Case1-9 .
Case 1: .
FAILURE.BY.DESIGN:.BOEING.AND.THE.737.MAX.TEACHING.
NOTE
This.case.illustrates.the.following.themes.and.concepts.discussed.in.the.chapters.listed:
Theme/Concept Chapter
Conflict.of.Interest 5
Organizational.Ethics 6
Business.Government.Relations;.Government.Regulation 7
Product.Safety 14
Case.Synopsis
On.Monday,.October.29,.2018,.Lion.Air.Flight.610.crashed.into.the.Java.Sea.in.Indonesia.shortly.afte
r.takeoff,.killing.all.189.people.on.board.. The.aircraft.was.a.nearly.new.Boeing.737.MAX,.delivered.t
o.Lion.Air,.a.low-
cost.regional.carrier.and.one.of.Boeing’s.major.customers,.just.four.months.earlier.. The.MAX.was.B
oeing’s.newest.aircraft.and.the.centerpiece.of.the.company’s.strategy.for.the.short.to.mid-
range.commercial.market.. CEO.Dennis.Muilenburg.faced.an.urgent.an.urgent.task:.to.determine.wha
t.had.gone.wrong.and.why.with.Boeing’s.newest.and.so-
far.successful.new.model..The.case.presents.the.history.of.Boeing.and.its.external.competitive.environ
ment;.the.evolution.of.its.strategy,.governance,.and.ethics.practices;.and.its.relationship.with.U.S..reg
ulators.during.the.design.and.certification.of.the.737.MAX.. What.organizational.and.environmental.f
actors.had.contributed.to.Boeing’s.development.of.an.apparently.unsafe.aircraft?. What.could.Boeing
,.government.regulators,.and.its.airline.customers
1
©.McGraw.Hill.LLC..All.rights.reserved..No.reproduction.or.distribution.without.the.prior.written.consent.of.McGraw.Hill.LLC.
,and.other.stakeholders.do.to.prevent.unsafe.aircraft.from.being.manufactured.and.sold.in.the.future?
TEACHING.TIP:.WHERE.TO.USE.THE.CASE.IN.THE.COURSE
This.case.is.integrative,.in.that.it.draws.on.many.themes.in.the.text.. Instructors.may.use.it.at.the.end.of.t
he.course.as.a.final,.integrative.assignment,.or.with.the.study.of.Chapters.5.and.6.(Ethical.Reasoning.an
d.Organizational.Ethics).or.Chapter.7.(Business.Government.Relations).
TEACHING.TIP:.VIDEO
Instructors.may.wish.to.introduce.the.class.discussion.with.a.short.video.of.the.Lion.Air.flight..The.first
.4.minutes.of.this.9-
minute.segment.depicts.the.fatal.flight.of.Lion.Air.610,.in.which.a.journalist.rides.in.a.simulator.with.a
n.experienced.737.pilot.who.recreates.the.flight.from.the.perspective.of.the.cockpit.. (The.remainder.of.
the.clip.depicts.the.Ethiopian.Airlines.crash.and.is.not.relevant.to.the.case.). Viewers.may.find.the.video
.clip.disturbing,.even.terrifying.
www.youtube.com/watch?v=OxPsxmU_ocI
TEACHING.TIP:.STARTING.A.CASE.DISCUSSION
One.was.to.start.a.class.discussion.of.this.case.is.to.ask.students.to.huddle.in.groups.of.2.to.4..Give.them.
5.minutes.to.write.one.or.two.sentences.beginning.with:.―One.reason.that.Boeing.produced.an.unsafe
.aircraft.was…‖. They.should.then.have.a.representative.write.their.sentence(s).on.the.board.or.share.o
n.a.common.electronic.platform..The.instructor.may.then.categorize.the.answers.and.use.them.as.a.jum
ping.off.point.for.taking.up.various.issues.raised.by.the.discussion.questions.
Sample.answers:. One.reason.that.Boeing.produced.an.unsafe.aircraft.was…
The.culture.of.Boeing.had.shifted.from.a.focus.on.engineering.excellence.to.a.focus.on.shareholder.ret
urns.. The.company’s.capabilities.for.aircraft.design.had.deteriorated.
The.FAA.delegated.most.of.the.work.of.certifying.the.737.MAX.to.Boeing.itself,.so.the.regulators.wer
e.unable.to.exercise.effective.oversight.
Boeing.was.under.tremendous.pressure.because.of.competition.from.Airbus,.so.they.decided.to.updat
e.the.737.rather.than.design.an.all-
new.plane.. This.created.an.unsolvable.engineering.problem,.because.the.bigger.more.fuel-
efficient.engines.they.wanted.to.use.did.not.fit.under.the.wings.of.737.
2
©.McGraw.Hill.LLC..All.rights.reserved..No.reproduction.or.distribution.without.the.prior.written.consent.of.McGraw.Hill.LLC.
,Boeing’s.top.executives.and.directors.emphasized.shareholder.returns.over.engineering.excellence..
Cost.and.efficiency.were.more.important.to.them.than.the.quality.of.the.aircraft.
Boeing.had.spent.so.much.money.on.stock.buybacks.and.shareholder.dividends.that.they.did.not.have.
enough.left.over.to.invest.properly.in.R&D.and.aircraft.engineering.
Boeing.had.a.code.of.ethics.but.did.not.seem.to.enforce.it.. It.ignored.worrisome.survey.results.and.did.
not.listen.to.series.warnings.from.senior.managers.
Manufacturing.of.the.MAX.was.rushed,.possibly.leading.to.defects.in.aircraft.delivered.to.customers.
The.FAA.basically.allowed.Boeing.to.certify.the.safety.of.its.own.plane.
Boeing’s.strategy.was.to.acquire.other.manufacturers.(e.g.,.McDonnell.Douglas).and.keep.updating.t
heir.old.models,.rather.than.to.design.new.aircraft.. Over.the.years,.they.lost.much.of.their.engineering.
know-how.
Instructor.Tip:. ―C‖.students.may.answer.this.question.by.describing.characteristics.of.the.unsafe.plan
e.or.its.design.flaws.. For.example,.―One.reason.Boeing.produced.an.unsafe.aircraft.was.relying.on.ju
st.one.sensor.‖. ―A‖.students.will.understand.the.distinction.between.the.problem.itself.(an.unsafe.des
ign).and.the.cause.of.the.problem.(e.g.,.organizational.culture,.regulatory.failures,.external.competitio
n).. The.instructor.may.need.to.point.out.that.the.question.asks.for.the.reason.Boeing.produced.an.unsa
fe.plane,.not.the.reason.the.plane.was.unsafe..(Question.1,.below,.addresses.the.reason(s).the.plane.was
.unsafe.)
Discussion.Questions.and.Answers
1. What.were.the.immediate.technical.causes.of.the.crash.of.Lion.Air.Flight.610?
Based.on.information.in.the.case,.students.will.conclude:.A.faulty.angle.of.attack.sensor.fed.errone
ous.data.into.the.plane’s.computers,.triggering.the.maneuvering.characteristics.augmentation.system
,.or.MCAS.. The.plane’s.computer.relied.on.only.one.sensor.at.a.time.(a.single.point.of.failure),.and.the.
aircraft.did.not.have.an.active.cockpit.alert.for.disagreement.between.the.two.sensors.. Once.MCAS.w
as.activated,.it.repeatedly.forced.the.nose.of.the.plane.down,.destabilizing.the.aircraft.. The.Lion.Air.pi
lots.had.not.been.trained.on.a.simulator,.were.unaware.of.MCAS.and.its.capabilities,.and.their.flight.m
anual.did.not.include.relevant.information.. Eventually,.the.pilots.lost.control.of.the.aircraft.and.it.cras
hed.nose.down.into.the.sea,.killing.all.on.board.
2. Describe.the.culture.of.the.Boeing.organization.. How.did.the.company’s.culture.affect.the.
development.and.production.of.the.737.MAX?
3
©.McGraw.Hill.LLC..All.rights.reserved..No.reproduction.or.distribution.without.the.prior.written.consent.of.McGraw.Hill.LLC.
, The.textbook.defines.corporate.culture.as.―a.blend.of.ideas,.customs,.traditional.practices,.compan
y.rules,.and.shared.meanings.that.help.define.normal.behavior.for.everyone.who.works.at.a.company‖.
(Chapter.6)..The.textbook.points.out.that.weak.ethical.cultures.can.foster.unethical.behavior.. To.hel
p.students.unpack.this.question,.the.instructor.may.wish.to.elaborate.by.pointing.out.that.corporate.or.
organizational.culture.is.often.understood.as.having.three.layers:.basic.assumptions,.values.and.nor
ms,.and.artifacts.(Schein,.2004;.Chatman,.2014).
Basic.assumptions.are.deeply.held.values.about.the.organization’s.purpose.and.reason.for.existence..
Norms.are.unwritten.expectations.for.appropriate.behavior.that.reflect.these.values..Artifacts.are.visi
ble.organizational.practices.that.communicate.values,.such.as.rituals,.stories,.and.language.
One.way.to.organize.this.discussion.is.to.prompt.students.to.fill.in.a.board.grid,.showing.how.these.thre
e.layers.of.Boeing’s.culture.changed.following.the.company’s.acquisition.of.McDonnell.Douglas.(19
97).
Boeing’s.Organizational.Culture.Before.and.After.the.Acquisition.of.McDonnell.Douglas
Level Past Present
Basic.Assumptions Boeing.is.a.trendsetter.in.aircraft.technolo
Boeing.is.an.aircraft.manufacturer.
gy.. The.purpose.of.the.company.is.to.desi . The.company’s.purpose.is.to.creat
gn.better.planes.that.fly.higher,.faster,.fart
e.the.best.value.for.its.customers.an
her. d.the.highest.possible.returns.for.its
.investors.
Shareholder.value.is.prioritized.
Values.and.Norms Core.values.are.quality,.innovation,.and. Core.values.are.efficiency,.profitabil
safety.. Engineering.excellence.is ity,.and.low.cost..Shareholder.value.i
valued..Investment.in.research.and.develo s.prioritized.
pment.is.prioritized.
Artifacts Stories.about.William.Boeing’s.attention. Common.slogans.were.―We’re.in.b
to.quality,.innovation,.and.safety.were.pa usiness‖.and.―We’re.managing.fo
rt.of.the.company r.value.‖
folklore.. The.company.was.described.as.
an.―association.of.engineers.‖
Summary:. Over.time,.Boeing.culture.had.shifted.from.a.focus.on.quality,.innovation,.and.safety.to.a
.focus.on.efficiency,.profitability,.and.shareholder.value.. This.affected.the.development.of.the.737.
MAX,.as.it.led.to.decisions.to.re-tool.an.old.model.(the.737).rather.develop.than.a.new,.clean-
sheet.model,.to.keep.costs.down.and.speed.up.delivery.to.key.customers..(The.decisions.made.by.Boe
ing.during.the.development.of.the.MAX.are.further.explored.in.the.response.to.Question.4,.below.)
3. Describe.the.ethics.policies.and.practices.of.Boeing.. What.ethical.safeguards.were.in.plac
e.to.promote.safety?. Evaluate.the.effectiveness.of.these.safeguards.during.the.developm
ent.and.production.of.the.737.MAX.
4
©.McGraw.Hill.LLC..All.rights.reserved..No.reproduction.or.distribution.without.the.prior.written.consent.of.McGraw.Hill.LLC.
Case 1: .
FAILURE.BY.DESIGN:.BOEING.AND.THE.737.MAX.TEACHING.
NOTE
This.case.illustrates.the.following.themes.and.concepts.discussed.in.the.chapters.listed:
Theme/Concept Chapter
Conflict.of.Interest 5
Organizational.Ethics 6
Business.Government.Relations;.Government.Regulation 7
Product.Safety 14
Case.Synopsis
On.Monday,.October.29,.2018,.Lion.Air.Flight.610.crashed.into.the.Java.Sea.in.Indonesia.shortly.afte
r.takeoff,.killing.all.189.people.on.board.. The.aircraft.was.a.nearly.new.Boeing.737.MAX,.delivered.t
o.Lion.Air,.a.low-
cost.regional.carrier.and.one.of.Boeing’s.major.customers,.just.four.months.earlier.. The.MAX.was.B
oeing’s.newest.aircraft.and.the.centerpiece.of.the.company’s.strategy.for.the.short.to.mid-
range.commercial.market.. CEO.Dennis.Muilenburg.faced.an.urgent.an.urgent.task:.to.determine.wha
t.had.gone.wrong.and.why.with.Boeing’s.newest.and.so-
far.successful.new.model..The.case.presents.the.history.of.Boeing.and.its.external.competitive.environ
ment;.the.evolution.of.its.strategy,.governance,.and.ethics.practices;.and.its.relationship.with.U.S..reg
ulators.during.the.design.and.certification.of.the.737.MAX.. What.organizational.and.environmental.f
actors.had.contributed.to.Boeing’s.development.of.an.apparently.unsafe.aircraft?. What.could.Boeing
,.government.regulators,.and.its.airline.customers
1
©.McGraw.Hill.LLC..All.rights.reserved..No.reproduction.or.distribution.without.the.prior.written.consent.of.McGraw.Hill.LLC.
,and.other.stakeholders.do.to.prevent.unsafe.aircraft.from.being.manufactured.and.sold.in.the.future?
TEACHING.TIP:.WHERE.TO.USE.THE.CASE.IN.THE.COURSE
This.case.is.integrative,.in.that.it.draws.on.many.themes.in.the.text.. Instructors.may.use.it.at.the.end.of.t
he.course.as.a.final,.integrative.assignment,.or.with.the.study.of.Chapters.5.and.6.(Ethical.Reasoning.an
d.Organizational.Ethics).or.Chapter.7.(Business.Government.Relations).
TEACHING.TIP:.VIDEO
Instructors.may.wish.to.introduce.the.class.discussion.with.a.short.video.of.the.Lion.Air.flight..The.first
.4.minutes.of.this.9-
minute.segment.depicts.the.fatal.flight.of.Lion.Air.610,.in.which.a.journalist.rides.in.a.simulator.with.a
n.experienced.737.pilot.who.recreates.the.flight.from.the.perspective.of.the.cockpit.. (The.remainder.of.
the.clip.depicts.the.Ethiopian.Airlines.crash.and.is.not.relevant.to.the.case.). Viewers.may.find.the.video
.clip.disturbing,.even.terrifying.
www.youtube.com/watch?v=OxPsxmU_ocI
TEACHING.TIP:.STARTING.A.CASE.DISCUSSION
One.was.to.start.a.class.discussion.of.this.case.is.to.ask.students.to.huddle.in.groups.of.2.to.4..Give.them.
5.minutes.to.write.one.or.two.sentences.beginning.with:.―One.reason.that.Boeing.produced.an.unsafe
.aircraft.was…‖. They.should.then.have.a.representative.write.their.sentence(s).on.the.board.or.share.o
n.a.common.electronic.platform..The.instructor.may.then.categorize.the.answers.and.use.them.as.a.jum
ping.off.point.for.taking.up.various.issues.raised.by.the.discussion.questions.
Sample.answers:. One.reason.that.Boeing.produced.an.unsafe.aircraft.was…
The.culture.of.Boeing.had.shifted.from.a.focus.on.engineering.excellence.to.a.focus.on.shareholder.ret
urns.. The.company’s.capabilities.for.aircraft.design.had.deteriorated.
The.FAA.delegated.most.of.the.work.of.certifying.the.737.MAX.to.Boeing.itself,.so.the.regulators.wer
e.unable.to.exercise.effective.oversight.
Boeing.was.under.tremendous.pressure.because.of.competition.from.Airbus,.so.they.decided.to.updat
e.the.737.rather.than.design.an.all-
new.plane.. This.created.an.unsolvable.engineering.problem,.because.the.bigger.more.fuel-
efficient.engines.they.wanted.to.use.did.not.fit.under.the.wings.of.737.
2
©.McGraw.Hill.LLC..All.rights.reserved..No.reproduction.or.distribution.without.the.prior.written.consent.of.McGraw.Hill.LLC.
,Boeing’s.top.executives.and.directors.emphasized.shareholder.returns.over.engineering.excellence..
Cost.and.efficiency.were.more.important.to.them.than.the.quality.of.the.aircraft.
Boeing.had.spent.so.much.money.on.stock.buybacks.and.shareholder.dividends.that.they.did.not.have.
enough.left.over.to.invest.properly.in.R&D.and.aircraft.engineering.
Boeing.had.a.code.of.ethics.but.did.not.seem.to.enforce.it.. It.ignored.worrisome.survey.results.and.did.
not.listen.to.series.warnings.from.senior.managers.
Manufacturing.of.the.MAX.was.rushed,.possibly.leading.to.defects.in.aircraft.delivered.to.customers.
The.FAA.basically.allowed.Boeing.to.certify.the.safety.of.its.own.plane.
Boeing’s.strategy.was.to.acquire.other.manufacturers.(e.g.,.McDonnell.Douglas).and.keep.updating.t
heir.old.models,.rather.than.to.design.new.aircraft.. Over.the.years,.they.lost.much.of.their.engineering.
know-how.
Instructor.Tip:. ―C‖.students.may.answer.this.question.by.describing.characteristics.of.the.unsafe.plan
e.or.its.design.flaws.. For.example,.―One.reason.Boeing.produced.an.unsafe.aircraft.was.relying.on.ju
st.one.sensor.‖. ―A‖.students.will.understand.the.distinction.between.the.problem.itself.(an.unsafe.des
ign).and.the.cause.of.the.problem.(e.g.,.organizational.culture,.regulatory.failures,.external.competitio
n).. The.instructor.may.need.to.point.out.that.the.question.asks.for.the.reason.Boeing.produced.an.unsa
fe.plane,.not.the.reason.the.plane.was.unsafe..(Question.1,.below,.addresses.the.reason(s).the.plane.was
.unsafe.)
Discussion.Questions.and.Answers
1. What.were.the.immediate.technical.causes.of.the.crash.of.Lion.Air.Flight.610?
Based.on.information.in.the.case,.students.will.conclude:.A.faulty.angle.of.attack.sensor.fed.errone
ous.data.into.the.plane’s.computers,.triggering.the.maneuvering.characteristics.augmentation.system
,.or.MCAS.. The.plane’s.computer.relied.on.only.one.sensor.at.a.time.(a.single.point.of.failure),.and.the.
aircraft.did.not.have.an.active.cockpit.alert.for.disagreement.between.the.two.sensors.. Once.MCAS.w
as.activated,.it.repeatedly.forced.the.nose.of.the.plane.down,.destabilizing.the.aircraft.. The.Lion.Air.pi
lots.had.not.been.trained.on.a.simulator,.were.unaware.of.MCAS.and.its.capabilities,.and.their.flight.m
anual.did.not.include.relevant.information.. Eventually,.the.pilots.lost.control.of.the.aircraft.and.it.cras
hed.nose.down.into.the.sea,.killing.all.on.board.
2. Describe.the.culture.of.the.Boeing.organization.. How.did.the.company’s.culture.affect.the.
development.and.production.of.the.737.MAX?
3
©.McGraw.Hill.LLC..All.rights.reserved..No.reproduction.or.distribution.without.the.prior.written.consent.of.McGraw.Hill.LLC.
, The.textbook.defines.corporate.culture.as.―a.blend.of.ideas,.customs,.traditional.practices,.compan
y.rules,.and.shared.meanings.that.help.define.normal.behavior.for.everyone.who.works.at.a.company‖.
(Chapter.6)..The.textbook.points.out.that.weak.ethical.cultures.can.foster.unethical.behavior.. To.hel
p.students.unpack.this.question,.the.instructor.may.wish.to.elaborate.by.pointing.out.that.corporate.or.
organizational.culture.is.often.understood.as.having.three.layers:.basic.assumptions,.values.and.nor
ms,.and.artifacts.(Schein,.2004;.Chatman,.2014).
Basic.assumptions.are.deeply.held.values.about.the.organization’s.purpose.and.reason.for.existence..
Norms.are.unwritten.expectations.for.appropriate.behavior.that.reflect.these.values..Artifacts.are.visi
ble.organizational.practices.that.communicate.values,.such.as.rituals,.stories,.and.language.
One.way.to.organize.this.discussion.is.to.prompt.students.to.fill.in.a.board.grid,.showing.how.these.thre
e.layers.of.Boeing’s.culture.changed.following.the.company’s.acquisition.of.McDonnell.Douglas.(19
97).
Boeing’s.Organizational.Culture.Before.and.After.the.Acquisition.of.McDonnell.Douglas
Level Past Present
Basic.Assumptions Boeing.is.a.trendsetter.in.aircraft.technolo
Boeing.is.an.aircraft.manufacturer.
gy.. The.purpose.of.the.company.is.to.desi . The.company’s.purpose.is.to.creat
gn.better.planes.that.fly.higher,.faster,.fart
e.the.best.value.for.its.customers.an
her. d.the.highest.possible.returns.for.its
.investors.
Shareholder.value.is.prioritized.
Values.and.Norms Core.values.are.quality,.innovation,.and. Core.values.are.efficiency,.profitabil
safety.. Engineering.excellence.is ity,.and.low.cost..Shareholder.value.i
valued..Investment.in.research.and.develo s.prioritized.
pment.is.prioritized.
Artifacts Stories.about.William.Boeing’s.attention. Common.slogans.were.―We’re.in.b
to.quality,.innovation,.and.safety.were.pa usiness‖.and.―We’re.managing.fo
rt.of.the.company r.value.‖
folklore.. The.company.was.described.as.
an.―association.of.engineers.‖
Summary:. Over.time,.Boeing.culture.had.shifted.from.a.focus.on.quality,.innovation,.and.safety.to.a
.focus.on.efficiency,.profitability,.and.shareholder.value.. This.affected.the.development.of.the.737.
MAX,.as.it.led.to.decisions.to.re-tool.an.old.model.(the.737).rather.develop.than.a.new,.clean-
sheet.model,.to.keep.costs.down.and.speed.up.delivery.to.key.customers..(The.decisions.made.by.Boe
ing.during.the.development.of.the.MAX.are.further.explored.in.the.response.to.Question.4,.below.)
3. Describe.the.ethics.policies.and.practices.of.Boeing.. What.ethical.safeguards.were.in.plac
e.to.promote.safety?. Evaluate.the.effectiveness.of.these.safeguards.during.the.developm
ent.and.production.of.the.737.MAX.
4
©.McGraw.Hill.LLC..All.rights.reserved..No.reproduction.or.distribution.without.the.prior.written.consent.of.McGraw.Hill.LLC.
