A presentation of the above captioned topic for corporate and regulatory audience.

1. Corporate Governance: The Boeing Case
MB938:Grand Challenges for Corporate
Governance
Developed & Presented by:
William P. Kittredge, PhD
7 May 2024

2. Your Guest Lecturer
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Successful serial entrepreneur
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Corporate board member
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Late life PhD – 2001 Syracuse University
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Faculty positions include University Georgia, Carnegie Mellon &
Johns Hopkins
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Consultant to corporations and governments worldwide

3. Your Guest Lecturer
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Senior Executive Service US Department of Commerce
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US Government Representative to OECD for Territorial
Development Policy & Program Evaluation.
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WPPSS Participants’ Review Board member.
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CalFed Water Resources Management consultant.

4. Introduction
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Corporate governance refers to the mechanisms and
processes by which an organization is directed and
controlled.
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Selection among alternatives and prioritization.
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Subject to laws and regulations of the nations in which
they operate and the provisions of their creation
documents (e.g. articles of incorporation

5. Board Section & Membership
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Most boards selected by stockholders.
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In nations with codetermination (e.g. Germany) the
workers elect some board members.
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In other nations (e.g. Japan) companies are required
to consider the interests of stakeholders, including
employees, banks, and trade partners over
shareholders

6. Key Components of Corporate Governance
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Board of Directors
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Executive Officers
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Shareholders
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Stakeholders
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Transparency & Accountability

7. Role Board of Directors
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Composition & independence
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Responsibilities in Strategic Decision Making
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Board Committees
– Audit
– Compensation
– Nominating

8. Executive Compensation
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Linking compensation to performance (e.g. stock
price)
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Incentive structures
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Challenges and controversies

9. Shareholders & Stakeholders
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Importance of shareholder engagement.
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Balancing stakeholder interests.
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Social responsibility.

10. Transparency & Accountability
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Financial Reporting & Disclosures
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Role of Auditors
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Regulatory Compliance

11. Corporate Governance Models
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Comparative Analysis (Anglo-American,
Continental European, Asian)
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Pros & Cons of different models

12. Anglo-American Model
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Ownership structure: Predominantly shareholder
oriented with dispersed ownership
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Board structure: Emphasizes separation of Executive
Officers & Board roles to ensure checks & balances.
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Shareholder activism: Common with shareholder
activism focused on increased shareholder value (e.g.
increasing stock price)

13. European Model
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Ownership Structure: Often characterized by concentrated ownership,
including family owned businesses
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Board Structure: Two tier – managing board & supervisory board
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Regulatory Approach: Emphasizes stakeholder interests & consensual
approach
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Shareholder Activism: Less prevalent than Anglo-American model & focus on
long-term stability

14. Asian Model
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Ownership Structure: Characterized by family owned businesses,
government linkages, & institutional investors
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Board Structure: Mix of single & two tier systems, family members often in
key positions
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Regulatory Approach: Diverse models reflecting cultural & economic
differences
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Shareholder Activism: Traditionally very limited or non-existent, change
driven by globalization

15. “If its not Boeing, I’m not going”
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The Boeing Company, founded on July 15, 1916, by
William E. Boeing in Seattle, Washington.
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Boeing's early focus was on producing seaplanes,
primarily for military use.
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The company's first major commercial success was
the Boeing Model 1 (B&W Seaplane).

16. “If its not Boeing, I’m not going”
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During the 1920s and 1930s, Boeing expanded
into aeronautics with innovations such as the
Boeing 247, considered the first modern airliner.
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The development of the 307 Stratoliner introduced
pressurized cabins, enabling high-altitude
commercial flights.

17. “If its not Boeing, I’m not going”
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In the subsequent decades, Boeing introduced
several successful models, including the 737, 747,
767, and 777, each marking advancements in
range, capacity, and fuel efficiency.
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The 747, in particular, became iconic as the first
wide-body airliner, popularly known as the "Jumbo
Jet."

18. “If its not Boeing, I’m not going”
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Traditionally, Boeing had a reputation as an
engineering-driven company, where technical
excellence and the safety of its aircraft were
paramount. This focus cultivated a culture deeply
rooted in aerospace innovation and quality
manufacturing, driven by a workforce that included
many experienced engineers and technicians.

19. “If its not Boeing, I’m not going”
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A significant shift began in the late 1990s and early
2000s, particularly evident after the merger with
McDonnell Douglas in 1997. This merger brought
changes in corporate culture and management style, with
new leadership often prioritizing cost-cutting, efficiency,
and shareholder returns. This was part of a broader trend
in American corporate governance during this period,
where maximizing shareholder value became a dominant
ideology.

20. “If its Boeing, I’m not going”
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Outsourcing and Cost Reduction:
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To reduce costs and boost profits, Boeing increasingly
outsourced substantial portions of its manufacturing and
design processes.
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This approach was markedly evident in the development of
the Boeing 787 Dreamliner, where extensive outsourcing led
to significant production delays and quality issues.

21. “If its Boeing, I’m not going”
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Corporate Restructuring:
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The company underwent several restructuring
efforts aimed at reducing operational costs and
improving profitability. These changes sometimes
led to layoffs and the consolidation of production
facilities.

22. “If its Boeing, I’m not going”
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Regulatory Scrutiny and Safety Concerns:
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The two fatal crashes of the Boeing 737 MAX in
2018 and 2019 brought intense scrutiny to
Boeing’s commitment to safety and its interactions
with regulatory bodies. Investigations and reports
suggested that a push to rapidly market the new
aircraft and compete with Airbus might have led to
compromises in safety procedures and oversight.

23. Regulatory Failure
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One of the critical issues was the FAA’s policy of delegating
oversight authority to Boeing itself.
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Under the Organization Designation Authorization (ODA) program,
Boeing was allowed to perform much of the safety certification
process on behalf of the FAA.
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This practice raised concerns about potential conflicts of interest
and whether Boeing had too much control over the certification of
its aircraft.

24. Regulatory Failure
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The Maneuvering Characteristics Augmentation System
(MCAS) was a new flight control system introduced on
the 737 MAX. This system was implicated in both
crashes.
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Investigations revealed that the FAA was not fully aware
of the system’s operational details and the potential
risks it posed, as these were not adequately
communicated by Boeing.

25. Regulatory Failure
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Rushed Approval Process:
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Reports suggested that there was substantial
pressure to expedite the certification of the 737
MAX to compete with Airbus’s new models. This
pressure may have led to oversight lapses and a
rushed approval process without thorough
evaluation of critical systems.

26. Questions & Discussion
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Your turn.