Boeing’s Deepening Crisis Exposes Decades of Corporate Culture Gone Awry
If only Boeing’s problems were just about a nightmare flight – a screw loose, a blown-out door plug, and 177 people who will probably need therapy for the rest of their lives. But as the iconic American plane manufacturer tries to make amends for the disastrous Alaska Airlines flight in January, it’s become clear that Boeing’s problems run far deeper. They expose decades of American corporate philosophy gone awry.
Boeing is a quintessential example of America’s rotting business culture over the past 40 years. The company relentlessly disgorged cash to shareholders when it could’ve spent it on building a better (and safer) product. Investments that could’ve benefited employees, communities, and other corporate stakeholders were often sacrificed at the altar of efficiency and free cash flow. Boeing focused on pleasing Wall Street because that’s how American executives believe companies should operate.
“The people who are at the top are there for a reason, and it’s basically to maximize shareholder value,” the University of Massachusetts economist William Lazonick told me. “It’s so ingrained in their thinking they don’t understand the problem itself. It’s built into the structure of these companies.”
Simply changing CEOs or hiring more engineers won’t make Boeing’s problems go away. The company needs to rethink its very reason for existing and what it should provide to society as an enterprise. A good American company isn’t just a vehicle for financial returns; it is first and foremost an employer, a contributor to economic and/or technological innovation, and a source of US power. Whether the recent disasters shake Boeing out of its somnambulance remains unclear. It’s also questionable whether other major companies with a similar maximize-shareholder-value-at-all-costs ethos will learn from the mistakes. But it’s clear that what Boeing – and the entire American corporate body politic – needs is nothing short of a philosophical counterrevolution.
There was a time when pilots had stickers on their bags that said, “If it ain’t Boeing, I ain’t going.” Founded in 1916, the manufacturer helped the US launch NASA and win World War II. For decades, it was the pinnacle of American engineering. “Boeing was America’s crown jewel,” William McGee, a journalist, advocate, and aviation-industry old hand, told me. “It was one of the most important and impressive companies in the US.”
This started to change in the late 1980s when T.A. Wilson, the last Boeing CEO with an engineering background, was replaced by Frank Shrontz, an attorney and businessman. The choice was a signal to Wall Street that engineering excesses would be curbed in favor of cost discipline and investor rewards. Lazonick’s research indicates that from 1998 to 2018, Boeing did $61 billion worth of share buybacks to pump its stock price and paid out $29.3 billion in dividends. Over these three decades of plenty for Boeing’s shareholders, the company’s staff was asked to penny-pinch. An investigation into battery fires on Boeing’s 787 Dreamliner in 2013 found that it wasn’t allowing engineers to stress test its products enough, that it wasn’t catching manufacturing defects, and that passengers could be in danger as a result. But the finance guys loved Boeing’s new focus, and the C-suite – which receives the lion’s share of its compensation in stock – loved it too. In the first quarter of 2019, Boeing announced a $2.7 billion stock buyback, and the market rewarded the company with an all-time-high share price of $426.76.
But later that year, it all fell apart.
The 737 Max 8 was supposed to be the most efficient, cost-effective, environmentally friendly narrowbody on the market. Instead, the plane exposed the rot at the core of the company’s culture. In his book “Flying Blind: The 737 Max Tragedy and the Fall of Boeing,” the journalist Peter Robison wrote that when the new model was being built, managers asked for a detailed accounting of every test flight and talked frequently about how any change had to “buy its way onto the airplane.” A manager lamented to one of Robison’s sources that people would “have to die” before Boeing made changes to the aircraft. And so they did: Two crashes – which were the result of the company’s attempt to work around a technical failure – claimed the lives of more than 300 people and grounded the 737 Max 8 for about 20 months. Boeing’s stock cratered, and France’s Airbus, a rival once colloquially known as “Scare Bus,” started to eat the American company’s lunch.
Executives promised to fix the problems that plagued the 737 Max 8, but the recent Alaska Airlines Max 9 mess has returned the focus to Boeing’s communication, supply chain, and overall quality-control