Market Commentary

Boeing CEO Dave Calhoun Faces Senate Scrutiny Amid Safety Concern

Namra Pervaiz
20 Jun 2024 · 2 minutes read

In a contentious Senate hearing on Tuesday, Boeing (BA:US) CEO Dave Calhoun faced intense criticism over the company’s safety record. This hearing comes in the wake of two fatal 737 MAX crashes and a recent mid-air emergency, with Calhoun apologizing to the victims' families and accepting responsibility.

Senator Josh Hawley criticized Calhoun's compensation, which rose to $32.8 million in 2023, and questioned why he hasn’t resigned. Calhoun defended his tenure, highlighting actions taken to address safety issues, despite plans to retire by the end of the year.

Senator Richard Blumenthal urged the Justice Department to prosecute Boeing for compliance failures, citing overwhelming evidence. The Justice Department has until July 7 to decide on prosecution, after finding that Boeing failed to implement a proper compliance program following the crashes.

Calhoun acknowledged that the recent Alaska Airlines door plug incident was due to a manufacturing defect. He also accepted responsibility for the software issues that led to the 2018 and 2019 crashes in Indonesia and Ethiopia, which killed 346 people. Despite these admissions, Boeing’s chief engineer, Howard McKenzie, downplayed concerns about incorrectly tightened fasteners on 787 jets, asserting they were safe.

A new whistleblower, Sam Mohawk, reported systemic issues with nonconforming parts at Boeing’s 737 factory, further intensifying scrutiny. The National Transportation Safety Board (NTSB) and the Justice Department are investigating the recent Alaska Airlines incident, where key bolts were missing.

Boeing stated it is reviewing these claims and has increased inspections and the size of its quality team since 2019. The company delivered a quality improvement plan to the FAA, following an order to address systemic quality-control issues.

Recent congressional trades saw Bill Keating and Blake Moore sell significant shares in February and January, respectively. Boeing’s stock closed 1.9% lower at $174.99 on Tuesday.