At contentious annual meeting, Boeing CEO defends 737 design

Washington Post and Associated Press

CHICAGO — At the Boeing Co.’s annual meeting for shareholders, one investor challenged CEO Dennis Muilenburg to explain why the company built the 737 MAX with a single sensor that was vulnerable to failure.

“That should have gone through some sort of internal review or something,” the Boeing shareholder said at the meeting. His name could not be confirmed.

“We don’t have to have 300-plus people die every time to find out that something isn’t reliable,” he said.

Boeing’s CEO and board of directors confronted difficult questions from investors and the media on Monday, the first time since two crashes of the 737 MAX jet threw the company into chaos. Speaking to a half-empty auditorium in the Field Museum, Muilenburg tried to reassure investors that the company takes safety concerns seriously and is working with regulators to update the technical features of the plane that contributed to both accidents.

“When it comes to safety, there are no competing priorities,” Muilenburg said at the meeting.

After the annual meeting, Muilenburg took reporters’ questions at a news conference for the first time since accidents involving the Boeing 737 MAX in Indonesia and Ethiopia killed 346 people and plunged Boeing into its deepest crisis in years.

Muilenburg said that Boeing followed the same design and certification process it has always used to build safe planes, and he denied that the MAX was rushed to market.

“As in most accidents, there are a chain of events that occurred,” he said, referring to the Lion Air crash on Oct. 29 and the March 10 crash of an Ethiopian Airlines 737. “It’s not correct to attribute that to any single item.”

Muilenburg took six questions from reporters, including whether he will resign — he has no intention of doing that — and left as reporters persisted, including one who pointed to the deaths of 346 people and urged the CEO to take more questions.

The shareholders meeting and news conference came as new questions have arisen around the MAX, which has been grounded worldwide since mid-March.

Southwest Airlines said over the weekend that Boeing did not disclose that a safety feature on the Renton-built 737 — an indicator to warn pilots about the kind of sensor failure that has been linked to both accidents — was turned off on the MAX planes it bought. Southwest said it found out only after the first crash of the Lion Air MAX.

Published reports, meanwhile, said that federal regulators and congressional investigators are examining safety allegations relating to the MAX that were raised by about a dozen purported whistleblowers.

And the pilots union at American Airlines said Boeing’s proposal for additional pilot training on the MAX doesn’t go far enough. For instance, the union wants, at a minimum, mandatory additional training to include video demonstrations of how to respond to failures of systems on the plane.

“Not every pilot that goes out there and flies is a Boeing test pilot,” said Dennis Tajer, a 737 pilot and spokesman for the pilots’ union at American.

The annual meeting came six months to the day since the Lion Air crash and on the same day that the Federal Aviation Administration convened a week-long meeting in Seattle of aviation regulators from around the world to review the FAA’s certification of MCAS, a key flight-control system on the MAX.

A spokesman said the FAA will share its technical knowledge with other regulators, but their approval is not needed before the plane resumes flying in the U.S.

In defending Boeing, the CEO stuck to a script that the company “owns” some responsibility for improving the safety of the 737 MAX. But to the frustration of some shareholders in attendance, he stopped short of accepting that the plane was built with any design flaw. He repeatedly said the crashes were caused by a “chain of events,” of which Boeing’s software and its sensors were only one part.

That explanation is being challenged by family members of the victims in the two crashes, some of whom stood in the rain outside the museum, holding umbrellas and placards with photos of people who died.

“Their response has been a farce,” said Tarek Milleron, the uncle of a 24-year-old American woman who died in the Ethiopian Airlines crash in March. “It’s a hollow denial. They talk about chains of events in accidents, but we need to know the chain of events inside Boeing that led to these crashes.”

Milleron said he traveled to the meeting from his home in Berkeley, California, to stand outside and draw attention to the lives of the 346 people lost in the crashes.

Muilenburg didn’t say how soon the 737 MAX could fly again. He said the company is working on a software update for the safety problem and is coordinating with the FAA to prepare for a formal certification flight. Boeing hopes that will pave the way for a worldwide grounding of the MAX jets to be lifted by global regulators.

Boeing’s managers and board of directors have faced growing pressure in the weeks since the second crash. Glass Lewis, an investor advisory group, said in a note to clients last month that the 737 MAX crashes “indicate a potential lapse in the board’s oversight of risk management” and recommended that one director, former American Airlines CEO Lawrence Kellner, be voted off the board for his role overseeing the audit committee.

At the meeting, shareholders voted to keep Kellner and all other current directors who were up for re-election. Nikki Haley, former ambassador to the United Nations and former South Carolina governor, was officially added to the board after being nominated by the company in February.

Boeing paid each of its directors more than $300,000 in cash and stock last year. The group includes the CEOs of Duke Energy and biotech firm Amgen, as well as retired Navy Adm. Edmund P. Giambastiani and Caroline Kennedy, the former U.S. ambassador to Japan and daughter of John F. Kennedy.

The board approved a 2018 pay package for Muilenburg of about $23.4 million in cash and stock.

The independence of the directors has been questioned. Muilenburg holds the dual role of CEO and chairman of the board, an increasingly rare position of power for a leader of a large public company that governance experts say can undermine the board’s ability to hold him in check. Muilenburg and two other directors also serve on the board of Caterpillar, an arrangement that could limit the criticism those directors give Muilenburg at Boeing.

At the meeting, Boeing shareholders rejected a proposal to create a separate independent chairman position. Investors also voted against measures that would force the company to reveal more details about its government lobbying.

One investor who spoke at the meeting, whose name could not be confirmed, expressed concern that Boeing’s design process does not have enough outside oversight.

“What are you doing to ensure that there is an outside external person or people looking in who have no interest in the outcome?” asked the woman, who described herself as someone who frequently travels on planes with her friends and family.

Muilenburg said the company relies on several independent checks in its process for building planes. He defended Boeing’s relationship with the FAA, which has recently faced criticism that it cedes too much of the plane certification process to Boeing.

“That is a way for the FAA to leverage the deep technical expertise of our team while maintaining the independent review that’s required,” he said.

After the hour-long shareholder meeting, Muilenburg fielded questions from the media for about 16 minutes before walking out of the room.