Boeing's Corporate Governance Crisis
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Case Details:
Case Code : CGOX003
Case Length : 9 Pages
Period : 2004
Pub Date : 2004
Teaching Note :Not Available
Organization : Boeing
Industry : Aerospace
Countries : Global
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
Corporate History
Bill Boeing, who had already made his fortune in Washington real estate, built his first airplane in 1916 with naval officer Conrad Westervelt. His Seattle company, Pacific Aero Products, changed its name to Boeing Airplane Company the next year. During WWI, Boeing built training planes for the US Navy and began the first international airmail service (between Seattle and Victoria, British Columbia)...
The Pentagon Scandal
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Boeing had been aggressive in the defense market, to counter sagging sales of its commercial airliners (particularly the 767s) due primarily to competition from Airbus.
During the late 1990s, Boeing had turned increasingly toward government contracts to make up for its declining position in the commercial market.
In a major move in this direction, it acquired defense contractor McDonnell Douglas in 1997. Government contracts made up approximately half of the company's revenue. It was in February 2001, that Boeing initially proposed to provide the US Air Force with reengineered 767s to be used as refueling tankers...
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The Road Ahead
As the Pentagon issue attracted wide publicity in the media,
Condit realized the need for urgent action. By firing his CFO, Condit hoped to
deflect mounting criticism in Washington over the methods Boeing had used to win
lucrative defense contracts.
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But some analysts felt Condit had conveniently got rid of a
key rival, who had always been viewed as a potential successor. Unfortunately for Condit, things continued to worsen.
The Board held several meetings during November 2003, where the Sears matter and the company's relationship with the Pentagon were discussed.
Platt announced, "Phil said to us, 'If you think it would be useful for me to step aside, I would be willing to do that.
That was not an offer we jumped at. But over the course of many board meetings we decided to take him up on it."... |
Exhibits
Exhibit I: Financial Highlights
Exhibit II: Geographic Operations
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