Boeing is paralyzed, and this failing of its executives and directors is to blame

Boeing is paralyzed, and this failing of its executives and directors is to blame

Corporate scandals have a tendency to refocus us all on questions of corporate culture and governance, and Boeing is no exception. David Calhoun is the latest of a spate of CEOs to step down in disgrace, his fall cushioned by the usual golden parachute.

This couldn’t be much more predictable. When Calhoun was hired in 2020, he was promised a $7 million bonus, directly linked to returning the 737 Max to the skies. As U.S. Sens. Edward Markey, Richard Blumenthal and Tammy Baldwin commented in a letter to Boeing’s board at the time, “This payment represents a clear financial incentive for Mr. Calhoun to pressure regulators into ungrounding the 737 Max, as well as rush the investigations and reforms needed to guarantee public safety.”

While some have been keen to frame Boeing’s problems as a consequence of its DEI (diversity, equity and inclusion) efforts, this argument is wildly unconvincing. What Boeing’s problems actually illustrate is that despite corporations adding more women and minorities to boards and C-suites over the past several years, conformity of thought and the strength of social ties are more powerful. The actual problem isn’t a lack of controls, visibility or knowledge. Rather, it is group dynamics.

Nell Minow, a leading corporate governance specialist, has decades of experience directly observing board dynamics. She has this to say about boardroom groupthink: “We take these people of extraordinary ability and achievement. We put them in a boardroom, and there they suddenly become totally incompetent. Why is that? My answer is that these are people who have a genius for sizing up the norms of the room and adapting to them. And that’s a fabulous quality to have. But unfortunately, you’ve got 11 people like that — and one very visionary, dynamic leader who controls their information, their access to other people in the organization, and even their tenure and their compensation. That’s not a good system.”

Board selection criteria vary, but while efforts have been made to increase the independence of board members, personal and social connections still predominate. Many studies demonstrate that members tend to have similar backgrounds, political affiliations and even religious beliefs. Bonding on the golf course remains a hallowed professional practice. At Boeing, its 2021 $246 million fine did lead to the addition of aviation and safety experts to the board, and 30% of its directors are women. But neither factor is enough to offset the complex web of connections, relationships and loyalties between its members.

How is it that as Boeing and other companies have diversified in such areas as gender and race, they seem not to have diversified their perspectives, or become any better at preventing ethical scandals?

“Meta-analyses of rigorous, peer-reviewed studies found no significant relationships — causal or otherwise — between board gender diversity and company performance,” Robin J. Ely, a Harvard Business School professor, and David A. Thomas, president of Morehouse College, wrote in 2020. “Having people from various identity groups ‘at the table’ is no guarantee that anything will get better.”

Senior leadership was almost 64% less likely to speak up against unethical practices than the most junior employees were.

Jessica Kennedy’s research has shed further light on Minow’s observations about how boards often seem ineffective when it comes to ethical oversight. Before Kennedy became a professor in management at Vanderbilt University, her work as an investment banker exposed her to numerous dysfunctional corporate hierarchies.

Kennedy has conducted a number of studies to explore what she had repeatedly witnessed: Greater seniority leads to higher identification with your group. Ethical issues in particular cause cognitive dissonance, leading people to rationalize or minimize problems. This means that the more senior you are, the more likely you are to justify what the group is already doing — for better or worse. Her study of 11,000 employees across U.S. government agencies found that senior leadership was almost 64% less likely to speak up against unethical practices than the most junior employees were.

Even if leaders created the very systems they oversee, they become products of them over time. This means that good leaders should be on guard that power will directly affect their judgment and moral compass; they should strive to build strong ethical structures from the start.

Efforts to solicit dissenting views from more junior employees should be deemed a priority.

It also means that making efforts to solicit dissenting views from more junior employees should be deemed a priority, not a risky move best postponed or avoided. One useful mechanism to consider: Give a group of younger employees and executives an assignment to innovate and challenge the existing board.

Improved deliberation is certainly an asset, but a healthy group dynamic is needed to achieve the greatest advantage. Curiosity, critical thinking and willingness to challenge an accepted perspective — particularly a monolithic one — is where diversity and inclusion imperatives really drive more considered and ethical decision-making.

So far, this is still missing at Boeing. Until the company appreciates that safety is non-negotiable for all stakeholders, from investors to customers, Boeing will have to keep digging. A new CEO will not help. What is needed at Boeing is an entirely new mindset on core corporate-governance topics.

Alison Taylor is a clinical associate professor at New York University’s Stern School of Business and the executive director of Ethical Systems, where her research focuses on ethics and business responsibility. She is the author of Higher Ground: How Business Can Do the Right Thing in a Turbulent World (Harvard Business Review Press, 2024).

More: Boeing’s CEO is departing, but the company’s problems run far deeper