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If you think the worst is over for Boeing since the board jettisoned the CEO, think again. Logically, you don’t drop the person in charge when progress is being made. Rather, you let them go when it becomes clear they are part of the problem, not the solution.
Now that the board has acted, we can ask if Dennis Muilenburg, Boeing’s BA, -1.35% now-departed CEO, should have realized the deep roots of the problem soon after the first 737 MAX crash in October 2018 involving Lion Air.
Equally, this is too big a tragedy to blame on just one person. Given the size of this error, the lives lost and the time it took to act, investors may want to demand some new directors as well.
The immediate storybook of the tragedy described the aircraft being flown into the ocean at high speed from low altitude while both pilots struggled to control the descent. On its face, this is a bone-chilling narrative.
As is apparent now, part of an artificial intelligence system helping run the plane’s autopilot failed to meet the test of a life-or-death AI program, which is, first, do no harm. This may have been due to inherent design flaws, faulty or malfunctioning aeronautic sensors, or inadequate pilot training. In all cases, the onus is on Boeing to insure the safety of its machines.
If the AI powering your search for a specific product on Amazon AMZN, -0.21% doesn’t help you, it’s not a big deal (although it should be to Amazon). But where life is at stake, AI must be designed to be “fail-safe.” This means when it malfunctions, it must not prevent the airplane (or automobile) from being safely piloted.
Boeing’s MCAS (Maneuvering Control Augmentation System) appeared to harm pilots’ ability to fly in certain situations. By the second crash in March 2019, this time with Ethiopian Airlines in similar flight conditions, the verdict seemed clear. The question any board will ask is: Should the CEO have seen this coming after the first crash? We can ask: Is that an unfair expectation?
A CEO is responsible for much more than just running a business. Of course this is required, but the best chief executives also have the ability to peer into the future at what lies ahead.
CEOs are never alone in this task. The role of a first-class board is to pose insightful questions. The best CEOs welcome this process as they know it improves their own thinking. Many executives and board members do this “look ahead” as a matter of instinct. They question everything from an outsider’s perspective to test if their “insiders” view is broad enough to include all important pieces of the puzzle.
Boeing’s board is full of current and former CEOs of some of America’s biggest companies as well as former senior military officials and a few of the politically well connected. Of course we don’t know what went on within the boardroom and whether they are constrained in any way by FAA nondisclosure policies.
But at the very least, the board should have been asking management very tough questions and running all kinds of “worst case” scenarios. In turn, investors should be asking them why it took so long to act and what other measure are needed to restore public confidence in Boeing.
Read: Boeing’s Muilenburg had to go after botching the handling of 737 MAX disasters, analyst says
Confidence goes beyond deciding when the 737 MAX will be safe to fly again. That decision will be in the hands of the pilots — as it should be.
Pilots have a special role in our modern aviation industry, as they are given the “final word” on every flight if that plane is safe for the mission scheduled. This approach goes back to the early days of commercial aviation when pilots were regularly ordered to fly in unsafe conditions. After too many crashes, the young industry — flying mostly “Air Mail” back then —realized it was in aviation’s best interest to put the pilots in charge of safety. That rule remains today. Pilots will have the final say on when the 737 MAX is ready to fly again, and their decision will ripple through the industry and regulators.
Read WSJ: Boeing’s New CEO to Focus on FAA Cooperation
Beyond that decision, restoring confidence could require more changes in both senior management and at the board level. At the least, the newly appointed executives need to show their awareness of the AI systems failure, and that a process is in place to insure these mistakes are not repeated. They need to return to the basics of “fail-safe” AI programs which have long been a part of the highly successful role that full-axis auto pilot flight systems have played in modern aviation.
Also read: If Boeing stock takes flight, this ETF could go along for the ride
James Schrager is a Clinical Professor of Entrepreneurship and Strategy at the University of Chicago Booth School of Business.
