Then-CEO Dennis Muilenburg (right) with President Donald Trump at a Boeing event in February 2017.
Photo by Ryan Johnson, courtesy the city of North Charleston, South Carolina.
It is generally considered bad form to fire employees at the height of the holiday season; most businesses can afford to hold such dismaying news until the new year begins. But when Boeing finally fired its CEO, the measure did not come soon enough.
In fact, Dennis Muilenburg’s departure from the Chicago-based aircraft maker’s executive suite was about a year overdue. That is a long, long delay, even by the standards of O’Hare Airport on a stormy summer afternoon.
While he does not deserve all the blame, Muilenburg ultimately will be remembered as the man who broke Boeing. The company has lived a corporate nightmare ever since one of its 737 MAX jets fell into the Indian Ocean in October 2018, followed five months later by the crash of a second 737 MAX in Africa. The two accidents together killed 346 people, grounded Boeing’s best-selling aircraft for more than nine months – and counting – and has saddled the company with losses climbing well into the billions of dollars. A poorly designed and undocumented flight-control system was the proximate cause of the crashes. But the disasters were both the culmination of and waypoints in a chain of bad management decisions.
Despite having some $20 billion in the bank, according to The Wall Street Journal, Boeing is preparing to issue new debt to bolster its finances. The company still has no clear idea when American and foreign regulators will let the 737 MAX return to passenger service.
A clear-thinking and independent board would likely have considered firing Muilenburg after the first crash in 2018, when the lack of disclosure about the new flight control system known as MCAS first came to light. It certainly would have canned him after the March 2019 disaster, especially as he first resisted grounding the MAX fleet and then repeatedly underestimated the work and time needed to return it to the skies. But the Boeing board was neither clear-thinking nor independent, as I wrote in this space last July. At the time, I marveled that Muilenburg was still employed. He was a throwback to an earlier era of club-style governance, holding both the board chairmanship and the company’s top executive post, thus making himself his own chief supervisor.
In the months between March and December, Muilenburg’s relationship with regulators had deteriorated to the point where Federal Aviation Administration officials openly criticized the company’s failure to provide timely information. Since the beginning of the MAX crisis, Boeing has lost an estimated $50 billion in market value. And a recent FAA-ordered audit found evidence that there may be wiring problems with the 737 MAX in addition to the previously identified software issues.
Yet it was not until October that the board relieved Muilenburg of his chairman duties. Even then, as the MAX complications and the resulting costs spiraled, he held onto the CEO position until Dec. 22. Then – three days before Christmas, and on the first night of Hanukkah – the Boeing board finally roused itself enough to dismiss him. An overdue shutdown of MAX production seems to have provided the wake-up call. Or, rather, the smelling salts.
Muilenburg’s replacement as CEO is David Calhoun, who also replaced him as chairman of the board last fall. So, again, we have the CEO role filled by a longtime Boeing director who has been part of the get-along, go-along gang for a long time – in Calhoun’s case, since 2009. It is not a pretty picture, even if Calhoun is at least ceding his place as chair to another board member, Larry Kellner.
Notwithstanding the 737 MAX, which will eventually fly again even if no one knows when, Boeing’s planes work. Its corporate governance does not. Muilenburg’s delayed departure is not the only fix at Boeing that is overdue. This is a company that could use an entire fresh crew on the flight deck.