Corporate denial lesson: Why Boeing needs an AA meeting

What you need to know:

  • To the students of corporate governance, it should come as no surprise that the CEO and chairman are one and the same person.

  • The corporate version of Davy Jones Locker is littered with examples of crisis perpetrated by this schizophrenic individual who finds it hard to censure himself.

  • In this case it may have cost priceless human lives and, in the language of business, a loss in shareholder value.

Warning! This is not a trick question: How many deaths does it take an airplane manufacturer to admit its model is flawed? You might think two plane crashes in less than five months and 346 lives lost should make the case.

Apparently not. American plane maker Boeing is still in a state of denial. As any astute disciple of Alcoholics Anonymous (AA) will tell you, the first step is acceptance.

SENSORS

At the company’s Annual General Meeting on April 29 this year, Boeing chief executive Dennis Muilenburg defended the 737 MAX’s safety record, saying Boeing would ensure it was “the safest aeroplane out there to fly”. That statement appears to come with a bag of salt as every day new revelations come to light.

Here is the litany of events in chronological order as they unfolded.

October 29, 2018: Lion Air Flight 610 crashes in the Java Sea off the coast of Indonesia, killing all 189 aboard. Boeing admits that the sensors linked to the Manoeuvring Characteristics Augmentation System (otherwise known as MCAS) have been known to be faulty. They had known about this since 2017 but oops, it had skipped their mind to let their airline customers know!

The story goes that in order to help save money, the light which would have shown whether the sensors were working was included as optional. This is like buying a new car and being told the fuel gauge display on the dashboard is optional.

March 10, 2018: Ethiopian Airlines Flight 302 comes down in a field shortly after take-off from Addis Ababa’s Bole International Airport and 157 are declared dead.

May 15, 2019: It is reported that the Federal Aviation Authority (FAA) believes Boeing should have put more information in its pilot manuals about MCAS. This follows earlier demands from the Allied Pilots Association of American Airlines for more training. Or put another way, more training than the one-hour iPad Course that was initially given to pilots. In other words, a relatively safe ground-based Microsoft Office programme requires more time for coursework than a significant change to operating a Boeing 737 airplane.

SIMULATOR

May 19, 2019: Boeing confesses there is a defect in its 737 MAX flight simulator software used to train pilots. Basically, even if you had trained on this machine it would have been unable to replicate similar conditions to those under which the two planes came down. Of course this assumes you were one of the rare ones who had access to a 737 MAX flight simulator. There are only two in all of North America. At present the only one in the United States is owned by Boeing. The other is in Canada.

So how does a company get to that state?

It turns out the Kenyan government is not the only cash-strapped one in the world. FAA, the US regulator assigned to oversee the safety of planes, did not have enough inspectors. So it “outsourced” to Boeing.

The moral quandary is: How do you police yourself when your incentives are to take shortcuts on safety checks and ensure you start selling as fast as possible?

This is like the Kenya Bureau of Standards telling you they don’t have enough staff to inspect goods at a port of entry, so maybe you can send some of your employees to verify what you said is in the 40ft container is actually true.

CREDIBILITY

As US Congressman Rick Larsen says, “The FAA has a credibility problem. The FAA needs to fix its credibility problem.” The trust is so broken that Ethiopian Airlines shipped the ‘black box’ from its crash site to France for evaluation instead of back to the home government of the aircraft manufacturer.

And dear Boeing, just because the pilots of the ill-fated planes come from developing economies, at least one of which is a ‘s***hole’ country, doesn’t mean they didn’t know what they were doing. There were rumours of pilot error and different standards in America. One suspects this is the reason you gave to convince Washington to delay grounding your defective plane when other governments in the world had come to the same decision 14 days earlier. Astonishingly led by your biggest customer — China.

Lastly, to the students of corporate governance, it should come as no surprise that the CEO and chairman are one and the same person. The corporate version of Davy Jones Locker is littered with examples of crisis perpetrated by this schizophrenic individual who finds it hard to censure himself. In this case it may have cost priceless human lives and, in the language of business, a loss in shareholder value.

If I was the owner of an airline that had bought 737 MAXs, I would be asking for a refund. I personally plan to avoid flying that particular airline model. Methinks the firm doth protest too much.

The author is the managing partner of C. Suite Africa, a boutique management consultancy. [email protected]