In business, it isn’t always easy to strike a balance between developing a product that is safe and effective, while also maintaining financial viability. Aeronautical engineering is no expectation, and this has been emphasised by a recent agreement of Boeing’s directors to settle a claim against them for $237 million, arising from allegations of mismanagement.
The derivative class action lawsuit led by some of Boeing’s largest shareholders, such as New York’s pension fund for government employees, alledges that the company’s directors breached their fiduciary duties by dismantling Boeing’s much lauded safety-engineering corporate culture in favour of one that prioritised financial-engineering and short term incentives.
The claim arose in the wake of two incidents involving Boeing’s newest plane, the 737 MAX, after 346 people were killed within a five month period in 2019. The incidents, occurring in Ethiopia and Indonesia, were attributed to a flight control system that relied on a single sensor that failed, leading to the deaths and worldwide groundings of the planes by regulators.
According to a draft release, which is yet to be approved by the courts, much of the $237 million settlement is expected to be made by Boeing’s insurers. In addition, the company is likely to adopt a number of changes to address the cultural concerns raised, including the appointment of an internal ombudsman, as well as adding engineering and safety experts to its board.
The FAA eventually cleared the 737 MAX to return to service in late 2020, after Boeing took significant actions to reinforce its commitment to safety. Tom DiNapoli, whose office led the lawsuit, said “this settlement will send an important message that directors cannot shortchange public safety and other mission critical risks”. The matter is likely to be settled without an admission of wrongdoing.