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The [Friday] Papers

By Steve Rhodes

For completists, there was no column on Thursday.
“As Boeing takes steps to get its embattled 737 MAX aircraft up and flying again, investigations and lawsuits continue to pile up in the aftermath of October’s Lion Air Flight 610 crash and March’s Ethiopian Airlines Flight 302 accident, taking a total of 346 lives. The crisis has caused frustrated stakeholders and corporate governance experts to question both the makeup of the board, and how they’re responding – placing a collection of people who are used to operating in inner sanctums under intense scrutiny and pressure,” Fortune writes.
“The main question: Is the board at least partially to blame?”
Spoiler Alert: Yes. Duh.
But the answer is actually more interesting – in a bad way – than that.


“Boeing’s board is hardly a paragon of corporate governance. According to performance analytics research firm MSCI, which ranks the quality of governance, Boeing scored 5.4 on a scale of 1-10. Based on that assessment, Boeing’s board falls in the bottom third of S&P 500 companies. Yet Boeing board members get plum pay. An Equilar study conducted last month on the Fortune 100, found median pay for Boeing directors was $346,000, which ranked as the 23rd highest. Median for all directors in the Fortune 100 was $318,675. (Boeing did not respond to a request for comment.)”
In other words, Boeing’s board sucks. And they get paid good money to suck. They also hold responsibility for actual human deaths.
So just who sits on the board? Let’s name names.
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“Three Boeing directors sit on the board of Caterpillar: Boeing’s lead director, David Calhoun, who is also the lead director of Caterpillar, Boeing’s CEO and Chairman Dennis Muilenburg, and Susan Schwab, a professor at the University of Maryland School of Public Policy and former U.S. Trade Representative in the second Bush Administration. Two of Boeing’s directors sit on the board of Marriott International: Lawrence Kellner, former CEO and Chairman of Continental Airlines and Schwab (who, by the way, also serves on the FedEx board).”
Boldface mine.
“Four of the 13 Boeing directorships are currently occupied by former government officials:

  • Edmund Giambastiani Jr., former Vice Chairman of the Joint Chiefs of Staff, the second highest ranking officer in the military before he retired in 2007 joined Boeing’s board in 2009.
  • Schwab, who joined the board in 2010, was George W. Bush’s main trade adviser and negotiator from 2006 to 2009.
  • Caroline Kennedy, a director since 2017, was the former ambassador to Japan during the Obama Administration.
  • And Boeing’s newest director elected last month is Nikki Haley, former governor of South Carolina and President Trump’s ambassador to the United Nations until she abruptly resigned last year. While governor, she provided incentives in 2013 for Boeing to expand its factory and opposed union organization. (Kenneth Duberstein, a former Chief of Staff in the Reagan White House, retired at the annual meeting this year.)

“As head of the audit committee, Kellner was technically responsible for the safety risks. In fact, shareholder advisory firm Glass Lewis recommended voting against Kellner in the most recent ballot, citing that ‘the audit committee should have taken a more proactive role in identifying the risks associated with the 737 Max 8 aircraft.’ ISS’s proxy analysis recommended voting for all audit committee members including Kellner, but ‘with caution.’ Kellner was re-elected.”
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“Boeing Chairman and CEO Muilenburg recently gave some indication of who on the board has safety expertise when he asked the board last month to form a committee to ‘confirm the effectiveness of our policies and processes for assuring the highest level of safety on the 737-MAX program.’ The committee is comprised of former Allstate chief exec Edward Liddy, former Joint Chiefs of Staff vice chairman Giambastiani, Amgen’s [Robert] Bradway, and Duke Energy Chairman and CEO Lynn Good. They were looking after the company when it fell into crisis.”
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The remaining three board members: Ronald Williams, former chairman CEO of Aetna; Mike Zafirovski, former president and CEO of Nortel; and Arthur Collins, former chairman and CEO of Medtronic.
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Meanwhile . . .
“As much as any company in corporate America, Boeing would appear to be well prepared to deal with a public-relations crisis. A major exporter and military contractor, Boeing has deep ties in Washington and spends lavishly on lobbying,” the New York Times reports.
“Dennis A. Muilenburg, the chief executive, is on the board of the Business Roundtable, an influential group that seeks to shape public policy. Boeing’s top executive in the nation’s capital is a seasoned operator who worked in the Clinton White House.
“Yet for all the scrutiny Boeing faced after the crash of Ethiopian Airlines Flight 302 and the subsequent grounding of its 737 Max planes around the world, the company initially had very little to say.”
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“At first, Boeing stood by the airworthiness of the 737 Max, even as some regulators took the jetliner out of service. After President Trump tweeted concerns about aviation safety two days after the crash, Mr. Muilenburg called the president and encouraged him to keep the planes flying.
“Yet Boeing did not make Mr. Muilenburg or other executives available for interviews at the time.”
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See also:
* Bloomberg: Boeing Max Crisis Ruins Credibility Of The FAA.
* Politico: How The FAA Delegated Oversight To Boeing.
* New York Times: Boeing Was ‘Go, Go, Go’ To Beat Airbus With The 737 Max.
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Joe Cahill’s concern over at Crain’s?
“Already, momentum is building for tighter regulatory scrutiny of new aircraft designs and greater skepticism toward whiz-bang aviation technology. That won’t bring back anyone who died aboard the downed Indonesian and Ethiopian planes, but it could reduce the chances that others will share their fate.
“Yet negative responses are also possible. In particular, there’s a risk that repercussions from the accidents could dampen Boeing’s appetite for innovation.”
Let me tell you something, Joe: Boeing doesn’t have an appetite for innovation, it has an appetite for profit. And that appetite will never be dampened.
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Finally:


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Posted on May 23, 2019