Boeing’s Woes Highlight Why Directors Must Ask Tougher Questions

The board of the Boeing Company will likely need a strategic crisis management plan to restore its reputation in the wake of the 737 Max catastrophe. While the board has announced several internal changes following the crashes of two Max jets that killed 365 people, convincing its many stakeholders that the changes are enough to prevent future tragedies will likely require the board deal with a number of difficult questions.

Boeing’s 737 Max airplanes have been grounded since March. In August, to begin addressing stakeholder concerns, the company created an Aerospace Safety Committee that reports directly to the board to oversee safety of aircraft design, production, operation and maintenance. The company announced more reforms in September that include establishing a new Product and Services Safety organization which unifies safety-related responsibilities across several Boeing business and operating units. Also, in early October, the board announced that it was removing CEO Dennis Muilenburg as board chairman and that lead director David Calhoun, a Blackstone executive, would be taking over as non-executive chairman.

While these moves have generally been received as good first steps for the company, the total impact of the 737 Max crisis on the company hasn’t fully been determined. As the Seattle Times and other news outlets have reported, the results of a number of investigations will soon become public. On Oct. 25, Indonesia’s National Transportation Safety Committee released its report on last year’s Lion Air 737 Max crash, reigniting concerns that problems with Boeing’s aircraft have not been corrected. CEO Muilenburg will address Congress on the matter later this month and other foreign regulators have investigations underway. Even more concerning, the Department of Justice criminal investigation into the 737 Max crashes will likely intensify now that evidence has surfaced that the company may have been warned in 2015 about problems related to the airplane’s software. And of course there are the many lawsuits related to the tragedy that will keep the company under public scrutiny for months to come.

If it hasn’t already, the Boeing board needs to develop a strategic plan detailing how it will respond to each of these events and other hypothetical incidents related to the 737 Max. These days, companies are facing a higher standard regarding the handling of crisis situations, so boards must work harder to mitigate the impact of such events. This requires that someone on the board be willing to ask the most difficult questions imaginable. For example, Boeing is likely anticipating questions its CEO will be asked at the Congressional hearings this month and determining what the best responses should be. Sound bites from Muilenburg’s testimony will likely be replayed hundreds of times internationally, so his responses must work to mitigate potential damage to the company rather than invite more investigations.

Every corporate board needs directors who are willing to ask the most difficult questions so that the company can prepare for problems that haven’t manifested yet. In addition to asking, “What can we do to make sure this never happens again?”, board members should also ask, “What will we do if we are unfortunate and this incident does happen again?”  The company will need a quick, strategic response to such an incident no matter how unpleasant contemplating it might be. Making sure there is a plan in place would help the company work its way through the crisis.

There is however, a more difficult question directors will need to ask themselves after a major crisis: “Why didn’t the members of this board anticipate something like this happening?” Answering that question can shed new light on issues regarding the company’s corporate governance, corporate culture, board composition and overall leadership that likely require immediate attention. A thorough evaluation of how those areas can mitigate risk is one of the best crisis management plans any board can implement.

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