Boeing plea deal won’t save its reputation

The Boeing plea deal hit the headlines this week, with many experts considering it a light punishment, but saving its reputation is an entirely different story. 

Here’s the latest news analysis to fuel your corporate governance education.

Here’s a summary of what happened this week:

• Boeing, the US aircraft manufacturer plagued with corporate fallout over crashed planes, faulty doors, and whistleblower claims of poor culture, has announced it will plead guilty to conspiracy to defraud the US government.
• The plea deal involves a maximum fine of $427 million. Boeing will likely only pay half that, considering it has already forked out $247 million amid its ongoing controversy. 
• A lawyer for the families killed in the two infamous 737 Max crashes has dismissed the arrangement as a “sweetheart deal”. 
• Analyst commentary has suggested the deal is the lightest punishment the firm could face.

This deal will have clear benefits in the eyes of Boeing’s board and corporate leaders, particularly regarding the firm’s short-term fiscal future. 

All indications suggest the company will suffer little beyond the fine, which — while more aggressive by US government standards—Boeing will easily be able to pay with little impact on its balance sheet. 

Meanwhile, analysts have also said that despite pleading guilty, the company will unlikely lose any key US government contracts. 

Boeing’s activities are hugely interwoven with successive US governments. It’s often seen as a showpiece of American business, engineering, and aeronautics prowess. Because of that, it continues to maintain extensive contracts to supply the American military, in addition to its vast control over the civilian aircraft industry. 

None of these advantages will likely be in danger following the plea deal. From that aspect, it’s easy to see why Boeing’s leaders might regard pleading guilty as a good corporate governance decision. But it’s only half the story…

The bad parts centre on the company’s reputation and continue to shed light on a reckless corporate culture in a company that—by its very nature—must consider safety a critical point in its strategy. 

Boeing’s reputational risk has grown thanks to several key events:

• The two crashes of the 737 Max planes that suggested severe faults with the company’s new aircraft. 
• The failed door plug on the Alaska Airlines 737 Max which raised serious questions about safety culture among engineers. 
• Investigations by the US Federal Aviation Administration (FAA) suggesting that the highest authority in American Aviation did not have confidence in the company’s quality control. 
• Whistleblower revelations following the Alaska Airlines incident which suggested the company was more concerned with fulfilling orders at speed than safety. 

This plea deal does not diminish the controversies above. In fact, it will only add to Boeing’s already faltering reputation. 

Multiple stakeholders dismiss it as a “sweetheart deal” designed to get the company off the hook with as little fuss as possible and leave those who have suffered through its multiple incidents behind. 

Multiple news outlets have framed it as such. When a new story about Boeing breaks, the plea deal will be used to establish context, likely through the same critical lens that won’t paint the company in a good light.

Yes. 

It may merit as much attention as the financially desirable plea deal—especially to investors, executives, and directors—but the company’s plummeting reputation will remain a problem for years. 

No matter the company’s attempts, the reputational risk will shape outside opinions of its inner workings. It might not seem like a threat to individual consumers, but that same lousy reputation will linger in the minds of airline bosses—the very people who keep the company in business. 

Already, some of Boeing’s biggest customers—like low-cost European airline Ryanair, which operates over 550 737s—have criticised the company for its poor culture and lack of leadership. 

In case it’s not obvious already, your biggest customers are critical stakeholders, so Boeing’s board must know that with or without a plea deal, they are not out of the woods until they rebuild a broken reputation with those key customers.

It depends, but in Boeing’s case, it’s likely to be years. 

Multiple negative and widespread media stories have portrayed the company in a bad light. Those stories continue even today—the company is being investigated over problems with oxygen masks on over 2,600 planes. 

You can’t quickly rebuild a reputation amid controversies. 

And then there’s the thorny issue of company culture. Whatever you believe, based on the news stories and whistleblower complaints, it is evident that something is wrong in the way Boeing conducts itself on the inside. 

This will also take years to fix, and as long as a bad culture persists, it will feed a negative reputation. 

In the longer term, our assessment of Boeing’s corporate governance decisions won’t be based on one plea deal—it will be based on what the company did to address reputational risk and safeguard its future in the eyes of key stakeholders.