An Ethiopian Air flight went down on 10 March. The first time the Boeing CEO was willing to admit that the plane’s flight control system was a factor in the crash was three weeks later, when a preliminary report was released.
In the report on 4 April, investigators did not determine the cause of the crash, but suggested that the manoeuvring characteristics augmentation system (MCAS), played a role. The MCAS had been implicated in an investigation into a Lion Air crash in Indonesia on 29 October 2018 and Boeing was already working on a fix.
MCAS is software that reacts to sensors on the nose when a plane is climbing at too steep an angle, and it pushes the nose down to avoid a stall. In both airplane crashes it seems a faulty sensor caused the system to repeatedly push the nose down and, eventually, the pilots could not arrest the dive.
The evidence that 346 people would still be alive if it weren’t for the MCAS is strong. However, the best Boeing CEO Dennis Muilenburg could do was release an obscure statement on the day of the report’s release. It wasn’t a bird, it wasn’t a plane, and it certainly wasn’t an honest admission of guilt:
“The history of our industry shows most accidents are caused by a chain of events. This again is the case here, and we know we can break one of those chain links in these two accidents. As pilots have told us, erroneous activation of the MCAS function can add to what is already a high workload environment. It’s our responsibility to eliminate this risk. We own it and we know how to do it.”
The use of phrases like “chain of events” and a “high workload environment” is a clear attempt to distance the company from taking full legal responsibility for what happened. Given that MCAS is so clearly involved, why play such games? It is one of the ethical questions of our time.
We need to ask why Boeing is breaking most rules in the crisis management book — and will probably get away with it.
One of the first, most important, tenets of crisis management is “do no harm”. The MCAS had been a factor in the first Lion Air crash and, even while a fix was pending, Boeing did not try to get the 737 Max 8 out of the sky to save lives. Even after the second crash, instead of issuing a recall, Muilenburg reportedly called US President Donald Trump to try to convince him the planes were safe.
This sort of profit-first callousness is mind-boggling if you think about the risks. People could stop flying or airlines stop buying. Therefore, the only way to understand Boeing’s behaviour is to accept there are still strong incentives for some types of companies to be dodgy rather than true.
Insurance contracts may exclude payments when companies admit liability, putting CEOs in difficult positions. Boeing has already been slapped with lawsuits and it may be found guilty anyway. By fighting the suits rather than apologising and opening its pockets for victims without coercion, it may be holding out in the hope that legal findings will stop short of full blame. It doesn’t want to incriminate itself in the meantime.
There are already some reports suggesting the pilots were climbing too fast, or something hit the sensor as Ethiopian Airlines plane climbed. MCAS is likely still to blame for the deaths, but Muilenburg might be cynically waiting for a few blurring factors, suggesting a “chain of events”, to avoid outright legal liability.
It’s often argued that companies should be careful of fighting lawsuits because it might be worse to be found guilty in the court of public opinion as opposed to a court of law. This is because customers, in Boeing’s case airlines, are the ones which can ultimately destroy them. But in the Boeing crisis, this clout may be only theoretical.
CNN reported last week that there were no orders for Boeing’s 737 Max 8 in March, the month this model crashed in Ethiopia. That sounds like a punishing response, but, in fact, a closer look at the numbers shows that orders for other commercial jets increased. The issue with one Boeing airplane doesn’t seem to be affecting sentiment for other Boeings at all.
Of the 5,000 737 Max 8s on order, only 50 had been cancelled, which is amazing too. If airlines feel these planes are profitable and the software problem can be fixed, they may be loath to cancel their orders. There is a backlog of orders for similar-sized planes from Airbus, so it could lead to unwanted delays in deliveries.
Overall, it’s worth considering there are only two major airplane manufacturers in the world and, if Boeing is punished, it could give Airbus virtual monopoly power. So, it is in the interest of the airlines and competition authorities to keep Boeing flying, not to mention the staff and countries it operates in.
Passengers could theoretically threaten the airlines, but how many of us will pay more to fly on a particular plane?
While Boeing faces the slew of lawsuits, shareholders are looking at its “strong balance sheet”, meaning its ability to pay. The company’s stock fell, but if the planes start selling again, it should bounce back. Recently a commentator on CNBC summed up the sentiment among some investment players saying it is clear Boeing will be fine if you “cut through all the noise”. What that means is that Boeing may get away, relatively scot-free, with murder.
All this goes against the grain of crisis management theory that suggests that the rational response to a crisis of this seriousness and magnitude is humility and honesty. The argument is that companies will do well to apologise early if they are to blame and immediately take steps to compensate victims; to show that they can fix the problem and make it right. A bad response can compound the damage to a brand if the company is seen as an unrepentant bully and ultimately censured by the courts.
The conventional wisdom is that, if you manage a crisis well, you can even create goodwill towards your company that wasn’t there. And that’s good business. Conversely, if you put profits before people, by being dodgy, concealing things or actively doing harm, you can lose them anyway.
One of the most famous examples of success, still being quoted, surprisingly even in relation to Boeing, is the Tylenol crisis involving Johnson & Johnson in the 1980s.
The aspirin-based painkillers were leading in the market and were a huge money spinner for the company. Crisis struck when several people died in Chicago because their tablets had been laced with cyanide. Even though the threat seemed localised, the managers of a subsidiary of Johnson and Johnson ultimately made the decision to recall all the bottles across the US market.
They reached out to doctors and hospitals, set up toll-free hotlines for customers and engaged regularly with journalists. When the US government later passed regulations to protect consumers from tampering, the company went over and above these requirements, adding extra protection to their packaging.
While the recall was expensive, involving bottles worth $100-million, the upshot for Johnson and Johnson was trust. When Tylenol returned to the market, sales recovered and even exceeded pre-crisis levels. The way the crisis had been managed had engendered a loyalty few companies can boast about, and it has become a textbook example of what happens when a company is willing to protect lives before its profits.
The problem is, the Tylenol crisis, where Johnson and Johnson was also a victim in a sense, has nothing to do with examples of companies that actively do harm — such as Boeing. In order to understand the behaviour of Boeing, we have to accept that it may be in the interest of some companies to duck and dive. A better historical example would be the Gulf oil spill involving BP.
BP – beyond public accountability
In April 2010, 11 people died when BP’s Deepwater Horizon oil rig exploded. Oil poured into the Gulf of Mexico, making it the worst oil spill in US history. And it took three months for BP to plug the leak.
Right from the beginning, there was a tension in BP’s communication that is being echoed by Boeing now. BP was trying to apologise without incurring legal liability, while distancing itself from the event. The CEO was saying things like “we are responsible, not for the accident, we are responsible for the oil”. In early press releases a subcontractor, Transocean, was mentioned. BP also described, in terms of a freak accident, something “tragic”, which suggests it could not have been prevented.
Later there was an apology campaign, but there were always signs that the BP CEO Tony Hayward — who famously cried “I want my life back!” to a journalist at the height of the spill — was bent on concealing the true extent of the problems at BP. He had been behind cost-cutting measures in the years before the spill.
If BP oil rigs around the world posed a threat to life and health, telling the truth could have triggered reactions that would have ground its operations to a halt. A survivor of the Deepwater Horizon explosion said the drilling on the rig had been behind schedule and a manager had neglected guidelines to speed up the job. And this circumvention may have gone well beyond that one rig. For example, a BP manager told CBS news that there was another BP platform in the Gulf of Mexico that posed an even greater threat than the one that had blown.
US academics Joy Smithson and Steven Venette describe Hayward’s responses when he faced questioning in Congress as “stonewalling”. When asked about operations on the rig, Hayward, a former rig geologist with a PhD, often said “I don’t know” or “I wasn’t there”. Smithson and Venette venture that, given his knowledge and experience, his answers were ridiculous. He may have lied to lawmakers and deliberately taken the fall to protect the company.
While BP was seen to be acting when Hayward was let go, he has been rewarded by the corporate world and is currently the chair of Glencore (he is also the chairman of Glencore’s ethics, compliance and culture committee as well as a member of its health, safety, environment and communities committee). There is something here that stinks like gangster loyalty codes and seems designed to scupper accountability to the public.
To make matters worse, there is also mixed evidence about how much punishment BP actually received. It was forced to establish a $20-billion repair fund. At one point in 2010, it had lost 50% of its market capitalisation, but the losses started to reverse in November of that same year. The long-term impact on the company is debatable and there have been conflicting studies.
Sabine Matejek and Tobias Gossling found, in an article in the Journal of Business Ethics, that BP had received a “green lashing”. It had tried to differentiate itself by being green and they produce evidence to suggest that the public felt misled.
Academics Lint Barrage, Eric Chyn and Justine Hastings found the opposite — that BP’s “Beyond Petroleum” campaign that ran from 2000 to 2008 helped to bring customers back. They show that the impact of the oil spill on BP’s retail margins was actually less severe in areas of the US where BP spent more on advertising in those years. The jury is out, but it is certainly worrying that some academics have concluded that “greenwashing” can actually be an insurance against a crisis.
As an aside, BP was convicted for building petrol stations in South Africa without obtaining environmental clearance on the same day that Boeing released its statement on 4 April.
Boeing may have to admit fault eventually, but in the time being, good crisis management may be a moral choice for its leadership, rather than a matter of survival. There is a different way that no one has the guts to try. Companies implicated in really bad stuff could play open cards immediately and tell the stark truth. Even if it’s dire, they could appeal to regulators and the public to stave off punishment, to give them time to fix things, and build a relationship based on trust for the future. Boeing could become one of the few companies in the world actually willing to acknowledge blame and respond appropriately when people have died.
But it won’t.
Boeing is fortunate that the problem is with software rather than mechanical, and the MCAS can easily be upgraded. It will also be helped by the fact that regulators are performing an amputation of sorts.
Good crisis management helps people to understand exactly where the problem is, how big it is, and then removes it completely. It creates a situation where everyone knows that the rest of the organisation is in good health. Boeing might have left safety concerns to hang, and that could have been fatal, but by isolating and ordering the MCAS system fixed, authorities are helping the company to help itself.
The rest of us will have to continue to grapple with the fact that some companies can, in fact, get away with murder. This is as long as they manage regulators and supply something useful, such as oil or airplanes.
They simply don’t need moral legitimacy to survive. It’s been speculated that it would be harder for BP to get away with what it did in the Gulf now, given the proliferation of smartphones and their cameras. Witnesses have an unprecedented ability to record evidence of malpractice in real time and reach the press quickly. Still, Boeing is unfolding right in front of us.
Very few people were willing, out of principle, to stop buying BP fuel. In the same vein, very few of us will take a principled stance against Boeing. We support immoral companies — and the cycle continues. DM
Francis Herd is an anchor of The Full View on SABC News. She specialises in business news and her MBA thesis dealt with the relationships between journalists and CEOs, and how these affect companies in crisis. As a broadcast journalist who has watched company leaders mishandle crises live on air, she is interested in the reasons why they can’t do better.
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