Boeing’s 737 MAX Scandal: A Fair Resolution? (Part III of III)

Michael Volkov
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The Volkov Law Group

Boeing’s settlement with DOJ raises more questions than answers.  While I understand that a criminal case against Boeing requires DOJ to identify one or more individuals who have committed a crime that can be fairly attributed to the Boeing corporation.  The doctrine of respondeat superior is the mechanism by which this legal attribution occurs.

Boeing has been praised for its remediation efforts and its end result.  It clearly could have been a lot worse.  In my view, it should have been a more severe enforcement action against Boeing.  When misconduct results in a loss of life, the prosecution and eventual result should reflect the seriousness of the matter. 

DOJ found that Boeing’s misconduct was not pervasive through senior management.  Based on this finding, DOJ stood down from a more comprehensive or rigorous settlement.  While senior management may not have been engaged in misconduct themselves, DOJ did not answer (and may not have to answer this question) whether Boeing’s culture contributed to an environment in which the two Technical Pilot’s committed misconduct, and failed to disclose their misconduct after the Lion Air accident occurred.  Even more significant questions should be addressed, as I outline below, about Boeing’s culture of ethics and compliance, and the adequacy of its safety controls.

Let me outline my argument.  Of course, I recognize that I am not privy to all the facts and the considerations. 

Culture of Ethics and Compliance:  Boeing’s safety violations were committed by two Technical Pilots is only part of the story in this case.  The two pilots clearly violated the law by withholding critical information about the MCAS operations that would have resulted in pilot training on MCAS and potentially avoided the two Boeing 737 MAX crashes. Their conduct is even more reprehensible when their deception continued after the Lion Air crash occurred and the MCAS was identified as a possible reason for the crash.  Their silence after the Lion Air crash is a terrible face since the pilots knew full well what the risk was but they chose to keep quiet.

We can all agree on condemning their conduct, but their failure to act and speak up occurred in a corporate culture that did not prevent them from continuing their criminal conspiracy. 

My question is where was Boeing’s culture of compliance? 

What commitment did the board and senior management make to this issue? 

How could such blatant misconduct occur in a culture of compliance? 

My questions are somewhat rhetorical but spring from several well-established principles. Companies that maintain an ethical culture suffer reduced rates of misconduct in comparison to less ethical companies. 

Where did Boeing fall on this spectrum of corporate culture and why?

In prior postings and a podcast episode on the Boeing scandal, I highlighted evidence suggesting that Boeing’s culture elevated profitability over safety.  That is not surprising.  Yet, DOJ makes no mention of Boeing’s culture, its failure to embed the importance of compliance, and the leadership failure at Boeing to ensure implementation of a culture of ethics and compliance.

Safety Controls: Boeing’s safety controls, interactions with the FAA, and regulation of training manuals and materials were circumvented through the actions of two employees.  It is significant that there were no safety controls to verify and corroborate the issues determined and advocated by the two Training Pilots.  Given Boeing’s business and the importance of safety issues, it is difficult for me to accept that Boeing’s safety controls could be easily circumvented by two actors.  Basic safety controls should not be so easy to circumvent, and Boeing’s safety controls appear deficient on their face.

DOJ and Boeing tout Boeing’s remediation efforts to re-organize and prevent future safety violations.  These improvements are structural and are positive.  Two of the measures – the creation of a permanent aerospace safety committee and a product and services safety organization, while laudable, should have been in existence prior to the 737 MAX scandal.  Boeing’s obsession should have been safety and its failure to maintain a robust safety compliance organization at the board level and in the organization is nothing to applaud or credit for remediation purposes.

Boeing’s remaining structural changes to its engineering function and its Flight Technical team is a positive step. To be effective, however, structural changes are unlikely to prevent and detect future violations unless those changes are coupled with a serious and significant effort to improve Boeing’s culture of ethics. 

Boeing is one of the largest companies in the United States, and its ethics and compliance program, safety controls and financial controls should reflect its status.  Safety is its core risk and its controls should have reflected this basic fact.  These are issues that should have been addressed prior to a glaring and tragic scandal resulting in significant loss of life.  A company committed to ethics and safety would have avoided this scandal – hindsight is 20/20 but these issues should have been addressed before the 737 MAX tragedy.

Absence of an Independent Corporate Monitor: DOJ’s decision not to require the appointment of an independent corporate monitor is questionable.  Boeing’s culture and compliance program failed on many levels, more than just the illegal conduct of two Technical Pilots.  Boeing’s culture is clearly deficient, and the proposed structural changes are unlikely to mitigate the potential for recurrence of safety issues.  In this case, DOJ should have appointed an independent compliance monitor to ensure that Boeing’s culture and controls are remediated throughout the organization.  Given the stakes of another safety scandal, DOJ was remiss in failing to take this basic step to protect Boeing customers and passengers from future safety violations.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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