Boeing Reports Misconduct Measures—Is It Enough?

Whenever a company faces a scandal based on serious misconduct, there is a search for the cause of the failure and for remedial actions to make certain the failure does not happen again.  In our book ROTTEN: Why Corporate Misconduct Continues and What to Do About It, my coauthor Marc Epstein and I identify 10 major steps companies must take to head off future misconduct.  

It is interesting to examine the actions Boeing reported it has taken in recent months to head off a reoccurrence of its misguided decisions regarding the installation of new pilot software on the 737 MAX, safety decisions which led to two aircraft crashes and the loss of 346 lives.  

Boeing revealed its internal steps as part of an agreement with prosecutors to pay $2.5 billion in fines (including compensation to the victims’ families) to settle all government matters regarding the violations and crashes, and to avoid the imposition of a federal monitor to oversee its compliance for a typical three-year period.  

The measures include organizational changes, enhanced compliance policies, enhanced compliance training, and a new mechanism for engineers to report safety, quality, and compliance concerns to a centralized product safety committee.  The centralized committee and a new board committee to oversee compliance matters demonstrated that one task is to isolate product safety concerns from the pressures of short-term performance goals inside the company—the source of much corporate misconduct.  

What more might Boeing have done?  Marc Epstein and I argue that resisting these short-term performance pressures depends on top management setting a corporate purpose that emphasizes such values as passenger safety at least equally with financial performance and, without letting top management off the hook, holds middle managers responsible for upholding the social purpose and values as well as the achievement of financial performance goals.  We also recommend the use of new tools such as the ethical performance audit and the ethical risk audit to constantly monitor the susceptibility of systems to misconduct.  

The reported Boeing steps are good, but reek of “more of the same” rather than a significant departure from existing approaches which have proven inadequate.  Ironically, the prosecutors announced no senior executive bore any responsibility for the crashes.   We believe there is so much more top executives could have done—and should now be doing.

Relevant article:

Prosecutors Credited Boeing for Compliance, Organizational Reforms