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Boeing will pay $200 million (£177.5 million) in response to claims that it misled investors about two fatal 737 Max crashes.
The aerospace giant and its former CEO Dennis Muilenburg were accused of misrepresenting safety-related risks by the US stock market watchdog.
Boeing is “putting profits over people” in an effort to enhance its brand, according to the Securities and Exchange Commission (SEC).
The 737 Max was grounded for about 20 months after two crashes that claimed 346 lives.
Mr. Muilenburg will also pay a $1 million fine as part of the agreement.
In times of crisis and tragedy, public companies and leaders must provide the markets with thorough, accurate, and honest disclosures, according to Gary Gensler, chairman of the Securities and Exchange Commission. He continued by saying that Mr. Muilenburg, the CEO of Boeing, “failed in this most basic obligation.”
Furthermore, neither Boeing nor Mr. Muilenburg confirmed nor denied the regulator’s findings, according to the SEC’s statement.
In its reaction to the SEC’s announcement, it would never forget the victims of Ethiopian Airlines Flight 302 and Lion Air Flight 610 and that as a result, major changes had been taken across the board at the company.
The airline said that fundamental changes had enhanced its transparency, quality, and safety culture. In addition, the airline’s safety systems and oversight of safety issues have been strengthened as a result of these modifications.
According to the SEC, a fund will reportedly be formed for investors who lost money between 2018 and 2019 as a result of incorrect information.
This town is primarily symbolic. Due to the 737 Max scandal, Boeing has already suffered tens of billions of dollars in losses; an additional $200 million won’t even be visible.
The SEC will have the chance to hold Boeing and its former CEO Dennis Muilenburg accountable for deceiving investors by making assurances about the safety of the plane even though he was previously aware of a serious problem.
It’s unlikely that this will have a substantial impact on Boeing. The company’s reputation has already suffered severe harm as a result of the controversy. The organization is currently working very hard to rehabilitate its reputation and regain the confidence of customers and investors.
The acquisition won’t have severe financial effects on Mr. Muilenberg personally. When he left the company, he received compensation and benefits totaling more than $60 million. However, the SEC’s choice to charge him personally sends a clear message.
Some claim that the former leader has not received adequate punishment for his part in the problem. But he has received explicit blame for this incident.
Air crashes involving Boeing
On October 29, 2018, 13 minutes after takeoff, Lion Air Flight 610, which had departed from Jakarta’s Soekarno-Hatta International Airport, crashed into the Java Sea, killing all 189 aboard.
About five months later, Ethiopian Airlines Flight 302, another Boeing 737 Max heading to Kenya, crashed six minutes after taking off from Ethiopia’s capital city Addis Abeba. The 157 people on board perished.
The Boeing 737 Max’s “Maneuvering Characteristics Augmentation System” (MCAS) was identified as the cause of the crashes.
After the initial incident, Boeing and Mr. Muilenburg “told the public that the 737 Max was safe to fly, even though they knew that MCAS constituted an ongoing airplane safety risk,” according to the SEC.
In response to the crashes, Boeing has spent more than $20 billion, including payments to the relatives of the deceased.
In response to the incidents, the US Congress passed new legislation that alters how the nation’s aviation authority, the Federal Aviation Administration (FAA), certifies new aircraft.
Several trials will likely start early next year to address unsettled issues.