boeing risk management case study

Boeing Crisis Management Case Study: A Detailed Analysis

In the fast-paced world of aerospace engineering, few companies have enjoyed the prestige and influence of Boeing.

Renowned for its innovative aircraft designs, Boeing has long been a symbol of excellence and reliability in the aviation industry.

However, even the most formidable airlines giants can stumble, and Boeing faced a monumental crisis that shook its foundation.

This blog post delves into the Boeing crisis management case study, examining how the company navigated through a storm of unprecedented proportions.

From fatal crashes to regulatory scrutiny, we unravel the complexities of the crisis and analyze Boeing’s response, shedding light on the importance of crisis management in the corporate landscape.

Let’s learn more about Boeing crisis management case study

Boeing as a prominent aerospace company

Boeing, a globally recognized aerospace company, has played a pivotal role in shaping the aviation industry for over a century.

Founded in 1916, Boeing has consistently pushed the boundaries of innovation, engineering some of the most iconic and groundbreaking aircraft in history.

From the pioneering days of commercial aviation to the modern era of space exploration, Boeing’s contributions have been instrumental in revolutionizing air travel and shaping the course of human progress.

As one of the largest aerospace manufacturers in the world, Boeing operates across multiple sectors, including commercial airplanes, defense, space, and services.

The company’s commercial aircraft division is particularly noteworthy, boasting a diverse portfolio of aircraft models that cater to the varying needs of airlines and passengers worldwide.

With a steadfast commitment to excellence and a relentless pursuit of technological advancements, Boeing has firmly established itself as a trusted partner to airlines, governments, and customers across the globe. Its aircraft have become synonymous with reliability, efficiency, and cutting-edge innovation, setting industry standards and shaping the future of flight

However, like any prominent organization, Boeing has faced its share of challenges and setbacks. In recent years, the company has been confronted with a crisis that has tested its resilience and called into question its reputation.

Background of the Boeing Crisis

Following are the key aspects of Boeing crisis and incidents that led the company towards unprecedented crisis.

Development of the Boeing 737 MAX aircraft

The Boeing 737 MAX, a narrow-body aircraft designed for fuel efficiency and enhanced performance, was a crucial addition to Boeing’s commercial aircraft lineup.

Developed as an upgrade to the highly successful Boeing 737 Next Generation (NG) series, the MAX promised increased fuel efficiency and operational cost savings, making it an attractive choice for airlines seeking to modernize their fleets.

The development of the 737 MAX began in 2011, with Boeing aiming to compete with rival Airbus’s A320neo aircraft. Key advancements included the incorporation of larger and more fuel-efficient engines, known as the LEAP-1B engines developed by CFM International, along with aerodynamic improvements and advanced avionics.

Boeing marketed the 737 MAX as a seamless transition for pilots already trained on the 737 NG, highlighting the aircraft’s commonality and familiarity. This offered airlines the opportunity to minimize training costs and streamline operations when introducing the new aircraft into their fleets.

To expedite the launch of the 737 MAX, Boeing pursued a strategy known as “minimum change, maximum benefit.” This involved making minimal alterations to the existing 737 design while maximizing performance gains through new engines and improved aerodynamics. However, this approach posed significant challenges in terms of maintaining the aircraft’s stability and handling characteristics.

As development progressed, Boeing faced pressures to bring the 737 MAX to market swiftly. The intense competition with Airbus and the demand for more fuel-efficient aircraft led to a compressed timeline, which put strain on the engineering and certification processes.

The Federal Aviation Administration (FAA) granted the 737 MAX its certification in March 2017, paving the way for deliveries to commence. Boeing anticipated that the 737 MAX would be a game-changer for the company, reaffirming its dominance in the narrow-body aircraft market.

Little did Boeing know that the development and subsequent introduction of the 737 MAX would soon be marred by a series of devastating events that would test the company’s crisis management capabilities to their limits.

Two fatal crashes involving the 737 MAX

The Boeing 737 MAX was thrust into the global spotlight following two tragic and highly publicized crashes that resulted in the loss of hundreds of lives. These crashes were:

Lion Air Flight 610 (October 29, 2018)

Lion Air Flight 610, a scheduled domestic flight in Indonesia, crashed into the Java Sea shortly after takeoff from Jakarta. The aircraft involved was a Boeing 737 MAX 8. All 189 passengers and crew on board perished in the accident. The investigation revealed that erroneous data from a malfunctioning angle of attack sensor triggered the aircraft’s Maneuvering Characteristics Augmentation System (MCAS), an automated flight control system designed to enhance pitch stability. The repeated activation of MCAS caused the aircraft’s nose to be pushed down, overpowering the pilots’ attempts to regain control. This tragic event raised concerns about the 737 MAX’s flight control system and its potential impact on flight safety.

Ethiopian Airlines Flight 302 (March 10, 2019)

Ethiopian Airlines Flight 302, a scheduled international flight from Ethiopia to Kenya, crashed shortly after takeoff from Addis Ababa. The aircraft involved was a Boeing 737 MAX 8, similar to the Lion Air aircraft. The crash claimed the lives of all 157 passengers and crew on board. Investigations into the accident indicated similar circumstances to the Lion Air crash, with the MCAS system being implicated once again. The data from the flight data recorder and cockpit voice recorder pointed to a faulty angle of attack sensor triggering the MCAS, leading to a nosedive that the pilots were unable to counteract.

Investigations and its Results

These two devastating crashes prompted worldwide alarm and raised serious questions about the safety of the Boeing 737 MAX. As a result, regulatory authorities around the globe, including the Federal Aviation Administration (FAA) in the United States, grounded the entire 737 MAX fleet pending further investigation and the implementation of appropriate safety measures.

Multiple investigations were launched to determine the root causes of the accidents. These investigations involved aviation authorities, Boeing, airlines, and other industry experts. The primary focus was on understanding the design and functionality of the MCAS system, the training provided to pilots, the certification process, and potential lapses in safety oversight.

The investigations revealed critical issues, including shortcomings in the design and operation of the MCAS system, inadequate pilot training regarding the system’s functionality and potential failure modes, and concerns about the regulatory processes surrounding the certification of the 737 MAX. The findings of these investigations had far-reaching implications for Boeing, the aviation industry, and the future of the 737 MAX aircraft.

Media across the world widely reported on Boeing crisis after incidents of two crashes .

Analysis of Boeing’s Crisis Management Approach 

Boeing’s initial handling of the 737 MAX crisis was met with widespread criticism and scrutiny. Several key aspects of their approach can be evaluated:

Delayed Acknowledgment

Boeing’s initial response was perceived by many as slow and lacking in transparency. It took several days for Boeing to issue a statement expressing condolences and acknowledging the tragedies. This delay eroded public trust and raised concerns about Boeing’s commitment to transparency and accountability.

Lack of Transparency

Boeing’s delayed acknowledgment of the accidents and limited transparency surrounding the issues with the MCAS system undermined public trust and raised concerns about the company’s commitment to safety. The perception of secrecy and withholding of critical information further eroded confidence in Boeing’s crisis management approach.

Boeing was criticized for not being forthcoming with information about the MCAS system and its potential risks. It was revealed that Boeing had not disclosed the existence of the MCAS system to pilots or airlines prior to the accidents. This lack of transparency raised concerns about the adequacy of the information provided to operators and the extent of their understanding of the system’s functionality and potential failure modes.

Confidence in the Aircraft

In the immediate aftermath of the accidents, Boeing maintained confidence in the safety of the 737 MAX. The company initially stated that the aircraft was airworthy and did not require any additional pilot training beyond what was already provided. This response created a perception that Boeing was downplaying the severity of the situation and prioritizing commercial interests over safety.

Minimal Engagement with Stakeholders

Boeing’s initial response seemed to lack proactive and open engagement with key stakeholders, including regulators, airlines, and the public. Insufficient communication and consultation with these parties created an impression of disconnection and a failure to prioritize their concerns and perspectives.

Inadequate Crisis Communication

Boeing’s communication strategy during the early stages of the crisis was deemed reactive and insufficient. The company’s messaging lacked empathy and failed to address the severity of the situation adequately. This approach fueled speculation and contributed to a perception that Boeing was more concerned with protecting its brand than addressing the safety concerns raised by the accidents.

Overemphasis on Commercial Interests

The initial response by Boeing was perceived by some as prioritizing commercial interests over safety. Maintaining confidence in the aircraft’s airworthiness without additional pilot training raised questions about Boeing’s commitment to putting safety first. This perception further eroded trust in the company’s crisis management efforts.

Regulatory Relations and Oversight

The crisis also shed light on concerns surrounding the relationship between Boeing and regulatory authorities, particularly the FAA. Questions were raised about the level of oversight and the certification process for the 737 MAX. The perception of a cozy relationship between Boeing and the FAA added to the public’s skepticism regarding the independence and objectivity of safety evaluations.

Decision to continue production and delivery of the 737 MAX

The decision by Boeing to continue production and delivery of the 737 MAX aircraft during the early stages of the crisis was a subject of intense scrutiny and debate. Analyzing this decision involves considering the factors and considerations that influenced Boeing’s stance:

• Financial Implications: Boeing faced significant financial implications due to the grounding of the 737 MAX fleet. The production and delivery of aircraft generate substantial revenue for the company, and halting production would have resulted in substantial losses. Boeing likely considered the potential impact on its financial performance, stock value, and relationships with suppliers and customers when deciding to continue production.
• Confidence in Remedial Measures : Boeing believed that the software updates and additional pilot training being implemented as part of the proposed fixes for the MCAS system would address the safety concerns. They may have felt confident that these measures, once implemented, would reinstate the airworthiness of the 737 MAX and enable its safe operation. This confidence likely influenced their decision to continue production and delivery.
• Regulatory and Certification Expectations: Boeing may have also considered the expectations of regulatory authorities, particularly the Federal Aviation Administration (FAA), regarding the steps required to recertify the 737 MAX. By continuing production, Boeing may have sought to demonstrate their commitment to addressing the identified issues promptly and efficiently. This approach may have been viewed as a proactive step toward meeting regulatory expectations and expediting the return of the aircraft to service.
• Supply Chain Considerations: Halting production would have had significant implications for Boeing’s extensive global supply chain. Numerous suppliers and manufacturing partners rely on the production and delivery of the 737 MAX for their own operations and revenue. Disruptions to the supply chain could have had cascading effects on multiple stakeholders. Considering these dependencies, Boeing may have determined that continuing production, albeit at a reduced rate, would minimize disruptions throughout the supply chain.

Impact of the crisis on Boeing’s reputation and financials

The crisis surrounding the 737 MAX had a profound impact on Boeing’s reputation and financials. Let’s examine the consequences in both areas:

Reputation Impact

The 737 MAX crisis severely damaged Boeing’s reputation and eroded trust among key stakeholders, including airlines, passengers, regulators, and the general public. The accidents and subsequent revelations about the aircraft’s design and certification processes raised questions about Boeing’s commitment to safety and transparency.

Financial Impact

Grounding and Production Halt: The grounding of the 737 MAX fleet resulted in a halt in deliveries and production, leading to significant financial losses for Boeing. The company had to store and maintain grounded aircraft, face cancellations and delays in orders, and adjust its production schedules.

Order Cancellations

Boeing experienced a substantial number of order cancellations for the 737 MAX from airlines and leasing companies. The loss of these orders translated into reduced revenue and affected the company’s long-term sales projections.

Boeing’s communication strategy during the crisis

The effectiveness of Boeing’s communication strategy during the 737 MAX crisis can be evaluated based on several key factors:

• Timeliness: Boeing’s initial response to the crisis was delayed, which had a negative impact on its effectiveness. The company took several days to issue public statements acknowledging the accidents and expressing condolences. This delay resulted in a perception of unresponsiveness and lack of transparency, eroding public trust.
• Transparency and Openness: Boeing’s communication strategy during the early stages of the crisis was criticized for lacking transparency. The company faced allegations of withholding critical information from regulators, airlines, and the public. The limited disclosure and perceived secrecy fueled speculation and further eroded trust in Boeing’s crisis management approach.
• Clarity of Messaging: The clarity of Boeing’s messaging during the crisis was also a concern. There were instances where the company downplayed the severity of the situation and maintained confidence in the airworthiness of the 737 MAX without acknowledging the need for additional pilot training or design changes. This approach created confusion and raised questions about Boeing’s commitment to safety.
• Stakeholder Engagement: Boeing’s communication strategy faced criticism for its limited engagement with key stakeholders, including regulators, airlines, and the families of the crash victims. Insufficient communication and consultation with these stakeholders created a perception of disconnection and a failure to address their concerns and needs adequately.
• Crisis Management Updates: Boeing’s efforts to provide regular updates and progress reports regarding the investigation, the proposed fixes, and the recertification process were essential. However, there were instances where the information provided was seen as incomplete or lacking in transparency, fueling skepticism and undermining the effectiveness of their communication strategy.

Legal and regulatory challenges faced by Boeing

Boeing faced significant legal and regulatory challenges as a result of the 737 MAX crisis. Let’s examine some of the key challenges:

• Legal Liability: Boeing faced numerous legal challenges, including lawsuits from the families of the crash victims, airlines seeking compensation for financial losses, and investors alleging securities fraud. The lawsuits alleged negligence, product liability, wrongful death, and other claims against Boeing. The company had to navigate complex legal proceedings, potentially leading to substantial financial settlements and damage awards.
• Regulatory Investigations: Multiple regulatory authorities conducted investigations into the design, certification, and safety of the 737 MAX. The primary focus was on the Federal Aviation Administration (FAA), which faced scrutiny for its oversight of Boeing and the certification process. Other countries’ aviation authorities, such as the European Union Aviation Safety Agency (EASA), also conducted independent reviews. These investigations aimed to determine the extent of any regulatory lapses and evaluate the adequacy of the aircraft’s design and certification.
• Certification and Reapproval Process : The grounding of the 737 MAX led to a lengthy recertification process. Boeing had to work closely with regulatory agencies to address the identified safety concerns, implement software updates, and enhance pilot training requirements. The process involved rigorous testing, inspections, and demonstration of compliance with regulatory standards before the aircraft could be cleared to fly again. The recertification process required coordination between Boeing, regulatory authorities, and international aviation bodies, adding complexity and scrutiny to the company’s operations.
• Regulatory Reforms: The crisis also prompted calls for regulatory reforms to improve safety oversight and the certification process. There were concerns about the level of independence and objectivity in the relationship between Boeing and the FAA. Governments and regulatory agencies around the world were under pressure to strengthen safety regulations, enhance oversight, and ensure transparency to prevent similar incidents in the future.
• Increased Regulatory Scrutiny : Boeing faced heightened regulatory scrutiny beyond the 737 MAX. Inspections and audits of other Boeing aircraft models, manufacturing facilities, and quality control processes were conducted to ensure compliance with safety standards. This broader scrutiny affected the company’s operations and required additional resources to address any identified issues.

Corrective measures implemented by Boeing to address the crisis

In response to the 737 MAX crisis, Boeing implemented several corrective measures aimed at addressing the identified issues and restoring confidence in the aircraft. Let’s analyze some of these measures:

• Software Updates: Boeing developed and implemented software updates to address the MCAS system’s design flaws, which were identified as a contributing factor in the accidents. The updates included changes to the system’s activation criteria, increased redundancy, and enhanced pilot control. These updates were intended to prevent the system from engaging erroneously and provide pilots with more control over the aircraft.
• Enhanced Pilot Training: Boeing recognized the need to improve pilot training on the 737 MAX, particularly regarding the MCAS system. The company revised the training materials and procedures to ensure that pilots were adequately trained to handle any potential issues related to the MCAS system. The training enhancements aimed to provide pilots with a better understanding of the system’s functionality, failure modes, and appropriate responses.
• Collaboration with Regulators: Boeing worked closely with regulatory authorities, primarily the FAA, throughout the crisis and the subsequent recertification process. The company collaborated with regulators to address safety concerns, share technical information, and seek approval for the proposed fixes. This collaboration was aimed at ensuring that the aircraft met all regulatory requirements and regained certification for safe operation.
• Independent Review and Oversight: Boeing initiated an independent review of its processes and practices related to aircraft design, development, and certification. The review was led by experts outside the company and focused on identifying areas for improvement and strengthening safety practices. The findings and recommendations from the review were used to enhance Boeing’s internal processes and ensure better adherence to safety standards.
• Cultural and Organizational Changes: The crisis prompted Boeing to reflect on its internal culture and decision-making processes. The company acknowledged the need for cultural and organizational changes to foster a stronger focus on safety, transparency, and accountability. Boeing aimed to address any shortcomings in its culture and decision-making frameworks to prevent similar issues in the future.

Final Words

The Boeing crisis management case study surrounding the 737 MAX crisis serves as a powerful reminder to importance of prioritizing safety, timely and transparent communication, strong regulatory relationships, rigorous risk assessment, independent oversight, continuous learning, and ethical decision-making.

Boeing’s initial response to the crisis faced significant challenges, including a lack of transparency and accountability. The decision to continue production and delivery of the 737 MAX while it was under investigation also raised concerns. These missteps led to a severe impact on Boeing’s reputation and financials, including loss of trust, order cancellations, legal liabilities, and financial losses.

However, Boeing took corrective measures to address the crisis, including software updates, enhanced pilot training, collaboration with regulators, independent reviews, and organizational changes. These steps were crucial in addressing the identified issues, rebuilding trust, and ensuring the safe return of the 737 MAX to service.

About The Author

Tahir Abbas

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Boeing 737 MAX: An Operational Risk Case Study

• Rex Chatterjee
• October 12, 2019
• Type: Case Study
• Tags: aviation , internal comms , manufacturing , operational risk , regulation

In August 2011, Boeing Commercial Airplanes, a subsidiary of Boeing, announced the launched of its new 737 MAX aircraft as the fourth generation of the 737 line. Initial deliveries of the aircraft took place in May of 2017, and the plane entered commercial service shortly thereafter. Among the first passenger carriers to run the 737 MAX commercially were Lion Air, of Indonesia, and Norwegian Air, of Norway. Within a year of its launch, 130 737 MAX aircraft were delivered to 28 Boeing customers, and in total 387 aircraft were eventually delivered.

On 29 October, 2018, a Boeing 737 MAX aircraft operated by Lion Air crashed thirteen minutes after takeoff, killing all 189 aboard. The incident was  widely reported  by  various media outlets  at the time. Initial reports targeted a malfunctioning flight-control system which had to be disabled in order for the aircraft to function properly. Responding to the incident, Boeing issued guidance on its operational manual to advise airline pilots regarding procedures for handling so-called erroneous cockpit readings.

On 10 March 2019, a Boeing 737 MAX aircraft operated by Ethiopian Airlines crashed six minutes after takeoff, killing all 157 aboard. Like the Lion Air incident from the year prior, the Ethiopian Airlines crash was  widely reported . Coverage reported that the incident was  similar to the Lion Air incident .

Though initial investigations into the incidents could draw no official conclusions regarding Boeing’s aircraft or systems, findings pointed to Boeing’s Maneuvering Characteristics Augmentation System (“MCAS”) as the likely culprit. The system, which Boeing did not disclose its 737 MAX pilot manual or in its supplementary directive after the Lion Air crash, was allegedly commanding the plane’s flight systems to repeatedly dive, based on erroneous systems data.

Between 11 and 16 March 2019, aviation regulators in countries across the world–including the US, Canada, China, Brazil, India, and others–issued grounding orders for all Boeing 737 MAX aircraft.

Since the grounding of the 737 MAX, investigations into the two crashes and issues with the aircraft have increasingly focused on Boeing’s deployment of MCAS as the primary culprit. Assessments and testing from a variety of sources within multiple investigations have raised issues with the way in which Boeing designed, developed and deployed MCAS, as well as its lack of training and education of pilots and crews on the system’s existence within aircraft, when it would engage, and what to do in case of its malfunction.

On 4 April 2019, Boeing  publicly acknowledged  that MCAS played a role in both the Lion Air and Ethiopian Airlines crashes of the 737 MAX.

On 18 October 2019, multiple news outlets  reported  that in 2016, prior to the safety certification and release of the 737 MAX, Boeing’s chief technical pilot for the 737 program had warned a colleague about MCAS, specifically pointing to issues unearthed in post-crash investigations. While, in the wake of the crashes, Boeing officials had maintained that MCAS was not designed to activate within the “normal flight envelope” of the 737 MAX and therefore its exclusion from the standard operating manual for the aircraft was warranted, the 2016 internal messages specifically highlighted that MCAS was erroneously engaging itself. The messages go on to indicate that, in 2016 or prior, the US Federal Aviation Administration (FAA) may have been supplied with inaccurate information regarding MCAS. Nevertheless, in 2017, the very same Boeing pilot, again communicating the FAA, requested that all mentions of MCAS be removed from the plane’s operating manual because its operation was outside of the plane’s normal envelope. Going further, the Boeing pilot proceeded to engage in inappropriate discourse with the FAA regulator on the subject of obtaining regulatory clearances from other regulators for the 737 MAX.

Boeing turned over documents related to these communications to regulators and to Congress on 17 and 18 October 2019, allegedly months after first discovering them.

Upon receipt and review of the documents, members of Congress made public statements about what they deemed to be a pattern of troubling conduct by Boeing.

Gaps In Risk Management

Independent Escalation Channels  – Boeing’s development team for the 737 MAX had knowledge of the issues with the MCAS. However, it is unclear whether any reporting mechanism existed for members of the team (e.g., engineers, test pilots, etc.) to report such issues to oversight resources outside of the 737 MAX’s direct value chain (i.e., officials and / or at Boeing whose success was not tied directly and exclusively to the marketing and sale of 737 MAX aircraft). While knowledge of the ultimately disastrous MCAS failures was present within Boeing long before the first 737 MAX was delivered to a customer, it was contained in isolated pockets, hidden from the view of senior management at the corporate level whose success is tied to the overall health of Boeing as a company. While some concerned members of the 737 MAX development staff may have wanted to communicate their concerns upwards, and while senior management may have wished to hear their concerns, the communication channels simply did not exist. Instead of reporting concerns to a unit or personnel with proper oversight authority, engineers at Boeing were instructed to take their concerns to business unit managers,  as reported by the New York Times . However, with their success tied directly to sales of the 737 MAX, business unit managers had strong incentive suppress the identification of safety risks and prevent escalation of same to members of senior management. In the wake of the 737 MAX situation, Boeing has indicated that it has adopted clearer escalation channels from engineers to neutral oversight personnel, including the company’s senior management.

Independent Safety Oversight  – Boeing lacked an independent internal organization charged with ensuring product safety. At a firm of the size of Boeing, producing products (i.e., aircraft) which have the potential to be deadly in the event of failure, an independent unit should exist as a check on commercial business units such as development, manufacturing, marketing and sales. The success of such a unit should not depend at all on sales of products, but rather on the safety of those products at time of sale and beyond. In the wake of the 737 MAX situation, Boeing has announced the creation of such a group within the company.

Employee Communications Monitoring  – It is unclear whether Boeing had a function in place to monitor employee communications. As with all public companies, however, it should. Monitoring of employee communications over company-provided systems (such as e-mail, instant messenger, SMS on company-provided phones, etc.), coupled with a general policy and enforcement program that all company business be conducted solely over those company-provided, and not personal, communication systems, is a crucial arm of risk management in an era in which employee communications are a major driver of risk. Near real-time monitoring of employee communications by a unit of Boeing’s compliance group would have alerted senior management to ground-level issues with MCAS in parallel to–and as a backstop to–internal reporting and escalation of the issue from engineering or other staff.

Regulatory Affairs Oversight  – While a debate rages on as to whether the FAA has fallen victim to so-called “regulatory capture” by firms such as Boeing, it is nonetheless crucial for the successful, comprehensive management of risk that all communications by a company’s personnel with regulators be not only monitored, but centralized and streamlined through a single source, such as an internal unit overseeing regulatory affairs. In instances such as this, where the specter of impropriety looms large over conduct by Boeing employees and, possibly, the FAA, it is essential that companies are able to manage their official positions on issues facing regulators and are furthermore able to deliver consistent messaging from all personnel involved. While Boeing, in this case, may be able to blame one or more rogue actors for the impropriety with respect to certain FAA-related issues, the company would do itself no favors in the eyes of its regulators, world governments, its customers, its investors and the general public by claiming to have little power to govern the conduct of its employees. Additionally, the FAA’s approval of the 737 MAX has not served as a significant line of defense against Boeing’s liability for its aircraft’s failures, owing partly to the relationship its staff (such as the chief technical pilot) enjoyed with members of regulatory staff. The surfacing of inappropriate communications between members of Boeing and regulator staff has only stoked the fire of governmental concern over Boeing and the regulatory framework meant to govern its conduct.

Costs & Impacts

Financial  – Boeing has experienced catastrophic financial losses in the wake of the evolving 737 MAX situation, having posted a company record loss of $2.9 billion USD for Q2 2019. Its market capitalization, as of August 2019, has fallen by $62 billion USD, on the back of a 25% erosion in share price. Overall, the halt of sales and impending cancellation of orders may cost Boeing roughly  $600 billion USD .

Business Position  – Boeing has seen fit to postpone development of at least one critical project (the Boeing New Midsize Airplane) and is reportedly considering staff reductions as of Q3 2019. Following the grounding of the 737 MAX, Boeing has suspended all deliveries of the aircraft to customers and slowed its production schedule (financial impacts of which are noted above).

Brand Equity – While multiple crashes and a global grounding of the 737 MAX fleet may have been sufficient to critically damage the public’s trust in Boeing, later evidence pointing out that the company knew of the issues giving rise to the crashes and buried them only further stokes the fire. Numerous polls have indicated that the public has lost its trust in the 737 MAX, and with recent evidence coming to light about Boeing’s practices, the same may well be said of public trust in Boeing itself as well. Serving the needs of the general public, airline customers of Boeing will face increased scrutiny and pressure on their dealings with the company, impacting Boeing’s ability to sell its products across the board.

Criminal Investigation  – At the time of this writing, Boeing and certain individual employees may face criminal prosecution in connection with the 737 MAX crash incidents.

Civil Litigation  – Boeing now finds itself the target of civil litigation from a variety of sources, including pilot groups seeking compensation for lost wages, crash victims’ families seeking compensation for wrongful deaths (potentially including punitive damages), and others. At the time of this writing, the total outcome of the global 737 MAX litigation is yet to be known.

Regulatory Pressure  – Boeing will likely face significantly increased regulatory scrutiny across the globe as trust in the company and its practices has been eroded by the 737 MAX crashes and their aftermath.

Key Takeaways

1.   Companies must designate certain personnel or units as managers and overseers of risk, with their success directly tied to safety and effective risk mitigation instead of sales and other commercial metrics. Companies cannot rely on commercial units (e.g., sales, marketing, etc.) to manage risk. With the success or failure of these units being tied directly to the sales performance of their managed products, these units are inherently disincentivized from reporting issues which may imperil sales and are not likely to serve as effective mitigants of risk.

2.   Companies must ensure clear and independent lines of communication between ground level staff and those personnel and / or units designed to manage risk. Staff members in product development, sales, marketing and a variety of other functional groups must be able to communicate clearly and confidentially with risk managers in order to effectively relay concerns without fear of reprisals or dismissal.

3.   Companies must institute policies, procedures and technological capabilities in order to be able to effectively monitor employee communications in real-time or near-real-time. Failure to monitor employee communications robs companies of their opportunities to manage risks borne out of the behavior of rogue actors. Assigning blame for corporate malfeasance to rogue internal actors ex post facto  is not an effective strategy. Instead, companies must own the risk that their personnel may act against the best interests of the firm and effectively manage incidents as they are occurring.

4.   Companies with regulatory exposure must institute policies, procedures and top-down governance over corporate communications with regulators. While in most cases, a regulatory communications function serves to manage regulatory relations and minimize the risk of incurring penalties or enforcement actions, in some cases, its purpose may be to detect regulatory capture and therefore ineffective regulation. While ineffective regulation may not seem, at first, to be a risk for regulated businesses, for businesses without strong regulatory affairs units, it may present itself as an invitation for corporate misconduct, as evidenced above.

Companies should be proactive about risk management and conduct broad risk assessments on a regular basis. Such assessments should monitor for threats across strategic and tactical vectors. From broad-based standpoints such as ensuring clear and independent reporting lines, to granular measures such as monitoring high-risk employee communications, risk management efforts must be comprehensive. Finally, it is vital that key stakeholders up and down a company’s chain of command “buy in” to the importance of risk management and participate in the process in a transparent and cooperative manner. It is incumbent upon company leadership to ensure that a “culture of risk awareness and management” is present at all levels of the organization.

Titan Grey stands ready to assist on business risk management matters of the nature discussed in this Titan Grey Thought Leadership piece. Please inquire via e-mail to  [email protected] .

Titan Grey Thought Leadership is presented subject to certain disclaimers, accessible here .

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Faculty - January 29, 2024

Risk Management Lessons Learned from the Boeing 737 Max 9 Incident

• Enterprise Risk Management

By Penny Cagan, Lecturer in the Enterprise Risk Management Program, School of Professional Studies

I am haunted by the photo of a young man who had his shirt blown out of an Alaska Airlines plane shortly after it took off from Portland International Airport in early January.

A plug that sealed an unused door fell off the plane shortly after takeoff and left an exposed gap in the fuselage. By some providential act, no one was seated directly next to the door and pilots were able to land the plane without casualties. Still, there remains the frightening reality of a full flight of passengers exposed to a depressurized cabin and the open air.

Risk management and quality concerns within Boeing were highlighted as far back as 2001, when a company engineer published a paper warning of the firm’s strategy to outsource the manufacture of airline components while concentrating on the final assembly. At the time, the engineer warned that the final product is only as good as the capabilities of the least-proficient supplier. Lesson number one in third-party risk management is that the contracting firm owns all the original risk plus the risk of being exposed to a supplier and its manufacturing process.

Spirit Aerosystems was Boeing’s only fuselage supplier. And yet, there have been reports in the press that Boeing pressured Spirit to cut costs and that they were engaged in a tussle for years. When a supplier is asked to cut costs, they naturally look to where savings can be found, and this can lead them to reassess the cost of employees, materials, and quality controls. Spirit Aerosystems laid off experienced employees during the pandemic and that lost expertise was difficult to replace. This event is yet one more reminder that cutting expenses related to quality control can cost more in the long run and be devastating to a firm’s reputation.

Boeing’s CEO took over leadership of the company in 2020 and made some top-level changes that were designed to tackle ongoing quality concerns. These efforts included establishing a safety board comprised of senior leadership, the appointment of a chief safety officer, and a restructuring that had all engineers report directly to the chief engineer. However, these high-level efforts appear to have missed critical quality issues embedded in the company’s processes.

Here are some lessons learned from the event:

• Issues do not age well, and the most critical quality issues should be prioritized and remediated.
• When an issue occurs with a vendor, the ultimate responsibility resides with the company itself. Managing third parties requires ongoing monitoring and oversight.
• The final product is only as good as the least-good supplier, and any one defective component can create serious consequences for the whole.
• Choking a supplier on costs can backfire and result in cutbacks in quality and subpar delivery. The contracting firm should consider itself a partner rather than adversary with the supplier.
• Concentration risks associated with a single supplier of a critical service, product, or resource should be managed closely.
• It is challenging to regain lost knowledge when experienced personnel are laid off.
• Culture is important and employees should feel empowered to highlight potential issues.
• Top-down initiatives should incorporate bottom-up process reviews.

Views and opinions expressed here are those of the authors and do not necessarily reflect the official position of Columbia School of Professional Studies or Columbia University.

About the Enterprise Risk Management Program

The Master of Science in Enterprise Risk Management (ERM) program at Columbia University prepares graduates to inform better risk-reward decisions by providing a complete, robust, and integrated picture of both upside and downside volatility across an entire enterprise.

Fall 2024 application deadlines for the M.S. in Enterprise Risk Management program are March 15, 2024 for applicants with international documents, and May 1, 2024 for the final deadline. Learn more here .

About the Operational Risk Management Course

Enterprise Risk Management lecturer Penny Cagan's Operational Risk Management course offers a review of the various types of operational risks, such as technology risk (e.g., cybersecurity), human resources risk, and disasters. The course includes case studies, risk analysis frameworks and metrics, and common mitigation techniques, such as insurance, IT mitigation, and business continuing planning.

Penny Cagan

Former Americas Head of Operational Risk Control, UBS

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Our Safety Journey

2023 Chief Aerospace Safety Officer Report

A Message from the Chief Aerospace Safety Officer

Progressing in our safety journey.

Boeing continues to strengthen its safety practices and culture and bring lasting improvements to aerospace safety. The progress contained in this report is evidence of a collaborative approach with our employees and industry to the safety of our products and services. It’s a journey we’ll continue to walk each and every day.

What's New

In the past 12 months, we’ve taken several steps in our journey:

Documented and started using more than 600 additional design practices in Technical Design Reviews.

Established a dedicated ombudsperson for U.S. Federal Aviation Administration (FAA) delegated representatives.

Inducted a new real-time data and analytics platform into our Safety Management System.

Saw new flight operations representatives providing in-person support to more than 60 airline customers.

Conducted our first joint safety risk management evaluation with a major network carrier to share information and lessons learned for the future.

Conducted workshops with airline heads of training on competency-based training and assessment.

Introduced experiential training called Boeing Virtual Procedures Trainer for pilots.

Held the inaugural Boeing Aviation Safety Conference with industry stakeholders.

Invested in a partnership with Embry-Riddle Aeronautical University to create a research center that will drive safety improvements throughout the industry.

Launched a digital learning platform for employees to discover and contribute safety knowledge.

Our employees submitted twice as many inputs into our Speak Up reporting channel compared to the last year, allowing them to voice concerns and share improvement ideas.

Why It Matters

We value human life above all else, and our teammates take that personally — knowing every decision, every task must be done with transparency and accountability. Safety is about ensuring every person who flies on, uses, operates, designs, builds or services Boeing products gets home safely.

In early 2023 the first Boeing Aviation Safety Conference was held for industry leaders to come together and share insights to improve operational safety.

Strengthening engineering.

Boeing continues to build on the foundation of engineering excellence and strengthen its engineering expertise and emphasis on product safety. Following the 2019 realignment of all engineers into a single integrated organization, Boeing began curating 100+ years of safety practices and lessons learned. These design practices capture Boeing’s mandates, recommendations, design decisions and rationale for current and future generations of engineers.

This effort includes training engineers on how to use design practices, allowing them to achieve exceptional levels of safety and quality in Boeing products and services. As of early April 2023, more than 1,960 design practices have been documented and released.

These design practices have now been incorporated into Technical Design Reviews to help engineers identify risks and issues earlier in the design process. During these reviews, engineers review engineering work, guided by institutional knowledge such as design practices, lessons learned, and other engineering specifications data and requirements. The company also is developing Design Records , an internal dashboard powered by a search engine tool that will make engineering data and information easier to find and access.

Other resources to strengthen engineering capability include a new Engineering Handbook. The online handbook can help engineers perform a specific engineering task or sharpen their skills in a particular area. It includes everything from onboarding and training to learning about engineering priorities, engineering practices and procedures, templates, professional development resources and engagement opportunities.

Enhancing Oversight Mechanisms

Boeing continues to enhance oversight of its safety processes and procedures. In addition to the Board of Directors Aerospace Safety Committee (ASC), which assists the Board in the oversight of the safety of company products and services, formal lines of communication ensure all safety and potential safety issues are evaluated, discussed and addressed during weekly Safety Reviews with business unit presidents, Boeing’s chief engineer, functional and program leaders, and members of the FAA.

The Chief Aerospace Safety Office (CASO), which was established in 2021, has developed a comprehensive strategy to strengthen Boeing’s safety practices and culture and is collaborating with global regulators, airline operators and other industry stakeholders to improve the aerospace safety ecosystem.

Boeing also continues to strengthen its Organization Designation Authorization (ODA). Boeing employees selected as representatives of the FAA perform a critical role in aircraft certification and safety assurance, and the company is working to ensure they are able to perform their delegated duties free from any interference.

Boeing is implementing a portfolio of 20 initiatives intended to increase advocacy and support for ODA representatives. For example, the company implemented organizational changes to ensure that leaders with deep regulatory knowledge are in a position to provide advocacy for and support to ODA unit members. The company also implemented enhanced regulator communication training for about 48,000 employees and widely expanded FAA data sharing and transparency. With direction from and in coordination with the FAA, the company is also working to improve ODA oversight, its administration, and to further improve the unit member appointment process and skills development.

Measuring Progress

In May 2022, Boeing commissioned an external company to conduct a survey of the more than 1,000 ODA representatives. Of the 71% of employees who responded to the survey, a significant number have noticed a general improvement in the culture around interference and integrity. Boeing will use these results and conclusions from future surveys to further address specific ODA concerns.

Perceived interference

Seeing improvement

Have concerns about retaliation for reporting concerns

Implementing a Safety Management System

Boeing continues to mature its enterprise Safety Management System (SMS), an integrating framework for managing safety risks. Recognized as an industry best practice, airlines around the world have been using an SMS for nearly a decade, gathering data to evaluate systems, make decisions and investigate issues to support the safety of the fleet.

In early 2023, Boeing welcomed the FAA proposal to make an SMS mandatory for all aerospace design and manufacturing organizations. Boeing voluntarily began establishing its SMS in 2019 and its SMS for Commercial Airplanes was formally approved by the FAA in 2020. The company continues to integrate the SMS into its other business units.

Boeing’s SMS collects and monitors data from a myriad of internal and external data sources — operational data from the global fleet, employee reporting, audit findings, and design and manufacturing data — to identify and mitigate product safety risks. Acquiring data is the first step of a complex process to risk mitigation. Boeing is also working to ensure the accuracy of conclusions derived from data.

In 2022, the CASO team completed the development of Boeing Safety Intelligence (BSI), a new safety analytics platform that uses advanced modeling techniques and machine learning algorithms to deliver real-time insights. BSI helps teammates proactively monitor emerging safety trends within the global fleet and across the company’s SMS, with data reviewed during weekly Safety Review meetings. The company is also working with the FAA Integration and Performance (AIR-740) data analytics team and using machine learning for hazard identification in reports from the fleet. Through BSI and the development of analytics capabilities, Boeing is moving from reactive to predictive hazard identification and mitigation.

Additionally, Boeing is enhancing the SMS governance structure and processes to ensure issues or risks are escalated appropriately all the way up to Boeing’s CEO. These enhancements include developing key performance indicators to ensure the SMS is performing as intended.

The inculcation of the SMS includes formal and informal training. In 2022, more than 130,000 employees completed updated SMS training, learning the vital role they play in speaking up about product safety issues and ideas.

Boeing invested in a partnership with Embry-Riddle Aeronautical University to create a research center that will drive safety improvements throughout the industry.

Investing in a safer industry.

Through the collaborative efforts of its Global Aerospace Safety Initiative, Boeing continues to make progress in developing and implementing comprehensive solutions to advance the safety of the global air transportation system.

The safety of the air transportation system is bigger than any one company, and that is why Boeing continues to share information and work together with airline operators, regulators, academia and other stakeholders to:

Align Safety Management Systems

With an SMS, airlines and manufacturers have the ability to use a common framework and language to produce better safety outcomes. As part of its SMS, Boeing in 2022 conducted more than 30 safety risk management evaluations, including its first joint evaluation with a major network carrier.

Evolve aircrew and maintenance technician training

Boeing continues to evolve training approaches to go beyond flying and maintenance skills and incorporate other competencies such as teamwork, communications and resource management. In 2022, the company delivered competency-based training and assessment (CBTA) courses to four commercial customers. Boeing also conducted workshops with airline heads of training on these programs that included more than 60 customers and more than 20 regulators. Additionally, CBTA courses for the Next-Generation 737, 737 MAX and 787 were approved by multiple regulatory agencies. The company also introduced the Boeing Virtual Procedures Trainer and Maintenance Synthetic Trainer for pilots and mechanics, providing experiential training and complementing current training programs.

Provide enhanced support to customer aircrews and maintainers

New flight operations representatives act as on-site advisers, consultants and partners to airlines’ flight operations, training and safety programs, providing guidance on how to best safely and effectively operate their Boeing airplanes. These highly experienced professionals with an average of 13,000 to 15,000 hours of airline experience have engaged more than 60 airlines in 2022.

Ensure fleet performance data is fed back into Boeing design processes

In 2022, Boeing launched an initiative to synthesize operational data and inform engineering and design. The effort is intended to assure airplane designs operate as envisioned once they are in the field. Boeing teams have completed data analysis of four pathfinder projects and have shared the operational data with engineering teams.

Provide more opportunities for collective problem-solving:

In February 2023, the company hosted the first-ever Boeing Aviation Safety Conference. More than 200 representatives from more than 90 carriers attended this inaugural event. The conference, which will be conducted annually, brings together safety, training and operations representatives of airlines and regulators and is intended to enhance aviation safety across the industry through the sharing of knowledge, best practices and lessons learned.

Partner with academia on safety

In 2022, the company partnered with Embry-Riddle Aeronautical University to advance aviation safety. In early 2023, Boeing donated $5.1 million for a research center that will drive safety improvements throughout the industry. The center, which is expected to open in the fall of 2023, will conduct research to mitigate known and emerging operational safety risks to advance the safety of all who fly.

Fostering Transparency and Openness

Pivotal to strengthening product safety is the transition to a more open and transparent culture where all employees feel comfortable speaking up and learning from mistakes and successes. A positive safety culture enables proactive identification and mitigation of risks to prevent accidents, injuries or loss of life.

Evidence of the company’s shifting culture is the increasing number of Boeing teammates who have voiced concerns and shared improvement ideas using the Speak Up confidential reporting channel. Since its inception in 2019, Speak Up has helped to resolve issues and share learnings across the enterprise. Compared to the previous year, employees in 2022 submitted twice as many inputs into Speak Up.

In addition to Speak Up, Boeing established a confidential channel for ODA representatives to voice concerns. In June 2022, the company appointed a dedicated ODA ombudsperson to further foster an environment where ODA representatives carry out their duties independently and without interference. Mark Fava, an experienced aviation lawyer with more than 35 years of aviation experience, serves as a neutral, independent third party to advise and assist ODA representatives with any concerns, including those related to independence and transparency. He is guided by the core values of the International Ombuds Association Code of Ethics.

A major initiative to further promote transparency and a culture of learning is the Safety Experience at Boeing , which the company developed for its teammates in early 2023. The Safety Experience is a digital learning platform that provides employees with an engaging and collaborative forum for discovering and sharing product safety information. The digital platform complements the Safety Promotion Center in Everett, Washington, where employees can visit to learn and reflect on Boeing’s safety culture and lessons from the past. The exhibits in the center will undergo a major upgrade in 2023.

Coming Soon

The Safety Experience at Boeing

An immersive digital platform that promotes a culture of learning and transparency. Launched within Boeing in 2023. Launching globally in 2024.

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Case study | Risks in Boeing

• Case study | Ri

By Abhilash Bommaraboina (PGDRM Batch July’20-21) and Kartikay Bansal (PGDRM Batch Jan’21-22)

Risks in Boeing ​

• Flawed and Unsafe Design:  In 2019, Boeing 737 Max crashed twice in the Java Sea and Ethiopia killing all aboard. Both planes suffered the same malfunction attributed to a flaw in Boeing’s design of the 737 Max. Boeing’s flawed and unsafe design of 737 a major weakness.​
• Over-Outsourcing:  Boeing relies heavily on outsourcing the manufacture of the components and parts for its planes. The scale of Boeing’s outsourcing was highlighted recently after Spirit’s laid-off 2800 employees who worked primarily on the troubled 737 Max.​
• Overdependence on US Contracts:  While most other aircraft manufacturers rely on airlines, Boeing depends on contracts from the US government. With about 27% of its revenue coming from the US government contracts, Boeing is at the mercy of US politics and economic factors in the American market.​
• Supply Chain Issues:  Just any global operator, Boeing also faces several supply chain challenges attributed to its  management strategies . This is a major weakness particularly for Boeing since it relies heavily on suppliers.​
• Intense Competition:  Airbus and Boeing are two big players and bitter rivals with the backing of the EU and the US respectively.  Competition in the airline  manufacturing sector is more complex since losing even a single customer or order can amount to losses in the millions.​
• Public Perception:  Once a specific airplane model has been involved in a crash and regulators have grounded the entire fleet due to safety concerns, the public can permanently associate it with a lack of safety. It is very difficult to convince the public that the flaw in 737 Max is fixed.​
• The Pandemic:  With the devastation, pain, and deaths due to the pandemic, most people would think twice before boarding a plane. The immediate threat is that the pandemic will bankrupt most airlines, forcing mass cancellations of their orders for Boeing.​

Boeing 737 max  Debacle

What exactly happened , impact of events, read the entire case study here: ​ risks in boeing by abhilash and kartikay ​.

Disclaimer This report has been produced by students of Global Risk Management Institute for their own research, classroom discussions and general information purposes only. While care has been taken in gathering the data and preparing the report, the student’s or GRMI does not make any representations or warranties as to its accuracy or completeness and expressly excludes to the maximum extent permitted by law all those that might otherwise be implied. References to the information collected have been given where necessary. GRMI or its students accepts no responsibility or liability for any loss or damage of any nature occasioned to any person as a result of acting or refraining from acting as a result of, or in reliance on, any statement, fact, figure or expression of opinion or belief contained in this report. This report does not constitute advice of any kind.

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Corporate Governance and Sustainability Development Goals: Boeing Case Study

• Conference paper
• First Online: 27 August 2023
• Cite this conference paper

• Marwan M. Abdeldayem   ORCID: orcid.org/0000-0002-9103-9802 3 ,
• Saeed Hameed Aldulaimi   ORCID: orcid.org/0000-0003-1131-5633 3 ,
• Ibrahim A. Abu-AlSondos   ORCID: orcid.org/0000-0003-2530-6009 4 &
• Abdulhameed Baqi 3  

Part of the book series: Studies in Big Data ((SBD,volume 136))

Included in the following conference series:

• Conference on Sustainability and Cutting-Edge Business Technologies

712 Accesses

7 Citations

This paper analyzes the Boeing controversy that emerged after the 2018 and 2019 crashes of two 737-MAX jetliners. It is specified that both tragedies were driven by changes made to a vital flight management system that Boeing had not informed regulators, authorities, and major airlines about. As a result, 346 individuals were killed, and Boeing attempted to blame the crew members instead of accepting responsibility for the tragedies. Boeing’s governance philosophy prioritized profit maximization for shareholder advantage and market competitiveness, leading to an agency conflict between shareholders and Board members that resulted in values violations and stakeholder neglect. This paper presents a thorough analysis that makes it clear that Boeing’s culture shifted after its acquisition of McDonnell Douglas, incentivizing stock price over quality and safety. Such a culture shift created a toxic corporate climate where whistleblowers were ignored and engineers were intimidated if they overlooked cost and time objectives. Concerning sustainability, the study revealed that Boeing violated several Sustainable Development Goals (SDGs), including goals 3, 8, and 17, and neglected the notion of a Triple Bottom Line (TBL) by focusing solely on the economic component and disregarding stakeholders’ concerns. The study proposes ways to help Boeing recover from the scandal, including attaining a healthy balance between shareholders’ values and stakeholders’ concerns, enhancing stakeholder engagement by strengthening transparency, honesty, and psychological safety in Boeing’s corporate culture, and making progress towards SDGs by complying with human rights and social justice guidelines, emphasizing all four principles of TPL, and engaging more meaningfully with key stakeholders in their value chain.

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Marwan M. Abdeldayem, Saeed Hameed Aldulaimi & Abdulhameed Baqi

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Abdeldayem, M.M., Aldulaimi, S.H., Abu-AlSondos, I.A., Baqi, A. (2023). Corporate Governance and Sustainability Development Goals: Boeing Case Study. In: Yaseen, S.G. (eds) Cutting-Edge Business Technologies in the Big Data Era. SICB 2023. Studies in Big Data, vol 136. Springer, Cham. https://doi.org/10.1007/978-3-031-42455-7_30

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Boeing Case Study:  Cyber Security Supply Chain Risk Management  

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What Corporate Boards Can Learn from Boeing’s Mistakes

• Sandra J. Sucher
• Shalene Gupta

Five lessons from the 737 MAX shareholder lawsuit.

Board members have an incredibly difficult job. On average they spend between 250 to 350 hours a year advising the company, and they must understand the manifold issues management is dealing with, as well as the industry and global context. When they fail at these duties, the consequences, including public outrage, can be immense, as we’re seeing in a shareholder lawsuit against Boeing. The suit offers five main lessons for companies and board members: 1) Hire board members for competence and objectivity; 2) Ensure that the board structure aligns with industry needs; 3) Prepare for the worst case; 4) Manage for truth and realism; and 5) Practice accountability and punish wrongdoing.

In February, Boeing shareholders filed a lawsuit against the company’s board of directors. They argued that the board had neglected their oversight duty, failing to hold Boeing accountable for safety before and after the crashes of two 737 MAX airplanes that killed 346 people in 2018 and 2019. “Safety was no longer a subject of Board discussion, and there was no mechanism within Boeing by which safety concerns respecting the 737 MAX were elevated to the Board or to any Board committee,” they wrote in the 120-page filing .

• Sandra J. Sucher is a professor of management practice at Harvard Business School. She is the coauthor of The Power of Trust: How Companies Build It, Lose It, and Regain It (PublicAffairs 2021).
• Shalene Gupta is a journalist and writer. She is co-author of   The Power of Trust: How Companies Build It, Lose It, and Regain It  (PublicAffairs, 2021), and the author of The Cycle: Confronting the Pain of Periods and PMDD (Flatiron, 2024).

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The Boeing Lesson: Laws That Prevent Frivolous Litigation Also Reduce the Likelihood of Product Recalls

Arvid O. I. Hoffmann, Chee Cheong, Hoàng-Long Phan and Ralf Zurbruegg

The lawsuits that followed the discovery of technical problems with Boeing’s 737 Max show that managers can be held personally liable by shareholders for neglecting fiduciary duties.

“Known as a shareholder derivative complaint, such legal actions seek to hold company officials responsible for alleged missteps and could result in defendants or their insurers paying monetary damages to a corporation and prompt internal governance changes,” according to a report in the Wall Street Journal . However, what happens when legal changes aimed to prevent frivolous lawsuits diminish such litigation risk? In a new Journal of Marketing study , we document the unintended consequence of firms becoming less likely to recall products.

At the heart of our study is a legal change called Universal Demand (UD) laws, which different states across the U.S. adopted between 1989 and 2015. UD laws make it more difficult for shareholders to file a derivative lawsuit to hold managers liable for breaching their fiduciary duties. In particular, these laws require shareholders to first demand that the firm’s board of directors takes legal action against the wrongdoers. As board members themselves are often defendants in the proposed lawsuit, they typically refuse such requests. Because judges tend to follow the decisions of boards, the case is often dismissed.

UD laws are intended to prevent frivolous derivative litigation from disrupting a firm’s normal business operations and to sort cases with merit from those without. UD laws are well-intended and linked to some positive consequences such as increased corporate innovation. However, the reduced threat of shareholder litigation as a governance mechanism disciplining a firm’s managers could have unintended negative consequences. We examine this notion in the context of managerial decision making around product recalls by combining theoretical insights from agency theory with a business ethics perspective. 

What Should Managers Do ?

Managers of publicly-listed firms should ideally strive to safeguard the long-term value of the firm, but in practice, they often face incentives and pressures leading to an overemphasis on short-term goals. Accordingly, managers are motivated to avoid recalls to avert immediate costs such as lost sales, an impaired reputation, and consumer compensation. However, this could lead to even bigger long-term damage to firms’ future stock price. Consequently, shareholders might sue managers for neglecting their fiduciary duties. UD laws reduce the risk of being held personally liable by shareholders, and we explore whether this changes firms’ likelihood to recall products.

Analyzing over 30 years of data, we find robust evidence that the reduction in shareholder litigation risk caused by UD law adoption leads to a substantial drop in product recall likelihood. Firms incorporated in states that have adopted UD laws are almost 30% less likely to announce a product recall. Importantly, the effect holds even when controlling for potential improvements in product quality.

Firms incorporated in states that have adopted UD laws are almost 30% less likely to announce a product recall.

We also find that managers’ opportunistic response to UD law adoption is less pronounced when organizational mechanisms mitigate agency conflicts between shareholders and managers. In particular, we find that the negative relationship between UD law adoption and product recall likelihood is less pronounced for more customer-focused firms or those subject to more stringent monitoring by institutional investors.

A Plan of Action for Legislators, Policymakers, and Firms

To alleviate the potentially detrimental effects of UD law adoption on consumer welfare and the future viability of the firm, we suggest the following action plan for legislators, public policymakers, firm owners, and consumer advocates.

• To enhance consumer protection in the near term, legislators need to overhaul UD laws to allow shareholders to claim demand futility when bringing a lawsuit concerning consumer safety. Demand futility enables shareholders to avoid the demand requirement if they can allege with particularity that demand will be futile because company directors have a conflict of interest.
• Public policymakers need to take a more holistic view when considering and implementing legal changes. That is, legislators tasked with revising corporate law should coordinate with regulators in charge of consumer protection. While doing so, these stakeholders should leverage insights from behavioral economics to anticipate unintended consequences of well-intended laws. 
• Shareholders and consumer advocates need to stimulate firms to increase their customer orientation. This is because a more pronounced customer focus reduces the level of managerial opportunism around product recall decisions. Firms can achieve this by appointing (more) marketing executives to the board, such as Chief Marketing Officers. 
• Finally, strategizing around the ownership composition of the firm can be beneficial. In particular, initiatives to attract more institutional investors to take a meaningful ownership stake in the firm are likely to pay dividends in terms of reducing managerial opportunism around product recall decisions.

Read the Full Study for Complete Details

From: Arvid O. I. Hoffmann, Chee S. Cheong, Hoàng-Long Phan, and Ralf Zurbruegg, “ So, Sue Me…If You Can! How Legal Changes Diminishing Managers’ Risk of Being Held Liable by Shareholders Affect Firms’ Likelihood to Recall Products ,” Journal of Marketing .

Go to the  Journal of Marketing

Battling Deceptive Pricing: How Revealing the “True Normal Price” Can Protect Consumers

New Perspectives on Addressing Issues at the Intersection of Marketing and Society

Regulating Product Recall Compliance in the Digital Age

Arvid O. I. Hoffmann is Professor of Marketing, University of Adelaide, Australia.

Chee S. Cheong is Associate Professor of Finance, University of Adelaide, Australia.

Hoàng-Long Phan is Lecturer in Business Administration, University of Danang School of Economics, Vietnam.

Ralf Zurbruegg is Professor of Finance and Business Analytics, University of Adelaide, Australia.

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Project Management Specialist (Experienced or Senior)

Job Description

At Boeing, we innovate and collaborate to make the world a better place. From the seabed to outer space, you can contribute to work that matters with a company where diversity, equity and inclusion are shared values. We’re committed to fostering an environment for every teammate that’s welcoming, respectful and inclusive, with great opportunity for professional growth. Find your future with us.

At Boeing, we are all innovators on a mission to connect, protect, explore and inspire. From the sea bed to outer space, you’ll learn and grow, contributing to work that shapes the world. Find your future with us.

Boeing Defense, Space & Security (BDS) has an exciting opportunity for a Project Management Specialist to join the Space Parts team in El Segundo, CA.

Our teams are currently hiring for a broad range of experience levels including; Experienced or Senior Project Management Specialist

Position Responsibilities:

Acts as Supplier Liaison for Critical Parts

Facilitates the replacement of Problem and Obsolete EEE/HIREL parts in Satellite Designs.

Helps drive cost reductions in EEE/HIREL parts for new business opportunities.

Leads, develops, coordinates, integrates, analyzes, and maintains integrated plans and schedules for complex projects, programs and change driven activities in accordance with project management industry.

Leads studies/analysis (trend, variance, impact), reports, risk assessments and planning efforts to determine impacts, constraints involving product development, production rates, process improvement, program initiatives

Identifies risk and opportunity potential, develops mitigation planning and refines the business case

Develops and establishes lead time requirements

Facilitates and ensures integration of project/program plan, schedules, change and baseline management, processes, techniques considered to be best practice across the industry

Acts as primary project contact to establish key stakeholder requirements and project objectives

Directs all phases of projects or subsystems of major projects from inception through completion.

Coordinates commitments with internal and external stakeholders to fulfill strategies.

This position is expected to be 100% onsite.  The selected candidate will be required to work onsite at one of the listed location options.

This position requires the ability to obtain a U.S. Security Clearance for which the U.S. Government requires U.S. Citizenship.  An interim and/or final U.S. Top Secret/ SCI Clearance Post-Start is required.

Basic Qualifications (Required Skills/Experience):

Bachelor’s Degree or higher

3+ years of experience working with military or space electronics

Experience with Microsoft Excel

5+ years’ experience in program or project management

3+ years’ experience in a leadership role, leading teams or projects to successful completion

5+ years’ experience working in ambiguous and fast-changing environments

Experience managing projects and utilizing standard project management tools

Preferred Qualifications (Desired Skills/Experience):

10 or more years' related work experience or an equivalent combination of education and experience

Technical Bachelor’s degree or higher  

Top Secret/SCI Security Clearance

Experience developing and maintaining integrated resource-loaded project schedules, including the use of project management tools and software such as MS Project, Milestones, etc

Typical Education & Experience:

Experienced (Level 4)

Education/experience typically acquired through advanced education (e.g. Bachelor) and typically 10 or more years' related work experience or an equivalent combination of education and experience (e.g. Master+8 years' related work experience, 14 years' related work experience, etc.).

Senior (Level 5)

Education/experience typically acquired through advanced education (e.g. Bachelor) and typically 15 or more years' related work experience or an equivalent combination of education and experience (e.g. Master+13 years' related work experience, 19 years' related work experience, etc.)

Relocation:

This position offers relocation based on candidate eligibility. 

Position may require travel up to 25% of the time.

Drug Free Workplace:

Boeing is a Drug Free Workplace where post offer applicants and employees are subject to testing for marijuana, cocaine, opioids, amphetamines, PCP, and alcohol when criteria is met as outlined in our policies.

This position is for 1st shift

At Boeing, we strive to deliver a Total Rewards package that will attract, engage and retain the top talent. Elements of the Total Rewards package include competitive base pay and variable compensation opportunities.

The Boeing Company also provides eligible employees with an opportunity to enroll in a variety of benefit programs, generally including health insurance, flexible spending accounts, health savings accounts, retirement savings plans, life and disability insurance programs, and a number of programs that provide for both paid and unpaid time away from work.

The specific programs and options available to any given employee may vary depending on eligibility factors such as geographic location, date of hire, and the applicability of collective bargaining agreements.

Pay is based upon candidate experience and qualifications, as well as market and business considerations.

Summary pay range for Experienced Level: USD $115,600 – $156,400

Summary pay range for Senior Level: USD $ 141,950 – $192,050

Applications for this position will be accepted through May 20th, 2024

Equal Opportunity Employer:

Boeing is an Equal Opportunity Employer. Employment decisions are made without regard to race, color, religion, national origin, gender, sexual orientation, gender identity, age, physical or mental disability, genetic factors, military/veteran status or other characteristics protected by law.

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Your Benefits

No matter where you are in life, our benefits help prepare you for the present and the future.

• Generous company match to your 401(k).
• Industry-leading tuition assistance program pays your institution directly.
• Fertility, adoption, and surrogacy benefits.
• Up to $10,000 gift match when you support your favorite nonprofit organizations.

These programs are subject to eligibility requirements and other conditions, which may differ for employees of certain subsidiaries or business units, or union-represented employees depending on bargaining agreement terms. If this information conflicts with the program documents, the latter shall control. This material is informational only.

Our hiring events are a great way to learn about our innovations and culture.

We're committed to environmental stewardship — an important pillar of our broader sustainability strategy to help make the world better for future generations.

Join our team of innovators and dreamers, engineers and designers, cybersecurity experts and technologists. This is where you'll help build tomorrow today.

See how everyone here is an involved and engaged member of our communities.

See how we innovate and operate to make the world better.

Apply for opportunities in engineering, product support, IT, manufacturing and other areas.

Oklahoma City is where you’ll shape tomorrow’s innovations.

Mother and daughter duo Denise and Kay push aerospace innovation forward every day.

Fascinated by kit airplanes as a child, Tresha is now chief engineer for the world’s most efficient twin-engine jet. 

With a curiosity inspired by school projects, Kariza now helps develop sustainable aerospace technology.

Learn how Boeing employees can earn a bonus by referring external hires.

The Boeing Pre-Employment Training Program (BPET) allows students from pre-certified academic manufacturing programs to skip the interview process when applying for specific manufacturing jobs at Boeing.

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Our three-year apprenticeships offer diverse experiences and prepare you to work on our aircraft.

Boeing’s Return Flight Program provides people with a pathway to return to their careers after an extended break.

Christina Upah believes problem-solving starts with a great team.

Ida Eggeblad uses interpersonal skills to connect teams across countries

How a conversation at a career fair led business operations leader Jennifer Hayden on an unexpected career path.

From intern to leader, east to west and in between, Laura shares how business and technology merge 

Rodney Kruse shifts his perspective each day by asking, “What have I learned?” 

A teammate’s skill for seeing the bigger picture helps her lead transformation at work and in her personal life.

'At Boeing, I've found a supportive environment where my attention to detail and focus are valued.'

'My team and I are using advanced tools and technologies to help chart Boeing’s future.'

Suellen achieved her dream to become a Boeing engineer. Now she’s mentoring our future leaders.

Elizabeth and Maggie share their stories on celebrating the perspectives and accomplishments from LGBTQIA+ employees and allies across Boeing.

Meet Melanie Brisbane, recent graduate and human resources professional. See how Melanie reached her dreams with help from our tuition assistance program.

Earn as you learn technical skills and receive credentials that can set you up for success.

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Romina Cutescu, a systems engineer, works on programs that are critical to homeland security.

Meet Anika Bell, an Army veteran and university recruiter who’s passionate about building diverse connections for an innovative future.

Aurelina Prada started at Boeing as an aircraft mechanic. Today, she's advocating for gender equity as a supply chain senior manager.

Since interning, Emily completed rotations in four business units and worked on the cargo air vehicle program. Today, she is a flight test conductor for the T-7A program.

Boeing engineers Gus and Casady share how Out in Science, Technology, Engineering and Mathematics (oSTEM) helps them feel seen and heard.

Boeing's partnership with Thurgood Marshall College Fund is an initiative supporting HBCUs through campus recruitment, career immersion, scholarships, and more.

Find out how Enrica is advancing her career at prestigious universities around the world with tuition assistance from Boeing.

Anthony 'Tony' Crutchfield, Boeing vice president and retired lieutenant general, shares decades of leadership experience with students and early career professionals from underrepresented communities.

Angelie has been with Boeing for 12 years and was diagnosed with autism in April 2019. Through her story, she inspires others to overcome adversity.

Nathan helps our defence customers make decisions using the power of modelling and simulation.

Meet Kay and Denise, inventors of an adhesive removal tool and an inspiration to other innovators across our company.

If you need a reasonable accommodation for any part of the employment process, please contact us.

Shanying Zeng is Boeing’s technical expert on the International Aerospace Environmental Group, which is helping Boeing find environmentally progressive alternatives for hazardous chemicals and material used in commercial and military aircraft.

Read how our Leading in Manufacturing training helped Jacob become a people-focused leader.

Meet Lee, a manufacturing engineer in Boeing’s Melbourne factory who has worked on commercial and defense aircraft, including the first Australian-made autonomous military aircraft, known as the MQ28A Ghost Bat.

Our tuition assistance program pays your institution directly so you don’t have to pay out of pocket. Learn about our generous funding for courses, certificates, undergraduate and graduate degrees.

Meet Danielle and Ankita, two teammates who are breaking biases with the help of allies.

Product security engineer Anna Guthrie builds resilient technologies to protect against cyberattacks. In this interview, she offers a glimpse into a day in her life with our growing cybersecurity team.

Three teammates champion a new approach to helping overcome the “mid-career crisis” and increasing diversity at all levels.

Engineering manager Aslihan Karlidag uses Boeing’s digital learning opportunities to keep her fears at bay

Senior software manager Chad Peterson knows that growth happens outside the comfort zone

Vice president Tresha Lacaux landed her dream internship at Boeing. Today, she’s landed her dream role

Discover how our Neurodiversity at Work program helped Thomas launch his software engineering career.

Meet Noah, a Production Systems Engineering Intern at Boeing who's enhancing airplane assembly processes and exploring aerospace's future.

Learn how this Chemical Technologies Intern advanced the aircraft painting process.

Meet Dr. Rongsheng “Ken” Li, a Principal Technical Fellow who has been awarded for his work in aerospace guidance, navigation and control systems.

Learn how Boeing helped shape the career path of this HR Intern and Spelman College economics grad.

Learn how this systems engineering intern benefited from spending the early years of her career at a leading aerospace company.

Discover how Suba Iyer turned her fascination with how things work into an engineering career.

Meet two systems engineers who are contributing to the next era of spaceflight.

Read how Sanh Ha, an engineer who is deaf, applied innovative thinking to safely overcome obstacles during a test flight.

From the University of Puerto Rico to working on Boeing commercial airplanes — learn how this intern got hands-on experience with cutting-edge automation techniques.

Meet Nic, a leader in the UK who is advancing equity and entrepreneurial innovation to solve aerospace challenges.

Discover how Boeing reignited a passion for Electrical Engineering for one intern by bridging theory and real-world application.

See how Boeing fuels ambition, inspiring one intern to broader her career goals beyond her major.

A lifelong interest in chemistry sparked this engineer to desegregate lunch counters in 1960 and unveil cutting-edge technology in Boeing laboratories 50 years later.

Teresa is a product engineer and inventor with multiple patents. Learn how she's helping to close gaps for Asian women in STEM.

Bo designs and develops software and hardware that supports the Wedgetail's missions. Watch the video to learn how his work has an immediate impact.

Be aware of fraudulent job offers purporting to be from The Boeing Company and/or its affiliates. Learn what to look for.

Read how Chantel, a manager in workforce and engineering, is breaking ground in representation and aerospace history.

Marvi applies her love of invention to challenging problems, and works towards her personal mission: to serve as many people as possible.

Read about Nelson's journey from the soccer field to becoming an accomplished engineer and leader at Boeing South Carolina.

Sarah designs and manufactures flight control components for Boeing commercial aircraft in Australia.

Shanth shares his journey from intern — working on NASA's Space Launch System and the CH-47 Chinook— to deputy chief of staff for our chief engineer.

Meet Susana, a supplier quality specialist in Mexico who's using problem-solving skills to drive operational excellence.

Learn how our partnership with SkillBridge is supporting veteran teammates in discovering their next mission.

Meet Rachel, a Material Accounting Intern who was a part of the team tracking and managing parts for Boeing Defense & Space.

Meet Raveena, a Design Engineering Intern at Boeing. With an Aerospace Engineering background from the University of Nottingham, she shares insights from working on the Structures team in Frimley.

Meet Sardor, a Supply Chain Analyst intern at Boeing, who shares insights into his virtual internship experience, the impact of Boeing's mission, and his commitment to building a successful future.

What is Vidhi's advice for aspiring engineering interns? Apply, adapt, and be a part of Boeing's innovation journey.

An inclusive approach is helping Jacqueline drive sustainable aviation in Southeast Asia.

From challenges to bright spots, Boeing’s KC-46 chief mechanic shares tips and lessons learned to help future leaders.

There are so many things to explore within Boeing, and the company makes it easy to do so.

Fight your imposter syndrome and apply! When you are here, your number one priority is to learn, and stay hungry. You are never done learning. This will be the best experience of your life because you will see how bright your future is and how far Boeing will take you.

Meet Isabelle, a systems engineer intern at Boeing. Discover her journey from University of South Florida to impactful work in defense programming.

Meet Jesus Sanchez, a power machine operator in Auburn, Wash. See how Jesus used our tuition assistance program to obtain an associate degree in business.

Meet Ian, an engineering intern at Boeing Global Services and Stanford University student who is building his skills and embracing challenges.

Boeing's partnership with Thurgood Marshall College Fund helped these two students land their dream jobs.

As a global equity, diversity and inclusion leader, Zan works to ensure everyone feels they belong.

Alex Campos, a Boeing Missile Defense contracts administrator and U.S. Navy reservist, shares his advice for staying on mission.

Read how Kristin Innes and her partner Bonnie are growing their family with help from Boeing's fertility benefits.

Nick Perry shares why understanding, identifying with and talking about disabilities helps reduce stigmas.

Meet Kim, Greta and Miwa: Three women who took chances and developed their careers on their own terms.

Meet Jimmy, an Air Force veteran and aviation safety coordinator that helps teams operating the F/A-18F Super Hornet and EA-18G Growler get home safely.

Darcy and Susan discuss their experiences as transgender women and the effects inclusion — and exclusion — have on their time at work.

Engineers Debra and Stacia discuss the importance of community connection and making an impact through even small actions.

From the Rosebud Reservation in South Dakota to leading attack helicopter programs in Mesa, AZ., Kathleen “KJ” Jolivette inspires STEM interest among Native American students.

Meet Ty'Quish, a mechanical engineer who has helped design and build the next-generation assault helicopter.

Our software engineering challenges are immense. But the possibilities are even greater. Learn how our team is harnessing the power of future-forward computing.

A a modeling and simulation engineer for Boeing Ground-based Midcourse Defense, or GMD, Kyle mostly deals in a world that’s conceptual, using a modeling system to simulate and predict how a customer request will perform in a real-world scenario.

Discover how Rakesh and the design engineering team at the 787 Interiors Responsibility Center in India innovate and grow.

Faced with caring for two sick family members, Sandra Lankford leaned on Boeing's caregiver benefits for support. Watch Sandra's story.

Read how Sarah Wauahdooah, a manufacturing research and development engineer, applies her robotics expertise on the V-22 Osprey program.

Satyaki helps to keep the Australian Army’s CH-47 Chinook helicopters flying around the clock.

Shruthi discusses innovating with her design build team, and taking her next career step as a manufacturing engineer at Boeing in India.

Stephanie Yount, engineer and recent Leadership Next graduate, discovers she’s most comfortable when she’s completely uncomfortable.

Meet Boeing finance leader Terrence Chance, and discover the breadth of the experience that's shaped his career.

We are an equal opportunity employer.

Dalena Nguyen, a Talent Acquisition Advisor, shares her top tips for making a great first impression when interviewing by phone or online.

Discover how our digital learning resources helped Boeing India teammate Antara upskill.

Abbey Carlson, a former Boeing intern, shares her two major milestones: graduating from college and accepting her first job with Boeing.

A Senior Composite Engineer at Boeing’s Satellite Development Center, Francis, says each patent represents a step toward achieving her childhood goal to make space safer.

Glen shares a personal story about a family member who was involved in an auto accident. For years after Glen avoided flying due to safety regulations that prohibit passengers from sitting in their own wheelchairs on airplanes.

Meet Hana McKee, an engineer whose curiosity inspires her to innovate the next generation of rotorcraft.

Meet Jae, a systems engineer on the world’s leading airborne early warning and control aircraft, Boeing’s E-7A Wedgetail.

What Marcie Purser, program management specialist, brings to the table is highly valued at Boeing: lasting connection.

Electrical engineer Marcela Angulo works on next-generation defense technology and inspires Hispanic students to get involved in STEM.

I was first introduced to Boeing during a Thurgood Marshall College Fund (TMCF) immersion experience in the summer of my freshman year in college.

I love Boeing’s commitment to connect the world. As someone who has family all around the globe, it's this commitment that enables me to visit my loved ones no matter how far away they may be.

Learn how one of our development programs – a partnership with MIT – is helping an engineer get on a path to executive leadership.

From space to defense, senior software and project engineer, Kimberly Sledge, inspires the next generation of Black women in STEM.

Chandler is pursuing her passions thanks in part to our development programs and tuition assistance.

From making repairs on aircraft to building spacecraft, Oborsouis "OB" Saint-Louis has had his hands in a little bit of everything.

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Whistleblower Claims Boeing Supplier Delivered Defective 737 Max Fuselages for Years

A former Spirit AeroSystems quality manager is alleging that the supplier knowingly delivered  defective 737 Max fuselages to Boeing for years.

Speaking to CBS News, Santiago Paredes detailed his work at Spirit Aerosystems' factory in Wichita, Kansas, where he inspected 737 fuselages before they were sent to Boeing. Spirit AeroSystems was spun off from Boeing in 2005, and is responsible for building most of the 737 Max line. Paredes spent a decade with Spirit before leaving in 2022, where he claims "it was very rare for us to look at a job and not find any defects," and that he was told to downplay any issues he found.

Read More:  Boeing Sharply Criticized at Two Senate Committee Hearings

"Working at Spirit, I almost grew a fear of flying," he said. "Knowing what I know about the 737, it makes me very uncomfortable when I fly on one of them."

Paredes further alleged that Boeing was aware Spirit was delivering the defective fuselages, and that it was "just a matter of time before something bad happened," referencing a blown-out door plug aboard a 737 Max 9 in January. CBS News also received several images from current and former Spirit workers showing dented fuselages and missing fasteners. 

In response to Paredes' claims, a Spirit spokesperson told CBS News that the company "encourages all Spirit employees with concerns to come forward, safe in knowing they will be protected." 

"We remain committed to addressing concerns and continuously improving workplace safety standards," he added. 

This comes nearly a month after whistleblower Sam Salehpour stepped forward with claims that fuselages for Boeing 787 Dreamliners weren't fastened together correctly, and that the planes were at risk of breaking apart over time. Then on May 7, the Guardian reported that the Federal Aviation Administration was investigating whether Boeing completed inspections for 787 Dreamliners to confirm that fuselages were correctly attached, and if employees might have falsified records. 

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