How Corporate Culture Drove Decision-Making

The story of Boeing is it placed profits ahead of safety and the result has been a series of crashes/mechanical problems that have led to inspections by the National Transportation Safety Board (NTSB) and litigation by the Securities and Exchange Commission (SEC). In this blog I will address the culture at Boeing that led to taking shortcuts in the production process and the role of whistleblowers to point this out to management. In my next blog, I will discuss the SEC actions taken against Boeing.

An article in Business Week addresses the problems with the corporate culture at Boeing that created an environment where profit maximization was placed ahead of the safety of the 737 MAX aircraft. The article places blame on Dave Calhoun, Boeing’s former chief executive officer. After 10 years on Boeing’s board of directors, Calhoun took over as CEO in January 2020 for Dennis Muilenburg after the latter played down design defects that killed 346 people when the MAX’s flawed software sent the plane (Lion Air) into the sea off Indonesia and into a field in Ethiopia. Calhoun often addressed how he had made safety a top priority in the wake of the crashes. His actions did not meet those words.

Accelerating Production at the Cost of Safety

Perhaps the most glaring production deficiency occurred in October 2022, when Boeing provided a MAX plan for Alaska Airlines. Workers at Boeing had apparently forgotten to reinstall four bolts that keep a piece known as a door plug in place on the 737 MAX after it was removed to allow three contractors from temporary staffing companies hired by Spirit to rework defective rivets.

Later, it would be determined by investigators from the NTSB that these bolts were missing at the time of the January 5, 2024, blowout of a door on the 737 MAX on an Alaska Airlines flight, triggering a 19-day emergency grounding of all MAX 9s, and re-igniting scrutiny of Boeing following the fatal MAX 8 crashes of the Indonesia and Ethiopian planes.

Boeing acknowledged its responsibility for the blowout in a statement issued after the NTSB report and said it is working to make sure incidents like this do not reoccur. “Whatever final conclusions are reached, Boeing is accountable for what happened,” said Boeing CEO Dave Calhoun in a statement. “An event like this must not happen on an airplane that leaves our factory. We simply must do better for our customers and their passengers.”

Boeing said it was taking new actions to improve the way it makes the 737 MAX 9 planes. including more inspections, giving the 737 teams more time “to focus on and implement quality improvements,” and bringing in outside safety experts to assess its operations.

The problems at Boeing were due to pushing through production without adequate testing of parts and other lax quality controls. Moreover, Boeing failed to replace aging 737’s with new planes. The Business Week article explains that the company “increasingly emphasized financial wizardry over manufacturing, spending $41.5 billion on stock buybacks from 2013 to 2018 that enriched investors and management.” Muilenburg alone “made at least $106 million from 2011 to 2018, mainly from stock grants. Boeing’s capital expenditures “plummeted to less than 2% of sales by 2018, half what European rival Airbus SE typically spends, after running as high as 7.2% in 1992.” As a board member and CEO, Calhoun participated in these decisions and “made more than $64 million from 2020 to 2022.”

Calhoun had the opportunity to reset Boeing’s culture in the aftermath of the disasters in Indonesia and Ethiopia. Instead, he essentially doubled down on the same strategy, laying out a plan in 2022 to generate $10 billion of annual free cash flow by 2026 and start returning some of that to shareholders.

Following the blowout, FAA inspectors found “multiple” instances where quality control procedures were not followed. Another assessment by an expert panel mandated by Congress described a “disconnect” between Boeing’s senior management and its assembly workers, some of whom feared retaliation for reporting safety issues. “Their priorities have been on production, and not on safety and quality,” according to FAA Administrator Michael Whitaker. The agency ordered Boeing to cap rates of production until it is satisfied the problems have been addressed.

Boeing was a well-respected American manufacturer whose name was once synonymous with engineering excellence. In fact, there was an expression of support for Boeing by the flying public back then: “If it’s not Boeing, I’m not going.”

Whistleblower Claims

Boeing has been hit with 32 whistleblower complaints with the Occupational Safety and Health Administration (OSHA) since 2020. The figures shed light on the extent of alleged retaliation by Boeing against whistleblowers. OSHA handles complaints of retaliation against workers who blow the whistle on the employer, under the Sarbanes-Oxley Act (SOX). The complaints were filed under different statutes, the majority under aviation safety. Two were filed under the category of fraud.

The documents also show that OSHA launched a review of the case of John Barnett, a former Boeing employee and whistleblower, after he was found dead in March 2024, from a suspected self-inflicted gunshot wound. Barnett was supposed to answer questions as part of a deposition resulting from a legal dispute with Boeing, his former employer. He did not show up.  Barnett was to offer evidence for legal proceedings linked to a defamation lawsuit against Boeing, which he claimed deliberately hurt his career and reputation because of allegations he had made of grave safety breaches on the aircraft company’s production line.

Barnett, a 62-year-old quality control engineer and manager at Boeing, who had worked for Boeing for over three decades until his retirement in 2017, was outspoken about his skepticism of the company’s safety standards. Following the Ethiopian Airlines 737 MAX 8 and a Lion Air 737 MAX crashes minutes after takeoff, killing everyone on board, Barnett told the British Broadcasting Corporation (BBC) that workers at one Boeing factory had been deliberately fitting faulty parts to planes to meet production deadlines, and that oxygen masks on the 787 Dreamliner had a 1-in-4 chance of failing during an emergency. Barnett said he had alerted Boeing managers as well as the FAA to the concerns but that no action had been taken. Boeing denied his allegations, though it acknowledged that an inspection in 2017 found that some oxygen bottles were in fact not deploying properly.

Barnett also told the New York Times in 2019 that he was once reprimanded for documenting “process violations” via email instead of face to face, which he took to mean the company didn’t want him putting problems in writing. In a 2014 performance review seen by the Times, Barnett’s manager told him that he had to improve at “working in the gray areas and help find a way while maintaining compliance.”

In a U.S. Senate hearing on April 17, 2024, Boeing engineer Sam Salehpour testified that he had been threatened for raising concerns about gaps between key sections of the 787 Dreamliner. “They are putting out defective airplanes,” he said. “I have serious concerns about the safety of the 787 and 777 aircraft, and I am willing to take on professional risk to talk about them.” Salehpour claimed that Boeing hid problems during its production of its Boeing 787 Dreamliner aircraft when it started pushing pieces together with “excessive force” to try to close the gaps, which he said did not end up going away. As a result, Salephour said that debris ended up in the gaps 80% of the time. “Effectively, they are putting out defective airplanes,” he said during the hearing.[iv] Salehpour also revealed that after he raised concerns over the issues he witnessed with manufacturing, he was moved out of the Boeing 787 Dreamliner program. I have raised these issues over 3 years, I was ignored, I was told not to create delays, I was told frankly to “shut up,” said Salehpour.

When he was moved to the program that assembled 777 aircraft, Salehpour said he witnessed “severe misalignment’ when the airplanes were being put together. “Boeing manufacturing used (an) unmeasured and unlimited amount of force to correct the misalignment, and this also weakens the airplane in the long run,” he said. “I literally saw people jumping on the pieces of the airplane to get them to align. I call it the Tarzan effect, among other improper methods.”

Salehpour said that he once again raised concerns internally and received physical threats as a result.  “I was silenced, I was told to shut up, I received physical threats.” My boss said, “I would have killed someone who said what you said in a meeting.” He also claimed that his boss called him on a personal phone, despite having a work phone, where he was “berated” and “chewed” out for 40 minutes for raising concerns over production issues.

The tone at the top at Boeing contributed to the production failures and crashes. The culture at Boeing did not foster honesty, integrity, and transparency in financial reporting. Instead, it promoted a profit at any cost environment that led to ignoring serious product flaws and deficiencies in the manufacturing process. Ask yourself: Knowing what you know now, would you fly on a Boeing-manufactured plane?

Posted by Steven Mintz, Ph.D., aka Ethics Sage, on April 23, 2024. You can sign up for his newsletter and learn more about his activities at: https://www.stevenmintzethics.com/.