Fired Boeing CEO’s Severance Defies Explanation

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This past December, I envisioned an article I wanted to write titled Things in Business That Defy Explanation. I had artifacts in mind, including why consumers buy Vegemite more than once, how the Pontiac Aztec ever got into production, and why Boeing CEO Dennis Muilenburg was still at his job. All baffling, particularly the latter.

The potential audience for my article was enticing: researchers hawking the explanatory power of their studies, serial explainers tethered to the notion that there’s a reason for everything, data scientists who believe the answer to any behavioral question can be revealed by extracting it from digital exhaust.

This month, my idea got dashed. But only momentarily. Muilenburg was canned. The CEO who presided over what The Washington Post called “the most disastrous period in Boeing’s 103-year history,” (Families ‘sickened’ by Boeing Payout, January 14, 2020), and who had two crashes during his watch that killed 346 people, was told to clean out his desk and head out the door. Justice rendered – finally!

Unfortunately, that left me searching for a new unexplainable artifact. Not for long, though. My problem abruptly ended when Boeing revealed that Muilenburg’s path to the exit included a quickie stop at Boeing’s corporate finance office. Seems they didn’t want him to leave the company bereft. “We know things didn’t go your way during your tenure as CEO, but we want you to feel whole. Would $62 million, plus $18.5 million in stock options help?”

Evidently Muilenburg found the arrangement palatable, because magnanimously, he walked away from an additional $14.6 million in severance. Perhaps he was worried about the public backlash over his payout, particularly from the families of the 737 MAX crash victims. “It is chilling that what 346 families have received as support for their loss is almost as much as the man at the heart of their loss will have as a cushy retirement fund,” said Zipporah Kuria, whose father was killed in the Ethiopian Airlines crash on March 10.

This development has upended one of my long-held beliefs: as long as a person earns their income honestly, I don’t begrudge it. I don’t think that way anymore. Given Boeing’s horrid results during the Muilenburg regime, I’m apalled. I distinctly remember the stern conversation I had years ago with one sales manager when I was – gasp! – 85% of my assigned sales quota for the quarter not yet ended.

Nobody had died as a result of my quota shortfall, but from the tension and gravitas in the manager’s voice, you would be forgiven for thinking so. One thing that kept our conversation mercifully short was the part describing the severance terms. “Should you be terminated for not making goal, you’ll get four weeks severance at your base pay. That should be plenty of time for you to find another job.” No need to talk with Finance about the stock options the recruiter used to entice me to join in the first place. They were already nearly worthless.

When asked what would be appropriate for Muilenburg, Michael Stumo, whose daughter was among the fatalities in the Ethiopian Airlines crash, said that Muilenburg should be treated “the same as someone on the factory floor who is fired for poor performance,” adding that “investors have had a front seat [at Boeing] for the last 20 years . . . They need to take a back seat now.”

Amen to that. Why are CEO’s so often spared the consequences of their horrible decision making and negligence? Why are they given a pass when stakeholders are grievously harmed as a direct consequence? Why, when a CEO is roundly regarded as screwing up in every way, is their ending the antithesis of the forklift operator employed “at will”, terminated “for cause”? “We warned this employee at his reviews that regularly exceeding allotted break times would be cause for dismissal . . .”

It’s understandable that readers of business articles crave explanations. But here I offer none. I struggle to develop a rationale for holding senior executives to a lower performance standard than other employees, and richly rewarding them when they are proven to be poor managers. Besides injecting enormous strategic risks into an already-precarious risk landscape, it’s horrible for morale.

Granted, compared to machine operators and administrative personnel, C-Level executives absorb outsize risks. But they are compensated for it. They aren’t subject to an hourly wage. I don’t know any who live paycheck to paycheck. Getting fired might compare to a spanking, but it rarely impinges on a CEO’s retirement aspirations. Their kids, grandkids, and great-grandkids will all go to college. For multiple generations, the CEO’s descendants are assured prosperity, as long as heirs don’t piss away their inheritances. Who could ever argue with this arrangement, except for the millions of people who face calamitous financial and health outcomes after being “let go”?

Prepare for the end at the beginning. A wise piece of business advice, though not one that not everyone can exercise. Imagine a young job candidate asking her hiring manager, “before you explain your benefits package, could you tell me how severance works here?” Muilenburg, on the other hand, has given everyone a master class on how to do just that.

Too bad his gilded landing defies explanation.

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