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 department of the U.S. federal government charged with coordinating and supervising the six U.S. armed services: the Army, Navy, Marines, Air Force, Space Force, t ...

Defense Security Service Defense or defence may refer to: Tactical, martial, and political acts or groups * Defense (military), forces primarily intended for warfare * Civil defense, the organizing of civilians to deal with emergencies or enemy attacks * Defense indust ...

on foreign investors seeking to acquire certain American companies. This is for

national security National security, or national defence (national defense in American English), is the security and Defence (military), defence of a sovereign state, including its Citizenship, citizens, economy, and institutions, which is regarded as a duty of ...

reasons and applies mainly to

defense contractor A defense contractor is a business organization or individual that provides products or services to a military or intelligence department of a government. Products typically include military or civilian aircraft, ships, vehicles, weaponry, and ...

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 is a British Multinational corporation, multinational Aerospace industry, aerospace, military technology, military and information security company, based in London. It is the largest manufacturer in Britain as of 2017. It is ...

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

BAE Systems Inc. BAE Systems Inc. (formerly BAE Systems North America) is an American company operating as an independent subsidiary of multinational defense, security, and aerospace company BAE Systems plc. The American subsidiary operates under a Special S ...

, " 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, Inc. 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 ...

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 * Allison family, a family of RMS Titanic passengers Compan ...

in 1995. However the

Department of Defense The United States Department of Defense (DoD, USDOD, or DOD) is an executive department of the U.S. federal government charged with coordinating and supervising the six U.S. armed services: the Army, Navy, Marines, Air Force, Space Force, ...

lifted this requirement in April 2000 and allowed Rolls-Royce to adopt the more flexible Special Security Arrangement. *QinetiQ — UK defence technology company

QinetiQ QinetiQ ( as in '' kinetic'') is a British defence technology company headquartered in Farnborough, Hampshire. It operates primarily in the defence, security and critical national infrastructure markets and run testing and evaluation capabili ...

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