Impact of Unethical Behavior on Boeing's Reputation, Revenue, Shareholders, and Customers

This report analyzes the impact of unethical behavior on Boeing's reputation, revenue, shareholders, and customers after the crashes of the Boeing 737 Max jets. It discusses the loss of trust, decline in revenue, lawsuits by shareholders, and loss of customers. Recommendations are provided to improve corporate culture and safety procedures.

ACADEMIC AND
PRFESSIONAL SKILLS

EXECUTIVE SUMMARY
After two consecutive crashes of Boeing 737 Max jets in Indonesia and then in Ethiopia led to
some many serious questions not just on the safety aspect but also on the ethical aspect. In this
report, the impact of the unethical aspects of the activities undertaken by management of Boeing
will be discussed and mapped thus presenting a proper analysis.

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
ANALYSIS......................................................................................................................................4
Impact of unethical behaviour on Boeing’s reputation................................................................4
Impact of unethical behaviour on Boeing’s revenue...................................................................5
Impact of unethical behaviour on Boeing’s shareholders............................................................6
Impact of unethical behaviour on Boeing’s customers................................................................7
CONCLUSION................................................................................................................................7
RECOMMENDATIONS.................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Ethic refers to values and certain moral principle of people behaviour that defines the way it
performs various activities and function. Ethics helps people in identifying things which are right
and wrong that need to be followed by individual or not. If a person has good ethical behaviour
and values it will never harm others for its satisfaction and happiness. Therefore ethics and
values defined nature and behaviour of individual that is the way it interact with other peoples.
Boeing is an American company that is established to design, manufacture airplanes, rockets and
telecommunication equipments (James, 2017). It is known as second largest defence contractor
on the basis of revenue generated and have 153,027 employees that are provide various services
to its customers. This report is about a case of Boeing where most of the people lost their lives
because of unethical behaviour of company. Due to malfunctioning of Manoeuvring
characteristics Augmentation System two accidents happened first was on October 2018 that
killed approx 189 people and in March 2019 157 people had lost their life in Boeing 737 Max
Ethiopian. Thus, all such accidents has impact on company image and reduce confidence of
public in Boeing so such unethical behaviour has impacted on image an d reputation of company
(Banks, 2016). Boeing was one of the well know company in term of fast selling aircraft but due
to such accidents and loss of life client have lost their trust and its has loss its brand image and
reputation. The aim of the report is to explain about importance of ethical behaviour in gaining
customers satisfaction, loyalty and building strong brand image in the market.
ANALYSIS
The crashing of Boeing’s plane was a bgi question on the ethical compliance of the company
and it is necessary to evaluate the effect that this crash will have on the different aspects
associated with the company.
Impact of unethical behaviour on Boeing’s reputation
The crashing of the planes were due to the faulty MACS software systems being
implemented in the Boe4ing 737 Max and the revenue of the business is bound to be affected by
it (Jones, 2017). The fear regarding air travelling is already omnipresent amongst majority of
fliers because they are apprehensive and this crashing of the two planes consecutively has
affected the airline companies majorly. This disaster has affected the reputation of the company
heavily as the majority of 737 aircraft is being grounded by the airline companies where they are
claiming the uncertainty of the Boeing Max 8 model and the reason behind this act (Hatton and
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Rutkowski, 2019). The demotion of the owner Dennis Muilenberg and the resignation of Kevin
McAllister who was the head of the jet line division has affected the reputation of the company
heavily. Apart from this, after the company issued a statement that they were not aware about the
fact that their system was unsafe was directly contradicted by the leaked statements. The email
conversation of two test pilots who are clearly seen expressing concerns over the MCAS system
and its potential causes that might cause crash (Bergstra and Burgess, 2019). The authorities
however tried to cover up the fact by saying that the MCAS was just behaving in an
unpredictable manner and they had no idea that it could go downhill in this manner. All such
faulty statements and the shift of the blame on one another rather than bearing the responsibility
for its failure has made the company lose its credibility in the eyes of the people. They no longer
trust the company and its promises made.
Additionally, after the crisis, many airline booking companies have started giving the
option to choose a specific aircraft for travelling because of this incident. The fact that the owner
of the company blamed the pilots who had no knowledge about the new automatic anti stall
system being implemented in 737 Max 8 was a clear violation of the informed consent rights
(Learmount, 2019).
Although Boeing is now moving towards regaining the market share, customers and
reputation that it lost after the crashes and the owner Dennis Muilenberg is also hopeful that the
trust of the common public can be regained, but this is a long journey on which Boeing travel
after having lost revenue and reputation.
Impact of unethical behaviour on Boeing’s revenue
After the crashes of the Boeing’s 737 Max, the profits of the company dwindled almost to
half in the next three months. The disputes that rose over the ethicality of the manner in which
Boeing was dealing took a heavy toll on its earnings. The reports issued by the company stated
that apart form the loss of income due to decreased sale fo Boeing 737 Max which was
anticipated at $2.7 billion, the company also had to bear an additional loss of $900 million due to
decreased production of Max (Boeing profits fall by more than half as 737 Max scandal swirls.
2019). The additional charges and penalties that the company had t pay and the trial it was
involved in has made the customers of Boeing turn away from them. Boeing was one of the top
aircraft manufacturers with an almost 38% share in the total manufacturers as identified in the
year 2017 but after these series of crashes in October 2018 and March 2019, the company has
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lost its market share significantly (Ethiopian Airlines Plane Is the 2nd Boeing Max 8 to Crash in
Months. 2020).
The ethical aspect of safety of the human lives is the major concern here where the failure
of the system was known by the technicians of the company before it was even implemented and
this makes the company and its employees responsible (Enomoto and Geisler, 2017). Also the
attitude of the owner Dennis Muilenberg has not been positive where he failed to respond to
public on time thus making matters worse. The Justice department demanded a settlement
amount that was unprecedented i.e. it was $615 million and additionally Boeing also took full
responsibility of the crashes that took place and the lives that were lost (Boeing’s rocky road to
win back trust after deadly 737 Max crashes: ‘We’re not there yet’. 2019). Additionally,
company also lost rocket launching contracts with Air Force causing a loss of $1 billion to the
company (Boeing profits fall by more than half as 737 Max scandal swirls. 2019).
However, the company did not claim the $200 million tax write- off that it was entitled to
and this step was praised by many members of the senators where they called it an act of
redemption (Boeing’s rocky road to win back trust after deadly 737 Max crashes: ‘We’re not
there yet’. 2019). The officials of the company also reports that it was just an act to show how
much responsible and dedicated they are towards the grave loss that has been caused by the
failure of their system.
Impact of unethical behaviour on Boeing’s shareholders
After it was revealed that the company had prior knowledge about the MACS software and
the crashes that took place of 737 Max, the shareholders of the company sued the company for
defrauding them (Cutler, 2019). The shareholders stated that Boeing effectively put their revenue
generation i.e. profitability before the safety compliance risking the lives of the travellers of the
company who comprise as a major stakeholder of the company. Additionally, company also
failed to act with honest post the incident that took place. Apart from this, the stakeholders also
claimed that the management of Boeing largely undermined the growth prospects of the 737 Max
so that they could retain the shareholders or the federal regulators from ensuring the safety of the
plane especially through their MACS system (Cruz and de Oliveira Dias, 2020). This was largely
a case of alleged misrepresentation and failure to disclose all the relevant facts thus putting the
company in a position of committing fraud against their interested shareholders.
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The share prices of the Boeing declined heavily after the crashes took place and
consequently the worth of the shareholder also fell drastically. Since then, there have been a lot
of cases that have been filed against the company by the shareholders at different places in
different district courts of USA (Beech and Suhartono, 2019). Therefore, it can be stated that
despite repeated efforts of Bowing to appease their shareholders, they are increasingly becoming
more divergent from the company which might put company in a bad perspective despite its
hope to recover within an year.
Impact of unethical behaviour on Boeing’s customers
The impact of the crashes has infallibly affected the customers of the company as well. Due
to these crashes, they have lost major players in their supply chain thus affecting their overall
revenue generation. This has been termed as the biggest setback for the company i.e. Boeing in
the past 1000 years (Casadesus-Masanell and Elterman, 2019). Companies like General Electric
who is a major part of supply chain has already cancelled all the contracts and many other airline
customers of the company, such as American Airlines and Southwest Airlines being prominent,
have parted ways form the airlines. Additionally, apart from US, there are many international
customers of the company in Europe and Canada specifically who have lost the trust required for
Boeing and therefore the loss of customers have been significant for the company. it is expected
that despite the positivity portrayed by the company and its owner specifically , there are chances
that the by the next year end, company can face a significant profit loss by almost 81% due to the
declining trust of both the airline customers and the indirect customers as well who no longer
intend to travel in Boeing Aircrafts (Jones, 2017).
Therefore, the analysis of the four different aspects shows that the road further is
extremely rocky for the Boeing and they are facing some serious repercussions due to the lack of
austerity.
CONCLUSION
The analysis above helps in concluding that the manner in which Boeing Company handled
the crisis that they faced was an impromptu approach that made them loos weak, dishonest and at
the end of a crime. The insensitivity and lack of moral ethics that ha business requires was an
add on to their list of negative aspects. Therefore, it can be said that company definitely needs to
work upon their corporate culture and develop better PR actions and strategies for the future so
that the situations that rose in the present context of these crashes can be avoided in future.
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RECOMMENDATIONS
On the basis of analysis done above certain recommendations can be made:
 The overall culture at Boeing needs to be improved where the company should not only
just focus on regaining the lost market but also on the work culture where integrity and
honesty needs to be integrated amongst the employees, management and directors of the
company (Learmount, 2019). And in integration with such cultural management, the
company can also develop hard and soft skills of the employees so that the employees are
encouraged to speak up and take actions when they find the activity not to be in the right
perspective. This will help in ensuring that company is succeeding in a correct way.
 This is the best chance for Boeing to emphasize on the importance of the ethical aspect
while achieving the mission, vision and objectives that have been set for the company
(Hatton and Rutkowski, 2019). Through this crisis, the company can make all the people
aware the need to be honest and ethical in the work that they are doing so that the targets
that have been set for the company can be achieved but not by compromising with risks
at such huge stakes. This will also increase the verifiability of the decisions that are being
taken thus increasing the transparency as well.
 The last major recommendation for the company can be to improve its current safety and
other equipment testing procedures and make them more transparent or reduce the
authority placed in fewer hands of the company to a more number of hands (Banks,
2016). When there will be more people who will be informed about the discrepancies
taking place, then obviously the chances of frauds will reduce because someone or other
might report it. Therefore improving the structure and strategies o the company will help
in addressing multiple problems that Boeing is facing right now and this will help in
gaining the rust of the customer again as well.
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REFERENCES
Books and Journals
Banks, S., 2016. Everyday ethics in professional life: Social work as ethics work. Ethics and
Social Welfare, 10(1). pp.35-52.
Beech, H. and Suhartono, M., 2019. Between Two Boeing Crashes, Days of Silence and
Mistrust. In New York Times.
Bergstra, J.A. and Burgess, M., 2019. A Promise Theoretic Account of the Boeing 737 Max
MCAS Algorithm Affair. arXiv preprint arXiv:2001.01543.
Casadesus-Masanell, R. and Elterman, K., 2019. Airbus vs. Boeing (M): MAX 8 Disasters (July
2019).
Cruz, B.S. and de Oliveira Dias, M., 2020. CRASHED BOEING 737-MAX: FATALITIES OR
MALPRACTICE?. GSJ. 8(1).
Cutler, R.M., 2019. Ten Reasons to Defer Boeing 737 Max Recertification. tech. rep.
Enomoto, C.E. and Geisler, K.R., 2017. Culture and plane crashes: A cross-country test of the
Gladwell hypothesis. Economics & Sociology. 10(3). pp.281-293.
Hatton, L. and Rutkowski, A., 2019. " Lessons must be learned"-but are they?. IEEE
software, 36(4), pp.91-95.
James, S. P., 2017. Zen Buddhism and environmental ethics. Routledge.
Jones, S., 2017. Drone crashes into Boeing 737 jet plane coming into land at Mozambique
airport. The Mirror. Retrieved. 6.
Learmount, D., 2019. What's the difference?: two fatal Boeing 737 Max crashes have raised
concerns that the system for extending pilot's qualifications to new variants of an aircraft
type may have been stretched too far. Flight International.
Online
Boeing profits fall by more than half as 737 Max scandal swirls. 2019. [ONLINE] Available
through: < https://www.theguardian.com/business/2019/oct/23/boeing-profits-737-max-
mcas-scandal>
Ethiopian Airlines Plane Is the 2nd Boeing Max 8 to Crash in Months. 2020. [ONLINE]
Available through: <https://www.nytimes.com/2019/03/10/world/africa/ethiopian-
airlines-plane-crash.html>
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Boeing’s rocky road to win back trust after deadly 737 Max crashes: ‘We’re not there yet’. 2019.
[ONLINE] Available through: < https://www.cnbc.com/2019/06/04/boeing-has-a-rocky-
road-to-win-back-trust-after-deadly-737-max-crashes.html >
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