Rule No. 1: Don't Copy

By Lisa Takeuchi Cullen

At first, William Swanson tried to shrug off the discovery that 16 of the rules in his handy and much acclaimed booklet Swanson's Unwritten Rules of Management had been ripped off from an obscure engineering work published more than 60 years ago. Then, when it turned out that other rules had been lifted from the precepts of Defense Secretary Donald Rumsfeld and humorist Dave Barry, the episode became a full-blown public relations disaster for the CEO of Raytheon, a defense contractor based in Waltham, Mass., that has 80,000 employees and more than $22 billion in annual sales. By last week a chastened Swanson apologized at the annual shareholders' meeting, and Raytheon's board docked him the equivalent of $1 million out of a pay package that amounted to $7 million in 2005--a rare move in the chummy world of corporate governance.

How did that happen to Swanson and his collection of folksy phrasings and spot-on aphorisms, which was first published in 2004 and given out free to Raytheon employees before it found a wide and enthusiastic audience that included Warren Buffett and Jack Welch? Credit goes to Carl Durrenberger, a San Diego engineer, who was packing up his cubicle at Hewlett-Packard to move to another division when he came across a copy of a 1944 chestnut given him by a former boss: The Unwritten Laws of Engineering by W.J. King.

He flipped through it, smiling at the dated language. Days later, he read a USA Today article online about Swanson and his rules. A memory flashed. He swiveled his chair to a box he had yet to unpack and fished out the King manual. Looking at the article and the manual side by side, Durrenberger, 29, was "flabbergasted" to note that 16 of Swanson's 33 rules were in fact King's--rusty lingo and all. "Bill Swanson of Raytheon is a plagiarist!" Durrenberger blasted on his blog.

Add Swanson's tale to this year's ledger of fakery and its fallout. RadioShack CEO David Edmondson resigned over a tarted-up resume. Harvard sophomore Kaavya Viswanathan has been roasted for her cribbed chick-lit novel. But Raytheon is a major government contractor that sells missiles, not stereos, and Swanson is a big boss, not a teenage undergrad. Still, he insists it all began with an innocent mix-up. Swanson asked staff members to compile a presentation from materials he kept in a file. It was such a hit that he and his staff collected 33 "rules"--one for each of his years at Raytheon--and began disseminating them in a 76-page booklet. "It's clear to me now that this file contained Professor King's book as well as other published material," Swanson says.

A little fumble like that may seem inconsequential in a field known for heavier-weight scandals. But because the defense industry--and corporations in general--is under greater public scrutiny these days, CEOs tend to pay for their blunders. Last year Boeing fired its CEO for having an affair with a subordinate--certainly a lesser infraction than the military procurement scandal that claimed his predecessor, Phil Condit, who, although not personally implicated, left because it happened on his watch. Swanson succeeds a CEO who agreed in March to settle with the Securities and Exchange Commission over accounting irregularities. But there's nothing phony about Raytheon's record under Swanson. Sales grew 8% last year; the stock price and profits have soared. Whatever rules he follows there are working.

Nonetheless, the ethical transgression of a top executive can have powerful repercussions. "If I were a board member or a shareholder, it would raise questions in my mind about how honest, transparent and responsible a CEO is being in other dealings," says Andy Wicks, co-director of the University of Virginia's Olsson Center for Applied Ethics. Jeffrey Sonnenfeld of the Yale School of Management points to the tarnish Swanson leaves on Raytheon, which the CEO had "no problem using as a bully pulpit from which to trumpet his empty cliches."

Lost in all this are the plagiarized. King died two decades ago, but his book remains a best seller for the American Society of Mechanical Engineers, its publisher. Rumsfeld had no comment. As for Barry, whose observation about being nice to waiters was lifted, the whole episode leaves him feeling weirdly connected to the Secretary of Defense--and a bit nervous. "I hope when they build their missiles, they're a little more careful about where they get their information," he says. "Because if they're getting any of that from me--well, if we ever launch anything, it'll land in Vancouver."