Boeing strike is another headache exposing bad governance

Boeing strike leaves company paralysed; an example of how bad corporate governance exacerbated an already serious situation. 

The American aircraft manufacturer has been through a rough patch over the last few years. You would think, at some point, its fortunes might turn around amid considerable effort to rebuild. 

That won’t happen in the near future, as a massive strike freezes its production once again lands the company with front-page headlines for the wrong reasons. 

Would it have been as bad if key governance decisions had been made correctly?

33,000 Boeing machinists went on strike on 13th September, and as of early October 2024, it has still not been resolved. 

The machinists’ main demands are a 40% pay rise over four years and the restoration of a defined-benefit pension scheme, removed from contracts during the Great Recession. 

Boeing initially offered a 25% pay rise, which was rejected. It then offered a “best and final” offer of 30%, which was also rejected. Negotiations are not expected to continue in the immediate aftermath.

First, the strike is the latest in a long saga of corporate nightmares for Boeing. If you need a reminder of the conveyor belt of controversies, just look here.

The bottom line is that if you add a major industrial dispute to plane malfunctions, regulator probes, guilty pleas in fraud cases, and corporate leadership reshuffles, you have the recipe for a corporate governance disaster. 

The second reason the strike is significant is its effect on Boeing’s financial fortunes. Analysts claim any extended stoppage could cost the firm billions of dollars. As of October 2024, the strike has been going on for weeks, and any hope of a deal has broken down again; an extended stoppage is the only likely outcome at this point. 

Remember that this delay will add to a production process that has already slowed considerably while a revamp of safety culture and checks is underway. Boeing has had to reduce the number of aircraft it promises to deliver to critical suppliers worldwide. Ryanair, Europe’s largest carrier, which only uses 737s, has voiced considerable disapproval of the company’s ability to follow through, saying its management “continues to disappoint”.

When we compare stakeholders’ conflicting interests, Boeing’s leaders don’t appear to have many options, at least not enough to solve the standoff quickly. 

Machinists are not backing down from their demand for a 40% increase, but the company says 30% is the highest it can go without compromising the airline’s profitability. Both statements have considerable weight; the union representing Boeing is committed, but Boeing itself has to balance these requests with shareholder expectations. It’s never easy to get right. 

Furthermore, relationships across the debate are not good. Industrial disagreements are one thing, but when the dispute descends into a blame game  – which this has – then the level of confidence in the firm’s ability to negotiate, agree, and safeguard its short-term future drops dramatically. This adds to Boeing’s already volatile reputation among stakeholders worldwide – from employees to investors to airlines to regulators. In their eyes, the company has lost control.

Just temporary measures, which news sources claim it is already examining. They included the sale of stock and equity-like securities, which may raise short-term capital and keep immediate worries at bay. 

Beyond that, the company can’t do much without a core cohort of workers. Its factories will have to remain shut during the strike, and its promised aircraft orders to airlines may have to be reduced again.

That’s the real question and a vital governance lesson. 

The last thing Boeing’s corporate leaders will want to hear at this point is that past mistakes have led to this corporate disaster. Still, it’s accurate, and it should serve as a warning to big companies’ boards and executives: if you let bad governance persist, you’ll get exactly this kind of crisis-laden era. 

It’s clear now that Boeing’s leaders presided over a poor safety culture and an unhealthy concern with profit for many years, while the board failed to ask the right questions, listen to whistleblowers, or challenge strategy. Its current issue with trust among stakeholders, financial penalties, and PR headaches directly result from that. 

The strike is different because it’s common at the moment. Post-pandemic and amid a cost-of-living crisis, disputes continue worldwide, and workers are fighting for serious increases and the restoration of benefits they haven’t enjoyed in over a decade. 

Facing this issue alone might not have been as hard for Boeing. But instead, it faces this issue amid a multitude of others. This ensures the company isn’t just seen as challenged but rudderless, willing to let crises evolve around it with no strategic mitigation until it’s too late. In cases like this, things will always get worse before they get better. For one of the world’s most important aircraft manufacturers and a long-championed example of American ingenuity, that problem couldn’t be more serious.