In the wake of Boeing’s cabin panel blowout in the Alaska Airlines Flight 1282, and the resignation of its CEO Dave Calhoun, aircraft manufacturer Boeing has been forced to do what it has not done in 16 years: join contract talks with the biggest union representing its workers, the International Association of Machinists and Aerospace Workers (IAM) District 751, which represents over 32,000 Boeing workers. Boeing isn’t engaging in these talks out of the goodness of their hearts, but because they are in the middle of the greatest safety crisis since the crashes of two of its Max 8 jets in Ethiopia and Indonesia 2018 and 2019, which killed 346 people. Boeing is part of a large jet airliner market duopoly alongside Airbus. Because of safety concerns over the last few years, Boeing’s share of the market has been in decline. They need peace in their worker’s front so they can right things and get back on track. Boeing simply cannot afford to be fighting multiple crises, and this has opened the door for the IAM District 751 to negotiate over standard line items such as pay and retirement benefits, as well as bigger issues such as quality and safety standards. If the IAW District 751 succeeds, Boeing will become a banner company for stakeholder capitalism in America.
When talks began, the union’s president, Jon Holden, said that, "It's very important to us that we build a safe, quality airplane”. Workers understand that they are at the coal face of safety concerns: if a plane goes down, the CEO may resign, but alongside passengers, workers will also die. Workers face the brunt of harm from low safety standards, regardless of how executives are punished, and they feel that they deserve a say in designing safer planes. There are practical reasons for letting them have a say: Japanese manufacturing successes showed the world the power of a heavily decentralized manufacturing process where shop floor managers could collaborate with workers to make decisions without having to send them up to senior management. Toyota’s manufacturing principles, for instance, saw a failure to utilize worker’s knowledge as a form of “waste”. The reasons are obvious: workers see things that managers do not.
The union not only wants a say in designing safer planes, they want a board seat. Holden explained that, "With what's going on these days, we are oftentimes the last line of defense. We have to save this company from itself." Leeham News called this a “check on the CEO”. This is a sharp departure not merely from how Boeing operates, but how most American businesses operate. Yet, again, this idea has been applied successfully before. German firms, for instance, typically have worker representation on the board. This is because German firms are not geared toward satisfying the demands of shareholders, but have a more holistic view of the firm as being obliged to all its stakeholders, of which workers are an important component. In the United States, in the wake of the Great Recession, climate change and rising inequality, the Business Roundtable (BRT), which represents the nation’s biggest businesses, changed its statement of purpose to reflect a desire to serve all its stakeholders. This was a sharp departure from Milton Friedman’s 1970 doctrine of shareholder primacy. Indeed, Friedman’s paper was titled, “A Friedman Doctrine: The Social Responsibility of Business is to Increase Its Profits".
Boeing is where it is today because, like many firms in the United Since since President Ronald Reagan saw off the air control workers strike in 1981, it has been able to crush its workers, and prevent or reduce unionization, slam the breaks on wage growth, at a time of rising productivity and profitability, while rewarding shareholders with rising dividends and buybacks. CEOs have forsaken a relentless focus on safety because their compensation rewards them for financial success. In other words, a CEO does not have any material incentive to make planes safer. Although these concerns could and should be fixed by changing the terms of executive compensation, these disasters show that a worker’s voice is needed within the company. We cannot assume that the pursuit of shareholder value is the same thing as fair pay for workers and safer planes. We need workers at the top table to save Boeing from itself, give us safer planes, and ensure fair pay and benefits.