Topline
Boeing's board of directors approved Friday that it would pay hundreds of millions of dollars to the company and implement new safety measures. This is the final settlement of a lawsuit filed by shareholders against Boeing. The suit began after two fatal crashes of its latest passenger jet, killing hundreds and forcing regulators worldwide to ground the plane.
After a Federal Aviation Administration test flight, a Boeing 737 MAX aircraft lands at Boeing Field... in Seattle, Washington, June 29, 2020. AFP via Getty Images
The Key Facts
A Delaware state judge has yet to approve the proposed settlement, which comes more than one year after New York State Comptroller Thomas P. DiNapoli and Fire and Police Pension Association of Colorado sued Boeing's directors. According to Friday's DiNapolis office copy, the settlement included the payment of $237.5 million by members of Boeings board to the company. This amount will be paid directly from directors insurers. Boeing will also employ an ombudsperson as a neutral third party to address any concerns of employees working with the Federal Aviation Administration. The board will also add a member with aviation/aerospace and engineering experience. It is expected that at least three members of the board have these backgrounds. According to the settlement agreement, the defendants denied and will continue to deny any wrongdoing. In a statement, Boeing stated to Forbes that it had already taken significant steps to strengthen and reinforce our commitment to safety in aviation. The settlement will build on these actions by adding oversight and governance reforms.
Important Quote
This settlement will send a clear message to directors that they cannot sacrifice public safety or other mission-critical risk, DiNapoli, who oversees New York's pension fund for government workers, stated in a Friday statement.
Important Background
Boeing's first 737 MAX was in service in 2017. This latest version of the best-selling plane in the company's history flew in 2017 and is still in use today. The new plane was grounded around the world and deliveries were halted following the March 2019 crash in Ethiopia of a MAX plane in Ethiopia. This was five months after an Indonesian crash that killed 346 people. The FAA finally cleared the MAX for service in late 2018. But DiNapoli and the Colorado pension plan argued the disaster was linked to a broader lack of attention to safety by board members, who they claimed breached their fiduciary duties to the company by dismantling Boeings lauded safety-engineering corporate culture in favor of what became a financial-engineering corporate culture. The two shareholders served as lead plaintiffs in a lawsuit filed against the board on Boeings behalf, an arrangement known as a derivative lawsuit.
