How Boeing CEO’s Catastrophic Reign Could Become Criminal

Dave Calhoun’s stewardship of Boeing as its CEO has been catastrophic. As he prepares to go, comforted by a $45 million retirement package, Boeing could soon face something virtually unthinkable for such a legendary company—criminal charges.

As first reported by Reuters, federal prosecutors have decided to recommend that the Justice Department prosecute Boeing for violating the terms of a deal made in 2021 in which a charge of committing fraud related to two crashes involving the 737 MAX that killed 346 people was deferred—as long as Boeing kept a pledge to seriously overhaul its compliance with safety regulations. The prosecutors say that the pledge has not been kept.

But the overriding charge leveled at Calhoun is that he, together with his board and major stockholders, have used the company as a gushing ATM, putting making money ahead of making airplanes.

Aviation history suggests that the one thing that every head of an airplane company wants to do is to retire with at least one new jet attached to his name.

But, strange as it may seem, the last thing Calhoun wanted to do during his tenure was to build a new airplane, even though one was badly needed to remain competitive with Boeing’s main rival Airbus.

In this, he was following the lead of James McNerney, who was Boeing’s CEO from 2005 to 2015. Calhoun became a director in 2009. Both had been executives at General Electric and were avid apostles of the now-discredited Jack Welch and his cost and job-slashing dogma.

In 2011 McNerney, with the backing of Calhoun, decided that instead of replacing the 737, designed in the 1960s, with a new “clean sheet” jet to compete with the Airbus A320, a 1980s design that was ahead of its time in technology and was much easier to upgrade than the 737, they would give the aging 737 one more stretch.

And so was born the 737 MAX. Not only did this turn out to be a seriously flawed jet. Instead of being the “low-cost derivative” the two crashes, and the quality control and safety issues that have plagued it since, have so far cost Boeing at least $87bn.

And this is where Calhoun starts to play with numbers in an attempt to justify his aversion to a new jet. Initially, he and McNerney put the cost of developing a new jet at between $15 billion and $20 billion.

As Boeing got deeper and deeper into a hole, Calhoun upped the price of a notional new jet until in 2020 he put it at $50 billion, a number he sticks with hoping that it is big enough to deter stockholders from wanting a new jet as long as he runs the company.

But, of course, the reality is that if Boeing wants to stay in the commercial airplane business it needs a new airplane. Whoever succeeds Calhoun will have to take that decision, whatever it costs (few experts believe it will be anything like $50 billion).

And, as that successor clears up the mess left by Calhoun they should also take a look at Boeing’s history and consider whether it contains the answer to one key part of that mess—how the company lost its mojo.

In 1992, when I wrote a book, Wide-Body, tracking the history of Boeing from the Jet Age to their greatest gamble, the creation of the world’s first wide-body jet, the 747, I interviewed more than a score of the engineers who designed the first jets.

Doubling the speed of air travel from around 300 mph to 600 mph, as did their first jet, the 707, introduced serious challenges to pilot skills and the whole safety regime. Crashes were far more common then than now, and seen partly as an inevitable cost of a huge growth in world air travel. During its almost three decades in service, the 707 was involved in 174 fatal crashes, killing a total of more than 3,000 people.

That accident rate would be intolerable now, and Boeing’s learning curve was steep, driven by the urgency to make flying far safer. As those engineers mastered and tamed their machines they virtually wrote the world’s benchmark standards for designing safety into every detail of a new jet.

The abysmal early record of the 737 MAX, its crashes, and the multiple flaws in the way it was certified as safe when it was not, would have shocked those pioneers.

But their company culture was different. Boeing’s original corporate headquarters was alongside Boeing Field, the hallowed Seattle base where every new jet was tested. Every day, the men who made the decisions at the top of the company had a keenly felt visceral contact with the machines they made and sold by just looking out the window. There was a tangible magic to that connection. Even the most beady-eyed accountant could get high on the sheer glamour and style of a new Boeing airplane.

That connection was lost when, in 2001, the company decided to leave its Seattle roots and move the C-suite to Chicago. (Calhoun moved it again in 2022, to Arlington, Virginia, to get closer to its main military customer, the Pentagon.)

Is something as atmospheric as the physical connection between a company’s executives and what they make and sell decisive in its quality of leadership?

Clearly, that’s an idea that Calhoun and his Wall Street-driven short-termism has no time for.

But when what you make can kill lots of people if you get careless about how you make it there should be serious reflection about the causes. In the case of Boeing, there was a foundational magic of place involved in how a rigorous safety culture was built. In that business, proximity has value.

Boeing’s main competitor, Airbus, now the world’s dominant commercial airplane maker, has its top managers in Toulouse, alongside the airfield where, in 1972, its first commercial jet made its debut. On visits with those managers, I have found the same palpable pride in a local achievement—the same magic—that I saw in Seattle (and, let it be said, until recently, a respect and even reverence for Boeing).

Calhoun and his managerial cohort have never felt the magic. As he was being grilled by senators recently Calhoun trotted out his standard bromide about “our culture is still not where it should be.” It’s really about where he should have been.