Boeing Co. (NYSE: BA) CEO Dennis Muilenburg was stripped of his chairman’s job two weeks ago. With new revelations about the 737 Max, that pilots knew of dangerous flaws in its flight control system, the new board chair, David L. Calhoun, and the rest of the board have to force Muilenburg out and replace him with a chief executive who was not with the company when the new 737 Max was developed.
Muilenburg’s two-day testimony before Congress shows he presided over a culture of secrecy that allowed flaws in the plane to be ignored or suppressed. Muilenburg said he know 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. Senators who questioned him were shocked and in some cases angry. He was accused of putting profits ahead of safety. Note that Muilenburg is among the highest paid CEOs in America.
Questions about whether Muilenburg should run Boeing 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 certainly 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 was 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.
CEOs are ultimately responsible for the culture of their companies and the ethics of their employees. Muilenburg has clearly 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. The board needs to signal that immediately. If it does not, then the board’s judgment and ethics will be called into question.