[dragonwriter]

An explicitly cited reason DoJ approved the deferred prosecution agreement was that, on the basis of the facts available, management was not collectively, even, much less individually aware of the facts imputed to Boeing based on the knowledge of lower-level employees which were necessay to be guilty of the crime.

[ericd]

The thing is, this sets up a moral hazard where it’s advantageous not to know, not to keep close tabs, and tight control over your supply chain. If there were potentially harsh penalties for allowing this to happen, regardless of knowledge, I think you’d see much better controls put in place, and the incentive would be to keep safety critical operations kept in-house, where they can be better monitored, rather than spun out to make the return on capital look better to public markets.

[dragonwriter]

> The thing is, this sets up a moral hazard where it’s advantageous not to know

No, they would be better off if they had known what the pilots were doing and stopped the fraud rather than allowing it.

> If there were potentially harsh penalties for allowing this to happen, regardless of knowledge, I think you’d see much better controls put in place, and the incentive would be to keep safety critical operations kept in-house, where they can be better monitored, rather than spun out to make the return on capital look better to public markets.

If you made inaccurate reports to governments a strict liability crime with a harsh pubishment not requiring intent, recklessness,or negligence, I think that would actually be a bad thing and lead people to actively avoid any activity or field of business that might require reporting to the government.

But, in any case, the fraud offenses at issue ARE NOT strict liability crimes now, so people without the requisite knowledge and intent cannot be guilty of them.

[ericd]

Thanks for the thoughtful response. I was admittedly thinking more about their quality problems due to their spinning out big chunks of their manufacturing, and the general failures of management, rather than specifically the MAX problems and the fraud in question, so my comment was somewhat off-topic. But in general, it seems that they’re encouraged to not look too closely at parts of their business that are acting in risky ways, and if that’s the case, perhaps we should change the incentives to try to fix that. I don’t know what that would look like, there are obviously limits to how much someone can know about what’s going on 6 layers below in the org chart. But making them liable would certainly be an incentive. I think people would still take the job, given how much is typically on offer.