Does compromising safety lead to investor returns?
- Zoe Mejia Ricart
- Jun 6
- 4 min read
Zoe Mejia Ricart
Finance Division
Is the Boeing 737 MAX scandal an isolated incident or the result of more than 25 years of prioritising profits over customer safety?
Founded in 1916, Boeing set out to transform the aviation industry through innovative design and a commitment to safety. Over time, however, the company experienced leadership changes that shifted corporate priorities away from these founding ideals. In 2003, Harry Stonecipher was appointed president and chief executive, marking a cultural shift from an engineering firm to “running like a business” (George, 2024). This transition directly contributed to issues that later emerged with the Boeing 737 MAX. Stonecipher proceeded by disregarding recommendations of Boeing’s head of commercial aviation regarding the development of a new aircraft and instead decided to “maximise profits from older models and use the cash to buy back Boeing stock” (George, 2024). Subsequent CEOs adopted this approach, shifting strategic focus from operational performance to financial targets. Particularly, between 2013 and 2019, the company bought back shares amounting to $ 43 billion (Mundy, 2024); the goal of increasing share price was achieved at the cost of product investment.
By 2011, facing increasing competitive pressure from the Airbus A320neo, Boeing launched a 5-year programme to upgrade the 737 into the 737 MAX instead of developing a new aircraft. The company’s decision stems from the cost-saving benefits, as airlines adopting the Boeing 737 MAX would avoid the expense of retraining pilots and updating training manuals.
A key change was the implementation of MCAS (Manoeuvring Characteristics Augmentation System), a software system that was not disclosed to the FAA (Federal Aviation Administration). MCAS could override pilots' inputs without their knowledge, ultimately contributing to the 2018 Lion Air and 2019 Ethiopian Airlines crashes (Office of Public Affairs, 2021). Both crashes resulted in the loss of all passengers and crew members on board. Boeing, however, reassured customers that “...the 737 MAX is as safe as any airplane that has ever flown the skies.” (SEC, 2022) This claim proved false as its CEO, Dennis A. Muilenburg, was aware of MCAS’s safety issues. Additionally, the company initially attributed the crashes to “pilot error and poor aircraft maintenance”. (SEC, 2022) Despite the first crash in 2018, no immediate corrective action was taken, and only after the second incident was the 737 MAX officially grounded.
Boeing entered into a DPA (Deferred Prosecution Agreement) under several conditions, the most significant requirement being to strengthen its compliance programme. Specifically, the firm had to meet with the Fraud Section at least quarterly and submit yearly reports regarding the status of its remediation efforts. Thus, ensuring the effective detection and prevention of violations of US fraud laws.
Former CEO Dennis A. Muilenburg was charged with making materially misleading public statements following the crashes, in violation of antifraud provisions of federal securities laws. Boeing therefore paid a penalty of $ 243.6 million to authorities, $ 500 million in compensation to victims’ families, and $ 1.77 billion to airlines for financial losses.
The overriding question remains: did Boeing’s profit-maximising choices actually generate returns for its investors? From a reputational and financial standpoint, the outcome suggests otherwise. Boeing lost credibility with investors and customers, as reflected by four consecutive years of losses totalling $ 14.6 billion (Mundy, 2024) and a drop in market value of roughly $ 62 billion in 2019.
Another indicator is its declining competitive position. Boeing has lost significant market share to Airbus, which has outperformed it in the single-aisle aircraft segment and has had a 157% increase in share price throughout the last decade. Collectively, over the past two decades, Boeing’s strategic judgment has cost shareholders an estimated $ 87 billion, with the most noticeable erosion starting in 2018.
The financial strain caused by the grounding of the 737 MAX led to significant sums paid in compensation to airlines; they set $ 4.9 billion in 2019 for this purpose (George, 2024). In Q1 of 2026, the company’s reported inventories amounted to $ 87.2 billion and gross debt of $ 47.1 billion (Boeing, 2026), highlighting the long-term financial consequences of its earlier decisions.
Following the scandal, Boeing experienced a partial recovery between 2020 and 2023. Its shares fell by 35.4% in 2020 but then rose by around 33.4% in 2023 (Boeing (BA) - Stock Price History, 2019). However, this progress was undermined in 2024 when a door plug blew out of a 737 MAX 9 during an Alaska Airlines flight. Once again, the company suffered further losses of approximately $ 11.8 billion, and its stock declined by 30% that same year.
Boeing’s history in recent decades has been marked by scandals and flawed leadership. Nevertheless, the company continues to be a key supplier to the US military and holds strategic importance within the global economy. It is imperative that the company restores the culture of engineering excellence that once defined it and rebuilds what years of weakened company priorities have caused. Boeing’s case challenges the notion that firms can trade safety for profitability without repercussions. For investors, regulators, and corporate leaders alike, it reinforces a fundamental principle: sustainable returns are built on trust, accountability, and product integrity, not on shortcuts.
References
Boeing. (2026). Boeing Company - Investors - Reports. Boeing.
Boeing (BA) - Stock price history. (2019). Companiesmarketcap.com.
Boeing documents show workers had 737 Max concerns they hid from FAA. (2020, January 10). CBC. https://www.cbc.ca/news/business/boeing-737-max-1.5422623
Boeing’s misplaced strategy on the 737 MAX. (2019, December 18). The Economist. https://www.economist.com/leaders/2019/12/18/boeings-misplaced-strategy-on-the-737- max?utm_medium=cpc.adword.pd&utm_source=google&ppccampaignID=18151738051&ppcad ID=&utm_campaign=a.22brand_pmax&utm_content=conversion.direct
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George, B. (2024, January 24). Why Boeing’s Problems with the 737 MAX Began More Than 25 Years Ago. Harvard Business School. https://www.library.hbs.edu/working-knowledge/why-boeings problems-with-737-max-began-more-than-25-years-ago
Miller, M. (2022, September 23). 737 Max: Boeing to pay $200m over charges it misled investors. BBC News. https://www.bbc.com/news/business-63003632
Mundy, S. (2024, July 10). Boeing’s deadly scandal holds lessons for investors. Financial Times. https://www.ft.com/content/b89ef6be-d02f-4117-aa18-55fa2d5db6b5?syn-25a6b1a6=1 Neal, W. (2021, January 8). Boeing to Pay $2.5 Billion for Fraud After 737 Crashes. OCCRP. https://www.occrp.org/en/news/boeing-to-pay-25-billion-for-fraud-after-737-crashes Office of Public Affairs. (2021, January 7). Boeing Charged with 737 Max Fraud Conspiracy and Agrees to Pay over $2.5 Billion. U.S. Department of Justice.
https://www.justice.gov/archives/opa/pr/boeing-charged-737-max-fraud-conspiracy-and-agrees pay-over-25-billion?bm
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SEC. (2022). SEC.gov | Boeing to Pay $200 Million to Settle SEC Charges that it Misled Investors about the 737 MAX. Www.sec.gov. https://www.sec.gov/newsroom/press-releases/2022-170
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