes senior representatives of key business functions.

Our new sustainability governance structure is illustrated below.

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Business Case

Doing the right thing is good for business. Employee productivity, recruitment and retention are improved when we operate an open, transparent and collaborative workplace. Our customers and other stakeholders also hold us to high standards of accountability for ethical behavior. We know that maintaining such standards contributes positively to our reputation and, ultimately, our bottom line. Our Ethics policy fosters a workplace environment across our global locations in which employees speak up when they observe misconduct without fear of retaliation for reporting it.

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