Dennis Muilenburg, president and CEO of the Boeing Company
We all know that two Boeing 737 MAX planes crashed in the past 13 months, killing 346 people. But what’s new is that, a few days ago, Boeing CEO Dennis Muilenburg told attendees at the New York Times' Dealbook conference that he’s asked the board to waive his bonuses. And according to Boeing Board Chairman David Calhoun, Muilenburg won’t receive stock grants until the 737 MAX fully returns to service.
Now, most would agree that with the 737 MAX tragedies, Muilenburg shouldn’t take home the roughly $23 million in total compensation he received in 2018. So why am I calling Muilenburg’s move to forgo his bonus distasteful? It’s not that I think he should actually take a bonus. Rather, there are three aspects of how this bonus decision came to pass that are troubling.
First, Muilenburg’s decision to not take a bonus came after he was grilled during congressional hearings the week prior.
For example, Congressman Steve Cohen (D-Tenn.) asked “What does accountability mean? Are you taking a cut in pay? Are you working for free from now on till you can cure this problem? These peoples’ relatives are not coming back; they’re gone…You’re continuing to work and make $30 million a year after these horrific two accidents that caused all these peoples’ relatives to die. You’re not taking a cut in pay at all?”
Muilenburg essentially replied that decisions about compensation will be part of a comprehensive review by the company’s board of directors. But then, a few days later, Muilenburg decides to forgo bonuses. I’m all for embracing a good idea, but the bonus gesture would have been much more sincere had it not been preceded by members of Congress essentially demanding that exact gesture.
We’ll likely never know whether the bonus gesture was something that Muilenburg authentically felt was the right thing to do, or whether he simply felt cornered.
Second, Chairman David Calhoun said that Muilenburg won’t receive stock grants until the 737 MAX fully returns to service. But I would argue that the issue here is not the 737 MAX returning to service, but rather fixing the underlying and fundamental problems that led to the tragic crashes. And it’s not entirely clear how much progress Boeing is making on that front.
For example, last month the Seattle Times reported that “seven weeks after the second fatal crash of a 737 MAX in March, a Boeing engineer submitted a scathing internal ethics complaint alleging that management — determined to keep down costs for airline customers — had blocked significant safety improvements during the jet’s development.”
They further note that “the details revealed in the ethics complaint raise new questions about the culture at Boeing and whether the long-held imperative that safety must be the overarching priority was compromised on the MAX by business considerations and management’s focus on schedule and cost.”
Has Boeing gotten this ostensible culture problem fixed? It could be months or years before we know for sure. But I do know that these types of problems are not typically corrected in a few weeks.
In a study of 27,048 executives, managers and employees, called The Risks Of Ignoring Employee Feedback, we discovered only 6% of people say that at their organization, good suggestions or valid complaints from employees Always lead to important changes. By contrast, 25% say that good suggestions or valid complaints from employees Never lead to important changes.
This is clearly a problem facing many more companies than Boeing. But not every company’s mistakes are as consequential as Boeing’s. For many companies, the worst case scenario is going out of business, not a loss of life.
The third problematic issues is how long it took for Muilenburg to meet with the families of those killed in the 737 MAX crashes.
He met with some family members in between the Senate and House committee hearings at the end of October, about a year after the first 737 MAX crash. He said he's "heartbroken" by their stories of their losses and added, "I wish I had gone to visit them earlier."
My advice to every CEO is simple; if something bad happens, don’t wait a year to meet with the impacted parties.
In the study Why CEOs Get Fired, we interviewed 1,087 board members from 286 organizations that fired, or otherwise forced out, their chief executive. We discovered that the second most common reason CEOs got fired, according to board members, was “ignoring customers.”
Board members overwhelmingly said that if a CEO ignores or alienates customers, it not only undermines the business and revenue, but it significantly undermines board support. Board members said their test for whether the chief executive was sufficiently engaged in the business was the extent to which they evidenced intimate knowledge of customers, customer needs and developing trends.
Muilenburg admitted that he wished he had visited with family members earlier. And while it might not seem like families who lost loved ones fit the classic definition of customers, I would argue that they represent Boeing’s most important, and fundamental, customer base.
The bottom line is that it’s likely the right move for Muilenburg to forgo bonuses. However, there are serious issues with how his decision came about. And I sincerely hope he learns from all of them.
