During hearings on engineering problems with the Boeing 737 Max that were almost certainly responsible for two fatal crashes, Sen. Richard Blumenthal attacked Boeing for a “pattern of deliberate concealment” after the first of the two accidents. Boeing Co. (NYSE: BA | BA Price Prediction) CEO Muilenburg and his management team did nothing about the first crash, which might have prevented the second. People inside Boeing had mentioned the problem. Members of Congress raised the question of whether Muilenburg should be the person to guide Boeing’s future. The answer is no.
When asked after the testimony about board support for Muilenburg, new Chairman Dave Calhoun said: “To date, he has our confidence.” That was not much of an endorsement for a man the Boeing board already has pushed out as board chair.
Muilenburg’s two-day testimony before Congress certainly did demonstrate he presided over a culture of secrecy that allowed flaws in the plane to be ignored or suppressed. Muilenburg clearly did say he knew about problems with the 737 Max software programs that contributed to the crashes after the first one but before the second. He said he knew broadly about messages between Boeing employees regarding the problems but did not know the details of the exchanges. It has been noted that Muilenburg is among the highest-paid CEOs in America. The board said his compensation would be sharply cut for the time being.
Questions about whether Muilenburg should run Boeing actually began shortly after the crashes. It quickly became clear that Boeing had put the 737 Max into service without proper safeguards and training on the flight-control system. A number of airlines have suffered financially because they cannot fly the planes. Some will ask for compensation for their losses. The 737 Max may not be back in service until early next year. The new revelations could push that date out further. In the meantime, new orders of Boeing aircraft have plunged, creating an opening for rival Airbus to pick up new orders. Boeing has been one of the most valuable brands in the world.
Another negative byproduct of the 737 Max scandal is that the public may be reluctant to fly the planes even when they come back into service.
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Chief executive officers are ultimately responsible for the culture of their companies and the ethics of their employees. Muilenburg has failed to build a company in which safety and truth about problems are prized. It is far too late for him to correct that now, particularly given his own behavior. The board needs to signal that immediately. If it does not, then the board’s judgment and ethics will be called into question as well.
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