Where was Boeing’s Board of Directors?

What surprised me was not that Mr Muilenberg has finally been dismissed, but that, in doing so, he takes with him a payout worth $US 62 million. 

There has been a lot of debate in recent years about the astronomical salaries of large company CEOs, and whether anyone actually merits such amounts, or indeed whether someone will really be motivated to work harder for $50 million than they would for, say, $5 million – even that relatively miserly sum being more than most employees are likely to earn over an entire lifetime.

But this payout is on another level again. Usually, when we discuss executive remuneration, we’re thinking of a CEO leading their company successfully and there’s an argument that, as the leader, the CEO should share in some of that success. However, since the second 737-Max crash in March 2019, Boeing’s order book has fallen to a 16-year low and its share price has fallen by about 20%, stripping $US 50 billion off the company’s market value. 

Where is the accountability for this destruction of value? More significantly, where was the Board of directors that set Mr Muilenberg’s remuneration? 

In most CEO employment agreements, there’s a clause saying that, if the CEO acts in a way that brings the company into disrepute, the Board may use this as grounds for dismissal, usually without compensation. Was nobody willing to stand up to Mr Muilenberg when he led the company into and through arguably the worst reputational crisis in the company’s history? 

Perhaps part of the answer is that, until October 2019, Mr Muilenberg was both Chairman and Chief Executive of Boeing, so we may assume that he had considerable influence over his Board. 

Part of the role of a Board is to ask ‘What if …’ In other words, when they were setting his remuneration, they should have asked themselves about some of the possible – if at the time unlikely – circumstances under which they might need to dismiss their chief executive. And, if they did so, what reputational issues might they need to consider?

If nobody did this, how can the directors argue that they were fulfilling their duty of care and loyalty to the company?

When we see more and more that even unsuccessful CEOs depart with what I can only describe as obscene pay packages, it’s no wonder that people become not only disillusioned with big companies, but sceptical about the value boards provide in general as a check and balance on executive behaviour and pay.

To make the specifics of this case even worse, on the very day that Mr Muilenberg departed with his nest egg, one of Boeing’s major suppliers announced that the recent shutdown in the 737-Max production line had forced it to lay off 2,800 of its employees – 2,800 people who will no longer receive a salary or wages, whose careers may be destroyed, and some of whom may no longer be able to meet the mortgage payments on their house.

Looking at it differently again, if Mr Muilenberg were to have a rush of conscience and pay $150,000 from his own pocket to every family of the 346 people killed in the two crashes, he would still be left with more than $10 million to cover his retirement – more than adequate reward for a CEO who has brought one of the world’s leading companies to its reputational knees.