Weeks after taking the board chairmanship away from Dennis A. Muilenburg, the board finishes the job by firing the CEO.
Weeks after putting the onus of his compensation on the Boeing board of directors, Dennis A. Muilenburg is out as CEO of the embattled company. He also lost his seat on the board.
The writing was on the wall for Muilenburg in October, says Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.
“It was inevitable,” Elson says. “Once (Muilenburg) lost the chairmanship, the rest was put into process. There was obviously a lack of confidence.”
Requests for comment from Boeing went unanswered.
In October, lead director David L. Calhoun was elevated to chairman of the Boeing board. The company was reacting to two crashes in five months that killed a total of 346 passengers. The plane, which had been Boeing’s most popular model, has been grounded since mid-March.
When he became chair, Calhoun said the board fully supported Muilenburg and wanted the CEO to focus his energy on getting to the bottom of the model’s problems and getting it back in the air.
A couple of weeks later, Muilenburg had a heated exchange with Rep. Steve Cohen, D-Tenn., while testifying at a congressional investigation into the crashes. Cohen asked if Muilenburg would take any cut to his $30 million salary or work for free while the Max problems were addressed and rectified.
“So you’re saying you are not giving up any compensation at all,” Cohen said. “You are continuing to work and you are making $30 million a year after these two horrific accidents that caused all these people’s relatives to go! To disappear! To die! You’re not taking a cut in pay at all?”
“Congressman,” Muilenburg responded, “again our board would make those determinations.”
“You aren’t accountable, then,” Cohen said. “The board is accountable.”
The board may have felt the same way. A press release explained the board’s move:
“The board of directors decided that a change in leadership was necessary to restore confidence in the company moving forward as it works to repair relationships with regulators, customers, and all other stakeholders.”
Whether this change will restore confidence in all stakeholders remains to be seen, but as of Monday afternoon, the stock had seen a 3% bump since the announcement.
“There’s a problem when a director becomes CEO, there are questions about ‘How did that happen?,’” Elson says. If Calhoun had been announced as interim CEO while an external CEO search was conducted, “that’s understandable.” Instead, CFO Greg Smith will serve as interim CEO until Jan. 13 “while Mr. Calhoun exits his non-Boeing commitments,” according to the Boeing press release.
Elson says Boeing should have gone outside of the company to find a fresh start, but now they’ll have to work hard to “unsully” the reputation of their leading product.
“And to avoid liability in the public is going to be tough.”