Economic Liberties Calls for Boeing Conservatorship
For Immediate Release: March 23, 2020
Press Contact: Robyn Shapiro, email@example.com
Economic Liberties Calls for Boeing Conservatorship
New working paper outlines seven conditions for a Boeing bailout
Washington, D.C. – As Boeing grapples with the impact of the Coronavirus pandemic and pleads with the Trump administration for a $60 billion bailout, the American Economic Liberties Project today released “Rescue Mission: Bailing Out Boeing and Rebuilding It to Thrive,” a working paper authored by Economic Liberties’ Fellow Maureen Tkacik that describes Boeing’s decades of mismanagement and outlines the conditions regulators and legislators must impose on the company before providing any public assistance.
“Boeing needed federal intervention long before the Coronavirus pandemic brought commercial aviation to a halt. The company’s long history of showering cash on shareholders at the expense of employees, suppliers, safety, and its own long-term survival decimated its ability to carry out its core mission,” said Economic Liberties’ Executive Director Sarah Miller. “Before taxpayers throw any money at the problem of Boeing, regulators and legislators must demand swift and dramatic changes to the company’s toxic leadership, and to the defanged and defunded federal regulatory apparatus that oversees its operations.”
“Rescue Mission” outlines seven conditions for a Boeing bailout, laying out a framework for using public assistance to return Boeing to a functional, productive, and innovative state. These conditions include:
- Replacing Boeing’s Board of Directors: Boeing’s Board of Directors not only failed to take appropriate action to prevent the second crash of its 737 Max, they expanded its stock buyback program by $20 billion despite knowing that the crashes were caused by Boeing’s faulty software.
- Firing Boeing CEO David Calhoun: Calhoun has failed to take responsibility for the company’s problems, blaming his predecessor for the Board’s fixation on stock price and strongly implying that the 737 Max crashes would have been avoided by American pilots. Allowing Calhoun to stay at the helm will only entrench the shareholder-focused decision-making that has destroyed the company.
- Prohibiting layoffs, buybacks, dividends, bonuses, supplier-squeezing, and stock-based compensation: Boeing’s efforts to “return” 100 percent of its free cash flow to its shareholders in the form of dividends and stock repurchases, which totaled more than $65 billion over the last decade, were destructive. Any Boeing bailout must prioritize the stakeholders that have been shortchanged over the past two decades of mismanagement: labor, safety, and the supply chain that was already devastated by the shutdown of 737 Max production before the coronavirus hit.
- Returning Boeing management to Seattle and reviving the company’s “working together” culture: For 20 years, Boeing leadership systematically undermined the company’s culture by forcing a series of arbitrary reorganizations at the expense of safety and labor standards. As a condition of federal assistance, Boeing will need to spend money to “insource” certain functions and begin rebuilding its workforce.
- Spending 10% of revenues on research and development and hire back experienced engineers to facilitate: Boeing must invest in its own future — with a focus on building a radically more energy-efficient aviation and aerospace industry. The company must also aggressively recruit back engineering talent and charge them with leading a rapid transition to low-carbon aviation.
- Establishing a systemic risk council to regulate the aviation industry: Decades of funding cuts to the Federal Aviation Administration have allowed Boeing to effectively regulate itself. Convening a systemic risk council – staffed by labor leaders and industry experts, and charged with determining whether a company’s business model undermines its safety and reliability – could facilitate the flow of information and safety best-practices within the aviation community.
- Structuring the government bailout as a conservatorship with a minimum ten-year horizon: Any structure in which the government provides financing to Boeing should be organized in the form of conservatorship. Boeing’s return to health will be slow and challenging. Regulators must ensure the company does not fall prey to the financiers who left it so ravaged.
The paper also builds on a framework Economic Liberties released last week for structuring a bold government recovery program that directly supports the workers, small businesses and communities impacted by the pandemic, and ends Wall Street’s ability to undermine the economy in return for cash.
“Rescue Mission: Bailing Out Boeing and Rebuilding It to Thrive,” is available here.
Learn more about Economic Liberties here.
Economic Liberties works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. AELP believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.