Boeing's Unethical Practices


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Case Details:

Case Code : BECG037
Case Length : 12 Pages
Period : 1997 - 2004
Pub. Date : 2004
Teaching Note : Available
Organization : Boeing
Industry : Aerospace
Countries : USA

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts Contd...

Lockheed Controversy

In mid 2003, Boeing faced allegations of ethical misconduct once again. This time, the allegation came from its competitor in defense business - Lockheed.

In June 2003, the media reported Lockheed's allegations that Boeing's unlawful access to proprietary technical and cost information of Lockheed, had helped it win the contract for the Evolved Expendable Launch Vehicle (EELV) project of the US Air Force in the mid 1990s. In response to Lockheed's allegations, Boeing acknowledged that around 37,000 pages of Lockheed proprietary information made its way into Boeing through ex-employees of Lockheed in August 1996. On June 9, 2003, Boeing came out with a full-page open letter in leading newspapers in the US, stating that the company "has always stood for integrity in its actions and products" and unethical actions by a few middle-level managers should not be allowed to reflect badly on the whole company...

Tanker Lease Deal Controversy

Another alleged unethical deal involving Boeing and the US Airforce came into the limelight at around the same time as the Lockheed controversy. Under the deal worth $19.6 billion, the Air Force leased 100 Boeing 767s air refueling tankers, replacing its aging KC-135 tankers.

The deal was criticized by Senator John McCain (Arizona) and many independent groups, who called it a waste of public money. It was reported that when the talks were initiated, the Air Force's plan was to buy the planes, but due to lack of funds it was not able to make outright payments. It was then that the Air Force and Boeing together devised the lease plan, under which costs were spread to over 11 years (2006-2017). It was alleged that the Air Force changed the assumptions about the cost of the tankers in order to make the lease appear a cheaper option than buying. It was also reported that Boeing was awarded the contract without any competing bids. Both the Air Force and Boeing refuted the allegations and stated that bids were invited from EADS (parent company of Airbus Industrie) also...

What's Done Cannot be Undone

After Condit's resignation, Boeing initiated various steps to regain the confidence of the public. In July 2003, Boeing announced that it would be conducting an independent review of its ethics policies companywide. It hired former New Hampshire Senator, Warren Rudman, to review the company's ethical policies and procedures...

Exhibits

Exhibit I: Boeing's Code of Ethics
Exhibit II: Boeing Values


 

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