Boeing is trying to restore the confidence of global regulators, airline customers, pilots and the flying public, after two 737 Max crashes killed 346 people in the span of five months. The company also recently named a new internal safety czar to oversee safety reviews and created a new process for elevating internal safety-related complaints.
A growing number of investors believe Muilenburg held too much power over the board of directors, where he has retained the dual role of chairman and CEO for over three years. At the company’s annual investor day last April, one out of three shareholders supported a proposal to restructure the board with an independent chairman. The proposal didn’t pass, but it earned a higher portion of votes than a similar measure last year.
Under Muilenburg’s leadership, Boeing tripled its stock price over three years. But the board failed to question his leadership decisions during one of the most tumultuous episodes in Boeing’s history, people close to the company told The Washington Post earlier this year.
Muilenburg losing the chairman role is “a signal that the board is not happy with the way business is being conducted,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.
Calhoun, a former General Electric executive, now faces the task of providing strong independent oversight to the company as it navigates Washington and prepares to return the 737 Max to flight. Boeing executives including Muilenburg are scheduled to testify at a hearing in Congress later this month.
In the announcement Friday, Calhoun said that “the board has full confidence in Dennis as CEO and believes this division of labor will enable maximum focus on running the business with the board playing an active oversight role.”
A new board member with aviation expertise could help the company ask tough questions about safety. No one on Boeing’s board in recent history has had technical experience with aviation safety. John H. Biggs, a former CEO of the TIAA-CREF insurance company, was a Boeing director during some of the discussions around the 737 Max and said he doesn’t remember anyone in that group questioning whether design decisions would create trade-offs that would affect safety.
Some corporate boards, such as JetBlue and Dow Chemical, mandate safety oversight in their bylaws, seeing it as a part of their duty to manage risks. This year, Boeing created a safety review committee on its board of directors, who consulted with internal and external experts to make a set of recommendations the company.
Boeing board members first learned about potential problems with the 737 Max software system shortly after the first plane crashed near Indonesia in October 2018, Calhoun said in an interview with The Post earlier this year. Calhoun’s review concluded that the software itself was working as intended, and had met the company’s criteria for safety when it was built. In the interview, he defended his group’s decision to keep the planes in the air. “I don’t regret that judgment,” he said. “And I don’t think we got it wrong at that time and that place.”
In March of this year, the software system was again activated in the moments before a crash of a 737 Max crashed into Ethiopia. The plane has since been grounded by global regulators.
Boeing has been working with the Federal Aviation Administration on a set of software fixes to the plane. After initially announcing that it would submit the fix for FAA review no later than April, the timeline for returning the Max to service has been continually pushed back. Some airlines are now preparing for a 737 Max grounding that could extend into 2020. The FAA has not committed to a firm timeline to lift the grounding order.
Boeing and its suppliers have been suffering financially. Boeing recently posted a $3.38 billion loss in the most recent quarter, the worst in company history.