If there was ever a need to illustrate the term annus horribilis in corporate history, the year 2024 and the company Boeing would be a perfect example. And the year isn't even over yet.

In the past seven days, Boeing has faced a series of problems. The Federal Aviation Administration (FAA) issued an airworthiness directive on July 8, requiring airlines using the Boeing 737 Next Generation and 737 MAX to inspect the oxygen generator system within five months due to possible strap failures.

This directive followed multiple reports of passenger oxygen generators shifting out of position — a problem that could prevent passengers from receiving oxygen in emergencies.

Additionally, Boeing agreed to plead guilty to a fraud charge arising from not disclosing key design elements to regulators responsible for certifying the 737 MAX aircraft for commercial use.

The U.S. Department of Justice revealed that Boeing agreed to a settlement on July 7, after the government determined that Boeing violated an agreement that shielded it from criminal prosecution.

Historic Settlement
The settlement is the result of a three-year review process that began in 2021. Boeing was ordered to demonstrate changes in its operational and production practices that contributed to the 2018 Lion Air and 2019 Ethiopian Airlines crashes involving 737 MAX aircraft, which resulted in 346 fatalities.

Boeing is estimated to have lost $60 billion in sales due to these crashes, and its profitability has decreased by over $32 billion since 2019. The company's debt has risen to nearly $50 billion. Besides the financial impact, the crashes have also taken an emotional toll on the victims' families.

If the federal judge approves the settlement and it takes effect, it will result in additional penalties and costs for the company. Boeing will be fined an additional $243.6 million and will be required to invest at least $455 million in compliance and safety programs.

Lawyers representing some of the victims' families are seeking the rejection of this Justice Department settlement, stating that:

„The only way to effect significant changes in Boeing would be to take actions that impact its financial situation, which would mean imposing larger fines and harsher consequences.“

If this challenge is successful and the settlement is rejected, it will result in a public trial requiring Boeing staff to testify about their roles in misleading the FAA regulators about the flight control system linked to the crashes. The financial impact for Boeing in such a trial is estimated to exceed $25 billion.

Financial and Emotional Hits
This series of events will further burden Boeing. Political and regulatory discussions emphasize frustration with Boeing executives who have continued to apologize and promise changes.

Whistleblowers have highlighted a range of failures in Boeing's assembly practices that prevented the resolution of potential safety issues while the aircraft were still on the production line.

More on this topic: What the Death of Boeing's Whistleblower Reveals About Exposing Corporate Injustices in North America

These lapses clearly show that they could impact the safe and reliable operation of the final product. The culprits for these failures have been sporadically identified as Boeing's culture, leadership style, and management measures.

Much has been published about the change in Boeing's leadership from an engineering and quality focus to one oriented towards economics and financial performance.

Restoring Public Trust
Can Boeing overcome its current challenges and restore its reputation as a successful corporation? One that its employees, clients, and the public can rely on for the production of commercial aircraft that are safe, comfortable, and sustainable?

To achieve this, the world needs to believe in Boeing again, trust that was built through decades of producing aircraft that customers highly valued for their quality and engineering design.

As we await the announcement of the new CEO, Boeing's board of directors needs to face its governance mirror and ask if they have fulfilled their entrusted oversight responsibilities.

It should come as no surprise that many of Boeing's directors have long been in their roles, bearing responsibility for the management missteps taken in recent history.

Recent legal challenges aimed at limiting the liability of board members in cases of corporate misconduct have failed in the U.S., with courts emphasizing the need for directors to be aware of corporate abuses and take action to rectify such cases.

Global Aviation Safety at Risk
All this raises an important question: is there a risk to Canadian airlines and members of Boeing's Canadian supply chain due to this series of problems?

If the settlement is allowed to take effect, Boeing will be identified as a convicted organization. As such, it will be subject to U.S. law that prevents convicted defense contractors from winning future defense contracts.

Given the nature of Boeing's presence in commercial aviation and defense, it seems unlikely that this conviction will hinder Boeing's relationships with suppliers and customers.

The world needs Boeing to return to its illustrious engineering, safety, and quality roots. Global aviation safety depends on the reliability of major aircraft manufacturers. Time is running out and Boeing cannot make promises. Actions and results are needed — and quickly.

Original:
Ivan Gradek
Faculty Lecturer and Academic Program Coordinator, Supply Chain and Aviation Management, McGill University