A proxy board is a requirement imposed under a Proxy Agreement by the

U.S. Department of Defense The United States Department of Defense (DoD, USDOD or DOD) is an executive branch department of the federal government charged with coordinating and supervising all agencies and functions of the government directly related to national secur ...

Defense Security Service The Defense Counterintelligence and Security Agency (DCSA) is a federasecurityand defense agency of the United States Department of Defense (DoD) that reports to the Under Secretary of Defense for Intelligence.DCSA is the largest counterintellige ...

foreign investors Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing is ...

seeking to acquire certain American companies. This is for

national security National security, or national defence, is the security and defence of a sovereign state, including its citizens, economy, and institutions, which is regarded as a duty of government. Originally conceived as protection against military atta ...

reasons and applies mainly to

defense contractor The arms industry, also known as the arms trade, is a global industry which manufactures and sells weapons and military technology. It consists of a commercial industry involved in the research and development, engineering, production, and serv ...

s which are involved in highly classified contracts. The Proxy Agreement is between the foreign company, the US subsidiary holding classified contracts and the DSS. A proxy board is a board composed entirely of American citizens which are responsible for the day-to-day running of the business. In this way the company's classified information is "insulated" from foreign exploitation but the parent company still benefits from any profits made by its subsidiary.

Special Security Agreement

A variation is a Special Security Agreement (SSA) where the board of the company can be composed of both American citizens and nationals from the parent company's country. In this case when issues relating to national security are discussed only American managers may participate. SSAs require companies to be run under American law and by American citizens. In May 2006 the CEO of

BAE Systems BAE Systems plc (BAE) is a British multinational arms, security, and aerospace company based in London, England. It is the largest defence contractor in Europe, and ranked the seventh-largest in the world based on applicable 2021 revenues. ...

described the "firewalled" status of BAE's US subsidiary,

BAE Systems Inc. BAE Systems Inc. (formerly BAE Systems North America) is an American subsidiary of British defense, security, and aerospace company BAE Systems plc. The American subsidiary operates under a Special Security Agreement which allows it to work o ...

, " The British members of the corporate leadership, me included, get to see the financial results; but many areas of technology, product and programme are not visible to us.... The SSA effectively allows us to operate in the US as an American company, providing the highest levels of assurance and integrity in some of the most sensitive fields of national security provision."

Examples of proxy companies

*Tyco Integrated Security and SimplexGrinnell: When the Swiss company acquired Tyco Integrated Security in 1997, and SimplexGrinnell in 2001. *GEC/Tracor — When the British conglomerate GEC acquired the US defense contractor

Tracor Tracor was a major North American defense electronics contractor which was acquired by Marconi Electronic Systems (MES), a subsidiary of General Electric Company plc, in 1998. Following the purchase of MES by British Aerospace in November 1999 t ...

in 1998 it was required to establish a proxy board due to the highly classified nature of some Tracor contracts. *Rolls-Royce/Allison —

Rolls-Royce Rolls-Royce (always hyphenated) may refer to: * Rolls-Royce Limited, a British manufacturer of cars and later aero engines, founded in 1906, now defunct Automobiles * Rolls-Royce Motor Cars, the current car manufacturing company incorporated in ...

was required to establish a proxy board for its newly acquired subsidiary

Allison Allison may refer to: People * Allison (given name) * Allison (surname) (includes a list of people with this name) * Eugene Allison Smith (1922-1980), American politician and farmer Companies * Allison Engine Company, American aircraft engine ...

in 1995. However the

Department of Defense Department of Defence or Department of Defense may refer to: Current departments of defence * Department of Defence (Australia) * Department of National Defence (Canada) * Department of Defence (Ireland) * Department of National Defense (Philipp ...

lifted this requirement in April 2000 and allowed Rolls-Royce to adopt the more flexible Special Security Arrangement. *QinetiQ — UK defence technology company QinetiQ set up a proxy board to manage its US businesses in 2004 following the acquisitions of Foster-Miller Inc and Westar Aerospace and Defense Inc

References

{{reflist United States Department of Defense