{"id":1098,"date":"2024-07-11T16:51:18","date_gmt":"2024-07-11T15:51:18","guid":{"rendered":"https:\/\/blogs.bath.ac.uk\/business-and-society\/?p=1098"},"modified":"2024-07-11T16:51:18","modified_gmt":"2024-07-11T15:51:18","slug":"boeings-fraud-case-shows-that-some-businesses-are-still-too-big-to-fail","status":"publish","type":"post","link":"https:\/\/blogs.bath.ac.uk\/business-and-society\/2024\/07\/11\/boeings-fraud-case-shows-that-some-businesses-are-still-too-big-to-fail\/","title":{"rendered":"Boeing\u2019s fraud case shows that some businesses are still too big to fail"},"content":{"rendered":"

Does committing a felony disqualify you from working with the US government? Not for big corporations, explains Dr Akhil Bhardwaj<\/a>. This piece was originally published by The Conversation.<\/a><\/em><\/p>\n

In January, Alaska Airlines flight 1282 nearly fell out of the sky when it lost a door plug at an altitude of more than 10,000ft, leading to rapid decompression of the main cabin of the plane.<\/p>\n

Although no one was killed, the incident happened after two similar Boeing-manufactured\u00a0737 Max planes crashed<\/a>\u00a0in 2018 and 2019, killing 346 people.<\/p>\n

These crashes sparked investigations by the US Department of Justice (DoJ), leading to\u00a0Boeing<\/a>\u00a0being charged with one count of conspiracy to defraud regulators in 2021.<\/p>\n

The DoJ agreed not to prosecute Boeing if the firm promised to pay a US$243.6 million (\u00a3190 million) criminal fine and enter a three-year\u00a0probationary period<\/a>\u00a0that involved enforcing a compliance and ethics programme. But the Alaska Airlines incident prompted the DoJ to reopen the case and has resulted in Boeing\u00a0agreeing to plead guilty<\/a>\u00a0to the original charge and paying an additional US$243.6 million.<\/p>\n

The US government is now in the position of having to decide whether to do business with a company that has admitted a felony. This is particularly ignominious for a country that routinely strips\u00a0felons<\/a>\u00a0of their right to vote.<\/p>\n

But apparently, the US government is willing to look the other way. In 2006, the US Air Force cited\u00a0\u201ccompelling business interest\u201d<\/a>\u00a0in letting the corporation settle criminal charges\u00a0related to felony violations<\/a>, which allowed Boeing to continue competing for defence contracts.<\/p>\n

Boeing is not the only major corporation with a chequered history that the US government is willing to do business with. In 2008, Siemens pleaded guilty to routinely using bribes to secure public contracts but avoided a conviction, which allowed it to maintain its status as a\u00a0\u201cresponsible contractor\u201d<\/a>.<\/p>\n

<\/h3>\n

Dependency runs deep<\/strong><\/h3>\n

Pleading guilty to all sort of felonious acts, for the purpose of doing business with the US government, apparently does not make a corporation irresponsible. You might say some corporations are too big to fail because the government is far too dependent on them.<\/p>\n

Path dependencies<\/a>\u00a0run deep, switching costs are far too high, and\u00a0bilateral dependencies<\/a>\u00a0exist between these parties. For Boeing, being too big to fail means continuing to secure\u00a0billions of dollars<\/a>\u00a0in defence contracts.<\/p>\n

What does this mean for Boeing\u2019s customers \u2013 both airlines and passengers? And, more importantly, will Boeing mend its ways? Its behaviour indicates that it has fallen into a\u00a0confidence trap<\/a>\u00a0\u2013 since past risk-taking paid off, it seems to believe that continuing to do so in the future would also be lucrative.<\/p>\n

Even when Boeing encountered clear signs that something was amiss \u2013 two planes that it manufactured crashed \u2013 it did not lead to soul-searching. Rather, the giant apparently continued to do business as usual including requesting\u00a0safety exemptions<\/a>\u00a0from the US Federal Aviation Administration (FAA).<\/p>\n

Not only is Boeing a major defence contractor, it is also part of a duopoly (with European rival Airbus), with orders secured for years into the future. Certainly, Airbus cannot simply ramp up production to grab more of the market share. Meanwhile,\u00a0Boeing\u2019s executives<\/a>\u00a0continue to be awarded tens of millions of dollars in remuneration.<\/p>\n

Quite simply, there seems to be no real impetus for key decision-makers at Boeing to change their ways \u2013 they are\u00a0paid handsomely<\/a>\u00a0for their\u00a0public humiliation<\/a>.<\/p>\n

On the face of it, the terms of the present agreement are also not very different from the 2021 deal, except for third-party oversight (although observers await more details). But this oversight involves\u00a0auditing<\/a>\u00a0Boeing\u2019s safety and compliance practices, which is what the FAA is supposed to be doing routinely in any case.<\/p>\n

In calling for third-party oversight, the DoJ does not seem to have much confidence in the FAA\u2019s ability to monitor Boeing effectively. Perhaps this move marks the beginning of a new era of much more \u201cprivatised\u201d regulatory oversight in aviation.<\/p>\n

Are airlines worried? Some seem to be, and others are not. Emirates has warned Boeing that it must act to fix problems, and its president Sir Tim Clark had said that the airline would\u00a0send its engineers<\/a>\u00a0to monitor quality.<\/p>\n

United Airlines CEO Scott Kirby reportedly asked Boeing to\u00a0stop making<\/a>\u00a0more advanced versions of the Max.<\/p>\n

In contrast, Ryanair has expressed wholehearted\u00a0support<\/a>\u00a0for Boeing. In fact, CEO Michael O\u2019Leary reversed course from calling Boeing management\u00a0\u201cheadless chickens\u201d<\/a>\u00a0in 2022 to praising them in 2024 saying that safety was their\u00a0\u201cnumber one byword\u201d<\/a>.<\/p>\n

But as these events unfold and the turmoil at Boeing continues, passengers are likely to face\u00a0higher fares<\/a>. Those wishing to avoid flying in Boeing planes such as the 737 Max\u00a0can<\/a>, but it\u2019s often complicated and expensive.<\/p>\n

There are, however, bigger concerns. Namely, the perception that the arc of the moral universe does not bend towards justice \u2013 rather it bends to the will of the rich and powerful.<\/p>\n

Correcting this problem requires an approach that makes clear that no one is above the law, which means holding executives responsible.<\/p>\n

One way of doing so would be to institute financial clawbacks \u2013 in this case, designing contracts to recover CEO compensation in the event of crashes or near-misses resulting from criminal behaviour.<\/p>\n

Those of us who fly literally put skin in the game every time we climb aboard a Boeing \u2013 or indeed any kind of \u2013 plane. Financial clawbacks inject much-needed executive skin in the game. While this does not put passengers and executives on parity, it might just restore some trust in the system.
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Does committing a felony disqualify you from working with the US government? Not for big corporations, explains Dr Akhil Bhardwaj. This piece was originally published by The Conversation. In January, Alaska Airlines flight 1282 nearly fell out of the sky...<\/p>\n","protected":false},"author":1377,"featured_media":1099,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[3,24,123,194],"tags":[313,314,4,10,115,124,71,89,315],"class_list":["post-1098","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-and-society","category-consumers","category-economy","category-regulation","tag-aerospace","tag-boeing","tag-business-and-society","tag-consumers","tag-management","tag-policy","tag-regulation","tag-responsible-business","tag-us"],"acf":[],"jetpack_featured_media_url":"https:\/\/blogs.bath.ac.uk\/business-and-society\/wp-content\/uploads\/sites\/133\/2024\/07\/boeing.png","jetpack_shortlink":"https:\/\/wp.me\/pd4Pj1-hI","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/blogs.bath.ac.uk\/business-and-society\/wp-json\/wp\/v2\/posts\/1098","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.bath.ac.uk\/business-and-society\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.bath.ac.uk\/business-and-society\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/business-and-society\/wp-json\/wp\/v2\/users\/1377"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/business-and-society\/wp-json\/wp\/v2\/comments?post=1098"}],"version-history":[{"count":0,"href":"https:\/\/blogs.bath.ac.uk\/business-and-society\/wp-json\/wp\/v2\/posts\/1098\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/business-and-society\/wp-json\/wp\/v2\/media\/1099"}],"wp:attachment":[{"href":"https:\/\/blogs.bath.ac.uk\/business-and-society\/wp-json\/wp\/v2\/media?parent=1098"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/business-and-society\/wp-json\/wp\/v2\/categories?post=1098"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/business-and-society\/wp-json\/wp\/v2\/tags?post=1098"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}