Boeing (NYSE:BA) is the target of a new shareholder lawsuit that claims the company’s board failed to provide adequate oversight of the company during the lead up and response to a pair of fatal 737 Max crashes.
The suit, filed in Delaware state court, alleges that former CEO Denis Muilenburg misled investors and directors, arguing that the board was more concerned with negative headlines concerning the company leaking out than it was getting to the bottom of the issues that caused the crashes. The shareholders claim the board failed to press management on 737 Max engineering issues and say that some directors skipped meetings focused on safety.
The 737 Max has been grounded since March 2019, and the investigation into the cause of the accidents has revealed some troubling aspects to Boeing’s safety culture. A Congressional investigation blamed the crashes on “a horrific culmination of a series of faulty technical assumptions by Boeing’s engineers, a lack of transparency on the part of Boeing’s management, and grossly insufficient oversight” by regulators, claiming Boeing was more concerned with internal deadlines and sales wins and overlooked safety concerns.
Muilenburg was replaced late last year, but new CEO David Calhoun served as a director through the 737 Max development and the initial investigation into what had gone wrong.
Boeing shares are down more than 50% year to date, and although the 737 Max is expected to be cleared to fly again before year’s end the company still faces an uphill challenge. The COVID-19 pandemic has wounded airlines and caused demand for new jets to plummet, and the market for new planes is likely going to take years to recover.