By: Andrew Bauer and Melissa Rocco
Earlier this week, Boeing and the Department of Justice (DOJ) were given an extension until mid-February to revise their plea agreement related to the 737 Max criminal case. As was widely reported, the initial agreement was rejected by Judge Reed O’Connor in the Northern District of Texas in December primarily due to on concerns over the DOJ’s insistence to include Diversity, Equity, and Inclusion (DEI) requirements in the selection of a compliance monitor. As the parties take aim at a reworked agreement, the case offers crucial lessons for business leaders navigating DEI policies amid changing political and legal landscapes.
Background
Following two fatal 737 Max crashes in 2019, Boeing entered into a deferred prosecution agreement (DPA) with the DOJ in 2021, acknowledging that two employees had knowingly provided false information to the Federal Aviation Administration (FAA) about the plane’s maneuvering characteristics augmentation system (in order to limit the pilot training needed for the Max’s). The DPA provided that the DOJ could prosecute Boeing if it breached its obligations, which included implementing anti-fraud provisions.
On January 5, 2024, after a door plug blew out the side of an Air Alaska 737 Max shortly after takeoff, the DOJ determined that Boeing violated the DPA by failing to implement sufficient controls to ensure its certifications of airworthiness provided to the FAA were complete, accurate, and not fraudulent.
The parties negotiated a settlement to Boeing’s breach, in which the company agreed to plead guilty for conspiring to defraud regulators. The 88-page plea agreement (plus attachments), required Boeing to pay a criminal penalty of $243.6 million, spend $455 million in compliance, quality and safety programs, implement a corporate compliance and ethics program to prevent and detect violations of federal fraud laws, and retain an independent compliance monitor selected by the DOJ to oversee its compliance program during a three-year probation period.
Regarding the selection of the compliance monitor, the Agreement stated that it shall “be made in keeping with the [Justice] Department’s commitment to diversity and inclusion.” This provision was consistent with the DOJ’s policies furthering DEI initiatives dating back to 2008.
Judge O’Connor seized on this DEI requirement. In his rejection of the agreement, Judge O’Connor wrote that “[i]n a case of this magnitude, it is in the utmost interest of justice that the public is confident this monitor selection is done based solely on competency.” He went on to express the Court’s concern that Boeing might exercise its input into the selection process “in a discriminatory manner and with racial considerations” and questioned whether the government would make selections based solely on merit. In addition, Judge O’Connor took issue with how the agreement marginalized the Court’s role in the monitor-selection process.
Importantly, though not the focus of this alert, the families of crash victims also approved of the plea’s rejection as they continue to advocate for stronger accountability measures, calling for Boeing to pay much higher fines and for executives to face criminal charges.
Current Status
Following the Court’s rejection of the plea, Boeing and the DOJ submitted a joint statement requesting an extension of the time needed to finalize a revised agreement. On January 4, 2025, Judge O’Connor agreed to give the parties until February 16, 2025 to revise the agreement.
In their request, the parties acknowledged the looming impact of the Trump administration, writing that they “will endeavor to update the court before [February 16], but also recognize that the upcoming change in department leadership, and the need to brief incoming officials, may necessitate additional time for the parties to determine whether they can reach a revised proposed plea agreement.”
Strategic Implications for Corporate Leaders
The controversy around Boeing’s plea agreement reflects shifting political and social landscapes in corporate America. Over the past couple of decades, DEI has been increasingly emphasized, driven by social movements and investor pressures. Supporters argue that DEI measures foster a more responsible and inclusive corporate culture. DEI’s critics, on the other hand, argue that it has no place in situations such as the Boeing plea as it deflects from the core issues. Following President-elect Donald Trump’s victory, DEI’s trajectory faces significant uncertainty.
The new administration’s policy agenda is likely to deprioritize DEI, just as President Trump did during his first term when he signed an outgoing executive order with the subject “Ending Employee Trainings that Use Divisive Propaganda to Undermine the Principle of Fair and Equal Treatment for All.” Although President Biden reversed this specific executive order once in office in early 2021, similar orders are likely to come with the new Trump presidency. No matter its form, the incoming Trump administration is likely to deprioritize DEI initiatives across federal agencies, reduce enforcement of DEI-related requirements in government contracts, and potentially even support legal challenges to corporate DEI programs.
Moving forward, the denial of Boeing’s plea deal raises critical questions for corporations and their leaders. Most importantly, what is the role of DEI when the core objective of an event or transaction is not directly tied to DEI’s laudable mission to drive cultural improvement?
As this situation evolves, corporate leaders should consider the following strategic guidelines:
1. Existing Policy Review. Review current DEI policies in their corporate environment to assess if they create vulnerability to legal or regulatory scrutiny should the momentum behind the Boeing plea rejection continue. Regularly monitor local and federal regulations to review changes. Consult with legal experts to ensure policies comply with current and emerging laws.
2. Program Architecture. Build DEI initiatives around concrete business outcomes. The most successful approach may be to focus on talent development and inclusion practices that can withstand legal scrutiny while delivering measurable business benefits. Establish clear mechanisms for monitoring DEI initiatives.
3. Talent Development. For hiring and promotion processes, integrate diversity goals into broader talent management strategies while also documenting and emphasizing merit-based selection criteria.
4. Risk Management and Flexibility. Develop contingency plans for DEI programs that may face scrutiny, legal, or political challenges, including considering alternative approaches to achieving workforce diversity. Companies should maintain flexibility to adjust programs based on legal and political developments.
5. Evolution vs. Elimination. Rather than eliminating or abandoning DEI programs, companies may choose to reframe DEI initiatives around business-driven objectives, focusing on talent development and to emphasize business and performance metrics.
Conclusion
Although the Trump administration is expected to deprioritize DEI as a matter of policy, companies will almost certainly still face pressure from various stakeholders to maintain inclusive workplaces. They will need to balance the competing demands from employees expecting continued DEI commitment, investors concerned about legal exposure, customers with varying perspectives on DEI, and regulators and political actors. Success will depend on finding ways to achieve diversity objectives while emphasizing merit-based decision-making and clear business rationales.