Executive compensation in the US is a hotly contested topic, and for good reason. We’ve gotten to the point where eight figure annual compensation just sounds standard for CEOs of big companies, even if they aren’t doing particularly well.
So while this is a controversial thing to begin with, the current situation at Boeing is getting an especially large amount of scrutiny, both for Boeing’s recently fired CEO, and for the newly appointed one.
This all came up after a public filing that Boeing made on Friday.
Fired Boeing CEO gets $62 million
Dennis Muilenburg, Boeing’s recently fired CEO, will be getting $62 million upon his departure from Boeing, made up of long-term incentives, stock awards, and pension benefits. The company states that this is what he is contractually entitled to, and that he’s not receiving any sort of severance package or bonus pay for 2019.
It says a lot when you walk away from a company with a $62 million payout, and that doesn’t even include a severance package or bonus for the year, eh?
The news of this came the same day that it was revealed that Spirit AeroSystems would be laying off 2,800 people. This company is a supplier for the Boeing 737 MAX, and production for the plane being suspended has caused them to lay off more than 20% of their workforce.
Meanwhile no Boeing employees have directly been laid off on a large scale.
New Boeing CEO’s controversial bonus
David Calhoun, Boeing’s new CEO, will receive a $7 million bonus if the company completes certain goals under his leadership, including bringing the 737 MAX back into service.
This has some US senators outraged, as they’re calling for Boeing’s board of directors to immediately cancel the $7 million bonus payment for the company’s CEO.
Senators Edward Markey, Richard Blumenthal, and Tammy Baldwin, have written a letter to Boeing’s board, which in part reads as follows:
“This payment represents a clear financial incentive for Mr. Calhoun to pressure regulators into ungrounding the 737 MAX, as well as rush the investigations and reforms needed to guarantee public safety. We believe that this bonus would be unconscionable in the face of two tragic plane crashes and proof that Boeing has not learned its lesson.”
Boeing has responded to this with the following statement:
“Dave Calhoun’s compensation is based on the fact that the safe return to service of the MAX is our top priority. This includes following the lead of our regulators and working with them to ensure they’re satisfied completely with the airplane and our work. The Board and CEO are in full agreement that the safe return to service of the 737 MAX must be done with full regulatory oversight. The FAA and global regulatory authorities will determine the timeline for certification and return to service of the 737 MAX.
The incentive award for Boeing’s new CEO, David Calhoun, will vest only after he has served in his role for multiple years and if he achieves a series of challenging strategic objectives across all three principal business units, including the full, safe return to service of the 737 MAX.”
Personally I think:
- The optics of this are really bad, as nearly 350 people are dead, and Boeing has repeatedly attempted to push the timeline for the plane returning to service (even before it was grounded, Boeing’s former CEO allegedly called Trump to beg him not to ground the plane after other global authorities had); now a guy should get $7 million as a reward that’s tied to the plane being back in the sky?
- At the same time, that’s just how it works for large corporations — executives get bonuses tied to performance goals, and currently Boeing’s biggest goal is getting the 737 MAX flying again
Bottom line
In some ways I think this whole situation is just so reflective of the state of corporate America.
A guy who lead what was once one of American’s most respected companies is walking away with $62 million despite the company performing horribly under his leadership. Worst of all, that $62 million doesn’t even include a severance package!
Then you have a new CEO who is being incentivized financially to get the plane back into the sky, even though Boeing has repeatedly shown that they’ve been more focused on a timeline rather than safety.
Probably saddest of all is that this is just kind of what I’ve come to expect. That’s how our economy works, I guess?
What do you make of the performance goal for Boeing’s new CEO? Is it appropriate, is it in poor taste, or…?
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