A corporate board of directors serves on behalf of the shareholders,hiring and firing the chief executive,setting the pay of top executives and setting up guardrails for the CEO. In their lawsuit,investors say Boeing failed to serve these roles,missing red flags about potential safety problems with the 737 MAX and failing to question Muilenburg on his handling of the crisis.
Other than Muilenburg,a dozen people served on Boeing’s board throughout the 737 MAX crisis,including Lynn Good,CEO of Duke Energy;Robert Bradway,CEO of biotech giant Amgen;and the former chiefs of Allstate,Continental Airlines,Medtronic,Aetna and Nortel.
The shareholder lawsuit seeks to hold these individuals personally responsible for paying Boeing back for damage the company sustained through their breach of duties.
‘Extenuating circumstances’
The allegations focus partly on representations Calhoun made to the news media after the second crash of a 737 MAX jet,in March 2019,that threw the company into crisis. Speaking toThe Post less than two months after the crash,Calhoun and another director,Lawrence Kellner,made the case that they had carefully considered the circumstances of the first crash,of a Lion Air plane in Indonesia,before deciding that the evidence did not warrant a decision to ground the jets. Both said that because the Federal Aviation Administration was not calling for a grounding,they felt less pressure to do so.
The Post quoted these comments - the first on-the-record interviews of Boeing directors since the crashes - in a report about the growing scrutiny around the board’s decision-making.
Calhoun said:“As we began to understand the events that happened,in my view,there were enough circumstances. . . . Extenuating circumstances that could or would have prevented this accident,that it looked like an anomaly.
“So for us not to immediately form a decision,and certainly with nobody at the FAA telling us to do anything - and nor should they or would they in light of where we are in the accident investigation - no,we did not consider a grounding of the fleet until we began to understand completely the facts.”
Kellner said:“The grounding of an aircraft should always be based on facts. And looking through the Lion Air crash - and a crash is typically a chain of events,it’s not a single individual item - we will know when we get some facts. Based on the preliminary report,based on what came out,based on where we are,I didn’t see a case that would say we should ground the aircraft based on Lion Air. . . . I don’t see an individual incident that says ground the aircraft in the Lion Air case.”
“The[board’s] sole topic of discussion with respect to the 737 MAX was immediate restoration of profitability and efficiency in light of longstanding supply chain issues.”
From Boeing’s investor lawsuit claim
Those accounts of the board’s decision-making are not supported by the evidence gathered by plaintiffs in the Delaware suit. During a board meeting less than two months after the October 2018 crash off the coast of Indonesia,directors made no recorded mention of the crash or product safety issues during the open board session,according to the legal complaint. “The sole topic of discussion with respect to the 737 MAX was immediate restoration of profitability and efficiency in light of longstanding supply chain issues,” the lawsuit says.
The board did not call for an investigation into the circumstances of the crash or the safety of the planes,and it did not question Muilenburg’s repeated assertions that the company’s 300 other 737 MAX airplanes in use were safe,the shareholders say.
In the days after the Ethiopia crash,the 737 MAX was grounded by regulators around the world. Family members of victims voiced anger at the company for no
t grounding the planes earlier,an action they believe would have prevented the second crash.
Boeing investors also say Calhoun misled the public about the board’s role overseeing safety through the design and development of the 737 MAX a decade ago. The company’s plan to revamp an older 737 jet included larger engines mounted farther up on the wings,which altered the plane’s balance. Boeing engineers designed software to compensate for this imbalance. In both crashes,investigators say,this software pushed the planes’ noses downward.
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Calhoun toldThe Post in 2019 that it was not part of the board’s job to inspect every technical feature on an airplane. However,he said,the board did ask questions about the plane’s safety throughout its design and certification process with regulators.
The investor lawsuit challenged this account,saying the board’s minutes “do not reflect any such probing questions” about safety during the entire development and certification process.
The board fired Muilenburg last year,giving him $US62 million ($80 million) in severance benefits. In December,the 737 MAX had its first flights since the worldwide grounding.
This year,the US Justice Department said Boeing has agreed to pay more than $US2.5 billion to resolve a criminal charge that it conspired to defraud the Federal Aviation Administration during its review of the 737 MAX.
The Washington Post
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