Annual Meeting: April 27, 2020

Departing Boeing CEO Dennis Muilenberg received total compensation of $14,250,195 for 2019. In a section of the proxy entitled “Holding Leaders Accountable” the board notes that “Muilenburg was not paid any severance or other benefits in connection with his retirement.”

However, that section makes no mention that Kevin McAllister, former executive vice president, received a severance payment of $14,750,000 from the company. McAllister’s 2016 compensation of $20,865,820 was based on his “successfully transitioning the 737 production system to the 737 MAX while increasing delivery rates, securing 912 net new orders, and delivering a record 763 airplanes. Under Mr. McAllister’s leadership, the Commercial Airplanes business also launched the 737 MAX 10 and flew the 737 MAX 9 and 787-10 for the first time.”

I have written before about how Boeing’s 737 story is emblematic of the ways improperly designed and monitored incentives can lead executives to short-term thinking or risk-taking (and implicitly send a message to junior staff to not raise concerns) contrary to long-term shareholder interests.

However, the company does not seem to have learned its lesson. When the company announced hiring and compensation for incoming CEO David L. Calhoun, it included features that concerned both shareholders and politicians. Senators Edward Markey, Richard Blumenthal, and Tammy Baldwin wrote a letter to the Boeing board questioning the proposed bonus for the incoming CEO. They expressed particular concern regarding the fact that a portion of Calhoun’s incentive compensation will be based on when 737 MAX deliveries resume. This concern is heightened, they write, by the fact that “In pursuit of profit, Boeing rushed the design, production, and certification of the 737 MAX.”

Calhoun, who has served on the board for years, has been criticized for claiming simple observer status in saying, “I watched the same movie you did.” Brooke Sutherland’s Bloomberg editorial entitled Boeing’s Board Needs Overhaul, Not Rejiggering concludes: “It’s still not clear why Calhoun needs a special bonus on top of a salary and a regular bonus to incentivize him do his job. But that lengthy list of priorities and tasks is a testament to just how deep the problems run at Boeing. Whether a guy who’s been on the board for a decade can deliver on all of these goals in a way that redefines the company’s ethos and culture remains to be seen.”