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How the wheels came off Boeing’s reputation

30th April 2024


photo of 3 paper aeroplanes flying straight and one red paper aeroplane veering right over a blue background

Along with Airbus, Boeing once ruled the skies. The two aircraft manufacturers dominate the aeronautical industry, with the US giant building an impeccable safety and quality reputation over decades, yet recent events have shown how quickly the mighty can hit turbulence.

And many in the aeronautical industry believe that a board led by non-engineers lost sight of the risk around its product, rather than focusing its energies on the risk around its bottom line. The result is that poor leadership and a cosy board that seemingly failed to challenge the rationale of a series of cost-cutting measures, have led the company into crisis.

It wasn’t so long ago that Boeing was viewed as something of a dull but dependable industrial giant, known for designing and manufacturing some of the safest and most advanced planes to such an extent that they conjured the phrase ‘If it’s not Boeing, I’m not going’.

However, in March of this year, Boeing’s airline customers sent two very clear messages that enough was enough when they asked to meet the board without its chief executive officer, David Calhoun, in attendance.

Customers lose confidence


Firstly, it was clear that key customers had lost confidence in Calhoun and within days the board had acted, announcing his exit by the end of 2024 and confirming that Stan Deal, head of the commercial airplanes division, would retire with immediate effect.

Calhoun has been CEO since January 2020, nine months into the grounding of the 737 Max following two fatal crashes. Having held senior positions at Blackstone, Nielsen and spent 26 years at GE, he did not have an engineering background.

The second message related to the board itself. The airline CEOs were spelling out that at the heart of the Boeing mess is a huge governance problem because the company’s issues, across quality, culture and leadership, have happened on the current board’s watch.

Again, Boeing’s directors appear to have got the message. The company announced that chairman Larry Kellner would not stand for re-election at its AGM in May and will be succeeded by former Qualcomm CEO Steve Mollenkopf, who joined the board in 2020, post the infamous 737 Max crashes in 2018 and 2019 that killed nearly 350 people.

Company culture issues


Indeed, many experts and critics believe that Boeing’s woes have been years in the making, pointing to the result of a shift in corporate culture that began with the company’s leadership and which appeared to have put profits ahead of the safety and engineering prowess for which the company was once renowned.

While Boeing has always denied that there has been such a shift away from its focus on safety and excellence, clearly engineering and manufacturing problems have contributed to not only the crashes but multiple recent and much-publicised in-flight failures. Emphasising that profit before transparency rarely works, Boeing has reported significant cumulative net losses over the last five years and doubts over its investment in safety are likely only to add to those financial woes.

Boeing governance problems

The problem for Boeing is that when governance issues become so ingrained they can be hard to fix. Bad boards can double down and become insular, entrenched and often reticent to create conflict among their members.

For example, a Harvard Business Review analysis concluded that the board lacked technical expertise at the time of the fatal crashes. In addition, with three of the company’s 13 board members also serving on the Caterpillar board and two on the Marriott board, Boeing’s directors gave the appearance of a cosy network, with close and intertwined relationships that could make objectivity and conflict difficult.

It would also appear that group-think may have been at the heart of Boeing’s inaction and the board’s failure to confront obvious issues.

Meanwhile, the company’s audit committee was responsible for overseeing risk, but its remit appears to have been to oversee risks around financial performance rather than safety. The board has since set up a safety committee and refreshed its membership and, since the start of 2020, four board members with at least 11-year tenures have departed, with the CEO and chair now set to join them.

The path ahead for Boeing


Beyond the board rejig, which seems unlikely to be over, Boeing could also consider adding union representation to its board. The International Association of Machinists District 751, which represents more than 30,000 Boeing workers, has already made that request and there are precedents, including Chrysler in the US during its own crisis.

Taking that kind of action would signal a genuine change of cultural ethos, adding the voice of employees to the board, not least as many have been raising the alarm over safety and manufacturing shortcomings at Boeing for years. 

Clearly, radical measures are needed to reframe how Boeing views its governance, corporate culture, and how safety and quality need to be at the core of its brand ethos.