The Wall Street Journal
By Andrew Tangel and Andy Pasztor
February 13, 2021 3:04 pm ET
When Boeing Co.'s board had its first formal meeting around seven weeks after the initial 737 MAX crash in late 2018, directors didn’t hold in-depth discussions about the jet’s safety, according to newly released details of internal company documents.
Months later, Boeing’s current chief executive told journalists the company’s directors had moved quickly to address the accident, according to excerpts of company documents contained in a shareholders’ lawsuit.
That and other new information in the suit cast doubt on whether Boeing directors pressed management about safety problems or seriously considered grounding the plane before a second 737 MAX crash in early 2019.
Parts of the internal Boeing documents, which indicate dates and particulars of meetings the directors held and what was discussed, are cited in the shareholders’ action claiming directors breached their fiduciary duties in overseeing management. The suit also alleges David Calhoun, then the lead-director who later became CEO, exaggerated to journalists the degree to which directors attended to safety concerns between and in the wake of the two crashes.
The suit alleges that Mr. Calhoun, who became CEO in early 2020, conducted a public-relations campaign that “insisted the board acted with more urgency and was more engaged than it actually had been” following the two crashes that killed 346 people in October 2018 and March 2019. The suit cites internal Boeing emails and other documents that weren’t previously public.
A Boeing spokesman said the lawsuit predictably presents a distorted account of Mr. Calhoun’s interviews, and added that the company’s court filings in the case show the board’s “extensive and active oversight” that was “accurately explained during those interviews.” The spokesman said the company is seeking to dismiss the lawsuit, saying it lacks merit and “presents a misleading and incomplete picture” of Boeing’s actions and the board’s oversight.
The company declined to make the CEO available for comment, or to address the lawsuit’s specific claims about Mr. Calhoun or the board’s response to the crisis. The spokesman said Boeing “is dedicated to the values of safety, quality and integrity in all that we do.”
Plaintiffs’ lawyers gathered the records in the litigation, filed in Delaware’s Court of Chancery, and portions were recently released after The Wall Street Journal asked a judge to make them public. Different versions of the suit have been filed. Delaware law grants plaintiffs access to internal board documents in such cases.
Mr. Calhoun, a Boeing director since 2009, acted as a prominent defender of the company’s board and its then-CEO, Dennis Muilenburg, following the second 737 MAX crash. That accident led global regulators to ground the aircraft, spurring an all-consuming corporate crisis that led to a shake-up of Boeing’s leadership and ramped-up board oversight of safety.
Now, as CEO, Mr. Calhoun is navigating Boeing through the aftermath of the MAX crisis and fallout from the Covid-19 pandemic that has crushed demand for new aircraft and prompted the manufacturer to slash jobs and production.
Mr. Calhoun’s May 2019 media interviews had a primary objective: “Position the Boeing board of directors as an independent body that has exercised appropriate oversight,” according to an internal Boeing document that became public for the first time in the suit. It couldn’t be determined who wrote or received the document.
In one interview, according to documents cited in the lawsuit, Mr. Calhoun said directors were “notified immediately, as a board broadly” when the first 737 MAX crashed in Indonesia on Oct. 29, 2018. A newly released portion of the suit said internal Boeing records show directors received their first written communication from Mr. Muilenburg on Nov. 5, a week after the accident.
Mr. Calhoun said in another interview the board met “very, very quickly” after the first crash to discuss it, according to the suit. The suit said the board’s first meeting came a few weeks after the accident, which involved a Lion Air jet in Indonesia. It was a Nov. 23, 2018, phone meeting that was considered optional due to the Thanksgiving holiday weekend, the suit said. It couldn’t be determined how many directors attended.
The lawsuit and a Boeing court filing note about a dozen exchanges between management, the board and individual members in the two months after the first MAX crash, including directors’ request for more information about the accident.
The first formal postcrash board session—a regularly scheduled meeting of directors—occurred in mid-December, according to the lawsuit and excerpts of the Boeing documents. A presentation for the board’s executive session lists the Lion Air crash as a “hot topic.” Yet, the suit said, board materials reflected “no substantive discussion” of safety issues, including a MAX flight-control system suspected in the crash or airplane sensors that can trigger it. Both topics had garnered media attention at the time.
Minutes from the Dec. 16-17, 2018, meeting show the board received a presentation about the 737 MAX that was instead focused on “the state of the production recovery, focusing on the factory, supply chain, and engines,” as well as “readiness for the next potential rate increase,” according to an excerpt of the minutes cited in the lawsuit. Boeing had been planning to ramp up production rates of the single-aisle jet, a top moneymaker, at the time but had been grappling with supplier bottlenecks.
Mr. Calhoun said in one May 2019 interview that the board had engaged in what he called a “deliberative process” with Mr. Muilenburg to consider grounding the plane after the first MAX crash, according to the lawsuit, adding: “We looked over that many times.” He said in another interview, according to the suit, that directors didn’t “regret that judgment” to keep the plane flying, as details about the first accident made it look “like an anomaly.”
Citing a summary of the internal Boeing documents, a newly revealed portion of the lawsuit said “no board communication or email discusses” such a grounding decision, nor do any board minutes or agendas in the nearly five months between the accidents.
After the second 737 MAX crashed in Ethiopia on March 10, 2019, Mr. Calhoun said in one interview that he “immediately corral[ed] a board discussion,” according to the lawsuit. The Boeing filing said management alerted the board the same day. The suit said directors met three days later by conference call to discuss the potential grounding of the MAX fleet.
In its court filing, Boeing said it has long relied on established procedures to keep the board engaged in design, safety and other matters over the years. The filing noted Boeing’s contributions to safety improvements, including the “steadily enhanced safety record of the 737 model, generation over generation.” After the first MAX crash, its filing said, the board responded promptly and those procedures “allowed it to diligently and appropriately oversee the company’s response.”
The board has since established a committee to increase oversight of safety. U.S. regulators approved the 737 MAX to resume commercial service in November 2020.
Details in the lawsuit also appear to contradict Mr. Calhoun’s May 2019 statement in one interview that the company’s “position in the media…was never discussed” with the board. The suit includes excerpts of internal emails and cites multiple communications among Mr. Muilenburg and directors before May 2019 about what the then-CEO saw as negative media coverage.
As time went on, Boeing’s challenges deepened amid increased congressional and regulatory scrutiny. The board shook up management in late 2019, including stripping Mr. Muilenburg of his dual role as chairman and handing that job to Mr. Calhoun.
As chairman in November 2019, Mr. Calhoun defended Mr. Muilenburg and the company’s “very active board” through the MAX crisis.
“No one is ever going to claim that they were fast enough,” he said on CNBC.
NO WAY this and all other Boeing travails would have occurred if the foolish Boeing had not passed over the Father of the 777, Alan Mulally. Instead they promote a board member who was a Jack Welch disciple of "cut, cut and then cut some more", McNerny, who was more focused on next quarters share price than what made Boeing great.
ReplyDeleteOf course Mulally was immediately snatched up by Ford, saving them from bankruptcy and turning the company around.
If Calhoun had a whit of sense, he would BEG Mulally to come onto the board.
Mulally still accepted the MickeyD takeover of the engineering and bean-counting culture, so either way, getting a collection of Douglas types of problems in the outcomes from the new Boeing/McDonnell Douglas engineering, testing, and manufacturing processes should have been expected. The old guard at Boeing (the real company), now retired, were essentially sidelined by McD-D ways and values and have moved on.
ReplyDelete