MASTERS OF BUSINESS ADMINISTRATION

MGT6211: BUSINESS ETHICS AND LAW

MARCH 2023 SESSION
CASE STUDY

BUSINESS ETHICS MGT6211

Module Name Module Code
AND LAW

Module Leader Harpajan Singh

Student Name Lee Seng Kiat Student ID I22023835

I certify that this assignment is my own work and where materials have
been used from published sources, they have been properly
acknowledged. I understand I will receive a mark of 0% for this
assignment and may receive further penalties if the content is found to
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Student’s
Declaration
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Date: _24/04/2023_________________________________________
MGT6211E – BUSINESS ETHICS AND LAW Student ID: i2022385
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Content Pages
1.0 Introduction---------------------------------------------------------------------------------------3
2.0 Question 1-----------------------------------------------------------------------------------------4
2.1 Sell before proper testing--------------------------------------------------------------4
2.2 Irresponsible attitude for first crash---------------------------------------------------4
2.3 The Ethics of Technology and Engineering-----------------------------------------4
2.4 Moral Responsibility-------------------------------------------------------------------5
3.0 Question 2-----------------------------------------------------------------------------------------5
3.1 Push the 737 Max on sale in a short period------------------------------------------5
3.2 Sell the plane without training on the new system----------------------------------5
3.3 Selling safety as an “add on feature”-------------------------------------------------5
4.0 Question 3-----------------------------------------------------------------------------------------6
4.1 Shareholders-----------------------------------------------------------------------------6
4.2 Customers--------------------------------------------------------------------------------6
4.3 Employees--------------------------------------------------------------------------------
6
4.4 Suppliers----------------------------------------------------------------------------------
7
5.0 Question 4-----------------------------------------------------------------------------------------7
5.1 Passengers--------------------------------------------------------------------------------7
5.2 Boeing Employees----------------------------------------------------------------------7
5.3 Investors and Shareholders------------------------------------------------------------8
5.4 Regulars and Government Authorities-----------------------------------------------8
5.5 General Public---------------------------------------------------------------------------8
6.0 Question 5-----------------------------------------------------------------------------------------8
6.1 Business Ethics--------------------------------------------------------------------------8
6.2 Consequentialist Theories of Ethics--------------------------------------------------9
6.3 Non-consequentialist theories---------------------------------------------------------9
7.0 Question 6-----------------------------------------------------------------------------------------9
7.1 Strengthen Ethical Culture-------------------------------------------------------------9
7.2 Enhancement Communication Channels-------------------------------------------10
7.3 Implementation of Ethical policies and procedures-------------------------------10
7.4 Develop and implement corrective system-----------------------------------------10
7.5 Ethical Decision Making-------------------------------------------------------------10
8.0 Conclusion---------------------------------------------------------------------------------------11
9.0 References---------------------------------------------------------------------------------------12

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1.0 Introduction

The Boeing 737 airplane is famous worldwide aircraft market, the first flight of Boeing 737
in 1967. They have kept revamping and innovating the Boeing 737 in engine and design for
the past 50-60 years. In 2010, a competitor developed a new Airbus A320neo with more
efficient engine performance. Airbus A320neo giving a big impact of the Boeing 737 sales
and market starting to compare A320neo with 737. A320neo threat 737 in the worldwide and
government department since they started to switch the order from 737 to A320neo. In order
to grab back the market and win a business order, Boeing came out with a whole new idea of
Boeing 737 Max with bigger size of airplane, new engines, and latest software. This Boeing
737 Max family developed in a very short period and pilots were only required to take a brief
tablet-based course instead of training in a simulator. However, Boeing 737 Max brings
significant sales order increment effect and brand name of Boeing to the world.

On 29 October 2018, an Indonesian Lion Air Boeing 737 Max plane crashed into the sea just
13 minutes after its departure. This crash took 189 people’s lives, and this incident happened
on a brand new 3 months of Boeing 737 Max which had lodged 800 hours of flight time.
After the crash, Boeing launched an upgrade on the software for the plane’s automated
function. In a meeting with Boeing, pilots doubted the software since the software did not
require any training or even talked about the software functionality. Boeing replied with the
reason of the software can be automated function and they want influenced and overloaded
the pilot with the information. On 10 March 2019, there is another Boeing 737 Max crashed
in Ethiopia and this incident same kind of malfunction happened in Indonesia. After these
two-crash incidents, there are some reports and findings on Boeing 737 Max model. The final
report showed that the new anti-stall software MCAS error resulting in a warning light did
not work and failed to provide sufficient information to pilot to handle the flight control
system. Boeing defaulted to the findings and changed the CEO of the company. This incident
shows the method of handling problems and critical issues by Boeing company.

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Questions for Discussion

2.0 Question 1: Identify the ethical issue of problem.

2.1 Sell before proper testing.

Boeing developed the 737 Max in a very short period, they didn’t do proper or full testing on
the plane before they started selling to the market. Boeing behaved unethically in approving
the plane for sale before it was stable. As an aircraft maker, they should ensure the stability of
the airplane with full control of it. Boeing pushed the 737 Max to the market urgently to grab
back the market share allocation since the A320neo occupying the business deal. They even
added in the anti-stall system software without feeding the pilots with sufficient information
of the software with training and manual handbook about the system. Boeing was supposed
to provide stimulator training to the pilots so that they can experience the operation and
application of the latest 737 Max.

2.2 Irresponsible attitude for the first crash

The crash of Indonesia Lion Air happens, and Boeing just upgrade the software for 737 Max
without giving a proper answer and reason of this incident. This action shows that Boeing is
an irresponsible company and avoid the responsibility from the problem occurred. This
suppose is a responsibility of the airplane maker to ensure the safety of the passengers and
maintain the stability of the airplane to avoid any critical incident happen. They should
investigate and identify the problems of 737 Max and announce to the public with the facts.

2.3 The Ethics of Technology and Engineering

Technology ethics mean the moral of the application of technology toward public, it should
concern about the risk management and the process of the technology. Boeing’s engineers
should be concerned about the new technology application and process will cause any
harmful action to the people. Boeing engineers should identify the defects of the new
software and inform management immediately without any delay. Technology can bring
unsafe and threatening to the people if engineer didn’t examine the software completely,
especially this software is used on the airplane software. Engineer responsibility is to protect
“safety, health, and welfare” to the public.

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2.4 Moral responsibility

Boeing have the ability and obligation to rectify the defect of 737 Max, but they didn’t solve
the problem when the first crash in Indonesia. Boeing found the error of the software and just
resolved it by upgrading the system. They are supposed to inform the airline who bought the
737 Max and give the proper training to the pilots immediately. Boeing covered their mistake
by ignoring the incident and pushing the responsibility to the airline. They disregard the
critical issue of their own airplane and fail to recover it instantly. This led to a total of nearly
350 innocent lives taken by irresponsible actions.

3.0 Question 2: List the facts that have the most bearing on the decisions taken by Boeing
with regard to the safety of the planes.

3.1 Push the 737 Max on sale in a short period.

Boeing ignores the safety of the planes and pushes the 737 Max on sale in a short time. This
shows Boeing putting profit over safety to rush the 737 max into service. Boeing is supposed
to run a full testimonial and application before being put into market. Engineers might
overlook the safety of the planes since the time given is limited. Boeing also have a good
relationship with the regulators to permit Boeing to rush the 737 Max. Boeing pushed
production to win the business deal and gain a competitive advantage.

3.2 Sell the plane without training on the new system.

Boeing designed an automated software system called Maneuvering Control Augmentation

System (MCAS) which did not include this MCAS training on pilots’ manual. Boeing
assumes the software can work in the background perfectly without pilot control. There did
not even have any manual book or guidance of the MCAS in the flight manual and pilot
training made it more problematic for flight crews to response on it. According to the internal
message, the flight stimulator for max was used for training on the pilot who had not
previously flown a 737 airplane. Mean the pilot for the stimulator doesn’t have any
experience on the 737.

3.3 Selling safety as an “add on feature”

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The Boeing 737 Max caused an error on the warning light function, this problem was found
out from the crash incident. Surprisingly Boeing is taking this as an advantage and sells this
safety issue as an “add on feature”. This shows that Boeing is considering safety is excluded
in the airplane and sell it separately. This is a defect of the airplane, but Boeing considers it as
an additional function for sale. Safety of an airplane should be considered as the top priority
for airplane makers, they must ensure that airplane is made without any design or
manufacturing defects.

4.0 Question 3: Identify the stakeholders affected by the actions of Boeing.

4.1 Shareholders

The Boeing 737 crash incident severely affected the company’s sales, profit, reputation, and
position in the global market. 737 Max crises have cost about $20 billion for stop selling 737
Max, compensate $2.5 billion to the victims by the U.S. government, fines, and compensation
to airlines. Boeing share price drop almost 23% from the 2 crash incidents. Shareholders are
facing company loss and lawsuits by concealing the safety of 737 Max. A significant loss of
shareholder equity from the action of Boeing and it also affected the sustainability of the
company financial. Boeing lost the competitive advantage and market confidence in the
company, the decrement of company image cost a long-term damage.

4.2 Customers

The Boeing crash crisis brought a big impact on their airline customers who bought 737 Max,
they force to temporary stop the Boeing 737 model service. This action affected the airlines
sales and profit, passenger loyalty and cost of shortage of airplane to continue provide
services to the passengers. Example of Southwest Airlines the most-loyal customer of
Boeing, they cancelled thousands of flights and suffer the huge damages from the 737 Max
crash incidents. Southwest Airlines is unable to add a new supplier for the airplane
immediately and pacify their customers with any flight replacements. Boeing’s customers
will be affected since they need to readjust the future action plan, recover the loss of profit
and customers loyalty from the flight cancellations.

4.3 Employees

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Boeing’s employees feel sadness after they heard about the 2 crashes happen, they are
pushing to assembly the 737 Max airplane in rush. All the employees feel sympathy and
emotion for the victims and their families. For the new hired staff started to feel anxiety lost
the job due to the closure of the 737 Max production. Older workers worry about the
affection of the wages, bonus, and retirement fund since company share has fallen
dramatically. Boeing employees will lose confidence in the company’s future direction,
career path and company sustainability. The reduction of employee spirit will affect company
performance and impact on the market competitive advantage since employees is one of the
most value assets of a company.

4.4 Suppliers

The Boeing crash incident affected the supply chain, suppliers are one of the parties which
were involved. Many Boeings’ supplier share price fell due to reducing Max 737 order and
temporarily closure of the production line. Example of Boeing’s largest suppliers Kansas-
based Spirit AeroSystems share drop 3-5% by the extension of pause production of 737 Max.
Suppliers need to figure out the storage of the supplies which is challenging due to the size of
the supplies is bulky and huge. Suppliers are also forced to cut jobs and reduce the workers to
help the company finance and prolong the sustainability of the organization.

5.0 Question 4: Explain what each affected person would want you to do about the issue.

5.1 Passengers

Passengers who take flight on airplane would like to know the safety of Boeing airplane.
Passengers’ top priority is safety followed by the comfort of the airplane. They would like me
to ensure that Boeing airplane is well maintained and fully tested before putting it into
service. All the reports, testimonials, technical data, and any related information must be
transparent and shared with the public. Passengers also expected the airplane establishment to
follow the professional ethics and standard of procedure from the airline authorities.

5.2 Boeing Employees

As Boeing’s employees, they would like to know more about the company status,
information, and their job status. Employees are worried about the future of their job and
unknown of company direction which will affect their livelihoods. Employees including the

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engineer and technical team would like to know more about the safety issue of the airplane.
They expected the company would have very clear information about the standards,
procedures, and regulations for their job scope. All employees would like to have a way
which can directly deliver accurate information or messages to the higher management
without any layering problems.

5.3 Investors and Shareholders

Investors and shareholders are concerned about the company’s share and profit, they would
like to have a detailed analysis of the company's current financial status. They need me to
provide insight on the damages of the crash incidents and company sustainability report. The
most crucial issue is the recovery plan which can help to recover the loss of profit and
company reputation.

5.4 Regulars and Government Authorities

The government will enforce me to ensure company compliance with the safety rules and
regulations. They want me to provide all the accurate information about the company airplane
production, technical data, and potential issues with the aircraft. They also expect me to
emphasize the importance of safety and clear instruction to the company employees and
management.

5.5 General Public

The public want me to provide clear information and actual factors of the crash incident. The
public also expected me to share the relevant news and updates of the incident. They also
need me to ensure future aircraft is safety to use and serve the public.

6.0 Question 5: Reference to relevant theories discussed in class.

6.1 Business Ethics

Business ethics is important in an organisation, it is referred to the company’s standard of

right or wrong conducted in the business. An ethical company should compliance with the
laws and regulations, responsibility for the public and customers, taking care of the
stakeholders. Boeing 737 incident shows that they are not an ethical company, Boeing didn’t

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responsible for the moral philosophy during design and manufacturing of 737 aircraft. The
company’s objective is to ensure safety of the aircraft, transparent with customers and
regulators, and listen to the employee’s feedback. Business ethical in Boeing should referring
to the passenger safety, and fair business practice. Boeing is crucial to maintain reputation,
trust, and sustainability in the industry.

6.2 Consequentialist theories of ethics

Utilitarianism is a consequentialist ethical theory that focusing and maximise on overall the
happiness of the result. Boeing should prioritize on the passenger safety and customer
satisfaction on taking flight with the Boeing aircraft. As for 737 crash incident, Boeing
response with an irresponsible way of action and led to the victims’ family members unhappy
on the action taken by Boeing. For responsible to stakeholders, Boeing needs to manage well
the interest of the stakeholders and ensure everyone is satisfied with result. Utilitarianism
would prioritize compliance with the law and regulation to prevent potential risk to the
individual and community. Applying utilitarianism in Boeing would considering the potential
consequences of decisions and actions taken and the influences toward the stakeholders.
Boeing should focus on the satisfaction and happiness of all the stakeholders.

6.3 Non-consequentialist theories

Non-consequentialist theories, also known as Deontological ethics which focus on the rights,
duties, and obligations beyond on the consequences part. On Boeing 737 case, deontological
theories apply on safety of passengers which is the moral duty for Boeing to test and ensure
the aircraft are safe to put in service. Boeing obligation is to compliance with the safety
regulations and conduct the risk management on the aircraft. Boeing should honest and
transparent to the stakeholders about the defects on the aircraft and error on the software.
They should transparent their business operation and practices to avoid the incident happen
again. For moral duty, Boeing should respect for human rights in manufacturing Boeing 737
aircraft, they should avoid any dangerous of passenger life.

7.0 Question 6: Determine a course of action to avoid a recurrence of such events in an

organization.

7.1 Strengthen Ethical Culture

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Company should establish a strong ethical culture and implement in the business objectives.
Organization needs to promote the business ethical and emphasize on the value and ethical
behaviour within the organization. Conduct the training and classes on the company
objectives, values, and responsibilities for the moral and ethics of business. All employees
have to understand the consequences of the decision made are follow to the ethical theories
and principles.

7.2 Enhancement Communication Channels

Organisation need provide the different channels for employees to communicate or feedback
on the working environment, job scope, and raise any issues to the management. The
communication channel should be in transparent methods and monitor closely by the
management team. Create a good environment for employees to ask for advice or direction
and ensure the information or message is delivered to the respective department.

7.3 Implementation of Ethical policies and procedures

Develop a complete policies and procedures for the employee to compliance with it. The
policies are for employees clearly understand the importance of ethics such as safety issues,
compliance to the laws and regulations, responsibility to the public and others. Regular
review and update the policies by changing the standards and organisation needs.

7.4 Develop and implement corrective system

Based on the analysis and learn from the past issues, develop a specific recovery plan or
corrective action for solved the identified issues and errors. As example of Boeing crash
incident, they didn’t prepare a corrective system when the incident occurred, and this led to
the intensive damage on company business and reputation. This system including revising
policies and procedures, improving communication channels, implementation of new action
plan.

7.5 Ethical decision making

Organizations should emphasize ethical decision making on all levels to comply with
company business ethics values. A transparency in communication and ethical considerations
should be integrated into the company culture and operations. Management level should be to

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ensure all the decisions comply with all the relevant rules and regulations. Continuous
monitoring and improving of the decision-making system by learned from incidents and
feedback from stakeholders.

8.0 Conclusion

The Boeing 737 crash incidents that occurred in recent years resulted in loss of life and raised
serious concerns about aircraft safety and business ethics of the company. Investigation
shows that the crash was caused by the design flaws of Boeing 737 Max, error in the MCAS
system, and improper training for the pilots. This incident brings the attention of business
ethical, transparency of operation, and conflicts of interest.

Boeing is concerned about business, sales, and profit more than passenger safety, they are
ignoring moral responsibility and business ethics. Boeing is supposed to transparent the
issues of the design and the MCAS systems with report to the authorities immediately
without delay. All these ethical issues caused the incident crash to become a disaster for
Boeing organization. The decisions taken by Boeing directly influences the safety of the
planes such as rush the development of 737 Max aircraft in short period of time, put the
airplane on service without a proper training for the pilots and even sell the safety features for
additional cost.

Boeing’s stakeholders being affected badly by the crash incident and caused significant losses
for them such as share price drop dramatically, employees lost their jobs, and affected the
whole supply chain system. All the stakeholders need the transparency of Boeing for the
incident by sharing the actual data and information about the 737 Max aircraft.

In conclusion, an organization should prioritize business ethics and implement a clear

company value for the employees to compliance with it. Lessons learned from the Boeing
incident should continue to inform and improve business ethics to prevent the incident
happen in an organization.

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9.0 References

1. Blog of the APA, 2019 Martin Peterson. The Ethical Failures Behind the Boeing
Disasters. Available at: https://blog.apaonline.org/2019/04/08/the-ethical-failures-behind-
the-boeing-disasters/ (Accessed on 18th Apr 2023)

2. CNBC, 2019 Leslie Josephs, Shawn Baldwin. How the Boeing 737 Max grounding hurts
its most-loyal customer – Southwest Airlines. Available at:
https://www.cnbc.com/2019/09/17/how-the-boeing-737-max-grounding-hurts-loyal-
customer-southwest-airlines.html (Accessed on 20th Apr 2023)

3. CNBC, 2022. 737 Max crash victim families press U.S. on Boeing settlement. Available
at: https://www.cnbc.com/2022/11/19/737-max-crash-victim-families-press-us-on-boeing-
settlement.html (Accessed on 19th Apr 2023)

4. Market Insider, 2019 Carmen Reinicke. Boeing sees $11 billiong of market values erased
in just 2 days as its 737 Max disaster worsens. Available at:
https://markets.businessinsider.com/news/stocks/boeing-stock-price-falls-erases-billions-
2-days-737-max-halt-2019-12-1028769301 (Accessed on 19th Apr 2023)

5. National Library of Medicine, Sci Eng Ethics, 2020 Joseph Herkert, Jason Borenstein,
Keith Miller. The Boeing 737 MAX: Lessons for Engineering Ethics. Available at:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7351545/ (Accessed on 18th Apr 2023)

6. Reuters, 2019 Jonathan Stempel. Beoing shareholders sue over 737 MAX crashes,
disclosures. Available at: https://www.reuters.com/article/us-ethiopia-airline-boeing-
lawsuit-idUSKCN1RL31D (Accessed on 20th Apr 2023)

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7. Supply Chain Dive, 2019 Matt Leonard. Boeing halts 737 Max production, suppliers brace
for impact. Available at: https://www.supplychaindive.com/news/boeing-stop-737-max-
inventory-suppliers-impact/569229/ (Accessed on 21th Apr 2023)

8. The Guardian, 2020. Boeing’s suspension of 737 Max production rattles airline industry.
Available at: https://www.theguardian.com/business/2019/dec/17/shares-in-boeing-uk-
suppliers-fall-after-737-max-production-halted (Accessed on 22th Apr 2023)

9. The Seattle Times, 2019 Paul Roberts. ‘Everybody feels it’: Boeing workers react to
second 737 crash. Available at:
https://www.seattletimes.com/business/boeing-aerospace/everybody-feels-it-boeing-
workers-react-to-second-737-crash/ (Accessed on 21th Apr 2023)

Total word counts – 2,948

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