The fine itself will do little to no harm to aircraft manufacturer Boeing and its former boss Dennis Muilenburg. The group has to pay $200 million, the former CEO $1 million, a small fraction of the severance pay he received after he was kicked out at the end of 2019. The reasoning with which the American securities and exchange commission (SEC) has now judged in the aftermath of the crash of two Boeing 737 MAX machines will hurt much more: Boeing had duped the public with misleading statements that Muilenburg himself was failed to fulfill the simplest duties as a corporate leader.
In October 2018 and March 2019, two planes operated by Lion Air and Ethiopian Airlines crashed within a few months. 346 people lost their lives. In both cases, it turned out, the main cause was a new flight control system, the function of which neither the pilots nor the airlines were aware of. The Maneuvering Characteristics Augmentation System (MCAS) repeatedly intervened unnoticed and so massively in the controls that the crews lost control of the machines. In March 2019, aviation safety authorities issued a worldwide flight ban on the MAX models, which was only lifted in the USA in November 2020 and in Europe in early 2021.
Boeing knew how problematic the new flight control system was
The purpose of the SEC proceedings was to clarify whether Boeing and Muilenburg had complied with their information obligations to the public and in particular to investors. The clear answer: no. Boeing and Muilenburg misled investors by making assurances about the safety of the 737 MAX despite knowing of serious safety concerns. Specifically, after the first Lion Air crash in October 2018, the SEC accuses Boeing of having blamed the maintenance and pilots of the Lion Air in a press release. At that point, after an internal investigation, they already knew how problematic MCAS was and had started to develop a new, defused version of the software. Muilenburg personally approved the statement.
After the second crash, Muilenburg publicly stated that Boeing strictly followed the prescribed development and certification procedures. Even then, he was aware that his employees had given the Federal Aviation Administration very little information about how the system worked. The mistakes are not particularly dramatic because of the investors, but because of the victims: If Boeing had communicated more honestly about its own mistakes earlier, at least the second crash might have been avoided with an earlier flight ban.
At least that’s how the Chicago lawyer Robert Clifford, who represents 70 victims of the Ethiopian crash, sees it. “Muilenburg or anyone else who persuaded the government to allow the 737 MAX to continue flying should be investigated for conduct that may have been criminal.” The SEC fine of just $1 million is “an insult” to the victims.
In response, Boeing stressed that it had made broad and deep changes as a result of the accidents, including in “safety culture, quality and transparency.”