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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"They're trying to save face among a litany of ethics violations by the company. But only when senior executives clearly admit there were institutionally-wide ethics violations will Boeing be able to save face."
- Keith Ashdown, Vice-President - Taxpayers for Commonsense,1 in November 2003.2
Troubles at Boeing
In December 2003, the Boeing Company (Boeing's) CEO, Philip Condit (Condit) resigned amidst widespread criticism against the company's allegedly unethical practices. Though both Boeing and Condit denied that the resignation was a result of ethical lapses in the company, analysts felt otherwise.
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In mid-2003, Boeing was sued by its competitor, Lockheed Martin Co., (Lockheed)3 for possessing proprietary information belonging to Lockheed. This resulted in the US Pentagon4 canceling contracts worth over $1 billion awarded to Boeing, and the company was also banned from bidding for defense projects in July 2003. Around the same time, Boeing's tanker lease deal with the US Air Force also came under scrutiny. Earlier the US Air Force had agreed to lease 100 Boeing 767s planes from Boeing. The total cost of the deal was reported to be $19.6 billion. It was alleged that the deal was awarded to Boeing without any competing bids and to make leasing look cheaper than buying them outright (although it actually costed more) Boeing and the US Air Force did some financial jugglery in their calculations of the cost of the planes.
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Analysts felt that Boeing managed to pocket the deal by
lobbying with top defense officials at the Pentagon. It was also alleged that
the deal was meant to bail out Boeing from its current financial crisis.
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As pressure from the media increased, the US Congress agreed to review the entire lease deal right from the negotiations stage. The controversy over the tanker deal resulted in two top executives at Boeing being fired in late November 2003, followed by Condit's resignation.
The alleged ethical lapses in Boeing raised serious questions about corporate governance in the company. Analysts pointed out that these alleged lapses happened in spite of Boeing having in place a detailed code of ethics. In December 2003, The Economist wrote, "The lesson from Boeing, meanwhile, seems to be that good governance and tough, independent board do not guarantee good corporate behaviour."5 |
Boeing's Unethical Practices
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