Example: Boeing (NYSE: BA) — decline linked to stakeholder mismanagement
Company: The Boeing Company (listed on the NYSE under ticker BA)
Boeing’s 737 MAX crisis revealed significant shortcomings in its management of stakeholders — especially passengers (public safety/trust), regulators, airline customers and employees/engineering culture.
Following two catastrophic crashes (2018–2019), regulators globally grounded the plane, resulting in a significant breakdown in trust and disruption of deliveries and cash flow.
In stakeholder terms:
Customers (airlines) lost confidence, and operations were severely disrupted. Regulators stepped up the scrutiny and placed restrictions. The public/passengers lost trust in safety and transparency. There was high pressure within engineers/employees and sometimes cultural issues between quality and speed/cost (also referred to elsewhere as part of the governance/leadership issue).
Evidence of income/revenues declining. Boeing said that its 2019 financial results were also negatively affected by the 737 MAX grounding: material declines in revenue and earnings were reported, and its 2019 results remained “significantly impacted.”
Reuters reported Boeing posted its first annual loss in two decades as the cost of its 737 MAX neared ~$19 billion.
For example, Boeing shares dropped significantly in 2019 when the crisis happened, with the stock reported at the time to have reduced ~23% since the Ethiopian Airlines crash in March 2019 (one of the two MAX crashes).
Why is this a stakeholder-mismanagement case. This case highlights how mismanagement of stakeholders can have a direct adverse impact on financial performance:
When a company loses customers’ and regulators’ and the public’s trust in it, it has to suffer grounding/halts, compensation, legal costs and reduced deliveries– which translates to less revenues and profit. It is then put back on the market in the form of a higher operational, legal and reputation risk – aka lower share price.
Sources:
- Reuters (annual loss; MAX costs near $19bn). Reuters
- Business Insider (share price decline since March 2019 crash). markets.businessinsider.com
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