Boeing’s board on Friday settled a lawsuit brought by major institutional shareholders that alleged the directors and top executives, including CEO Dave Calhoun, failed to adequately monitor the safety of the 737 MAX before the first fatal crash in 2018 and in the months leading up to the second crash in 2019.
Since the shareholders filed suit on behalf of the company, the insurers of the board and top executives will pay the settlement amount of $237.5 million, less the attorneys’ fees and expenses, to Boeing.
As part of the settlement, Boeing has agreed to enhance its corporate oversight in various ways. It will create an ombudsperson program to handle internal complaints by the engineers who work at Boeing on behalf of the FAA. And within one year it will appoint a new board member with experience in aviation safety.
Lawyers for the lead plaintiffs representing Boeing stockholders — New York State Comptroller Thomas DiNapoli, as trustee of New York State’s pension fund, and the Fire and Police Pension Association of Colorado — reviewed more than 44,000 internal documents turned over by Boeing.
“We sued Boeing’s board because they failed in their fiduciary responsibility to monitor safety and protect the company,” Di Napoli said in a statement. “It is our hope, moving forward, that the reforms agreed to in this settlement will help safeguard Boeing and the flying public against future tragedy.”
Boeing in a statement said the proposed settlement builds on actions it has already taken since the crashes and offers “additional oversight and governance reforms that will further advance safety.”
The settlement comes after presiding Judge Morgan Zurn, vice chancellor of the Delaware Court of Chancery, in September criticized the board’s handling of the two fatal accidents in unusually sharp language.
Zurn ruled then that the case could proceed, based on allegations that the directors’ failed “to establish a reporting system for airplane safety” and turned “a blind eye to a red flag representing airplane safety problems.”
Her ruling also bluntly asserted that “to preserve its image … The Board publicly lied about if and how it monitored the 737 MAX’s safety.”
Zurn cited a series of interviews Calhoun gave to The New York Times, The Washington Post and The Financial Times after the crashes that contained, as itemized in the shareholder suit, a series of misleading statements about how active the board had been.
In a motion responding to that ruling, Boeing’s lawyers asked the judge to clarify the accusation of lying and claimed the suit had misrepresented Calhoun’s comments to the press.
In the settlement, Boeing’s board admits no liability or wrongdoing.
For their part, the plaintiffs state that they “ continue to believe (their claims) have legal merit,” but decided to settle because there are “substantial risks to the successful resolution of any litigation.”