Boeing CEO Dennis Muilenburg will take a significant cut in pay for 2019 and 2020, according to the company’s new chairman.
In an interview on CNBC Tuesday morning, Dave Calhoun, who was named Boeing’s chairman last month when the board stripped Muilenburg of that title, said that the CEO called him Saturday morning to suggest he shouldn’t take any stock or bonus money for this year.
The pay cut is due to widespread criticism of the company after two fatal 737 Max crashes that killed 346 people and have been tied to a faulty safety system on the plane. The jet has been grounded since March, which has cost airlines billions of dollars, and Boeing is preparing to pay those customers $5 billion in compensation, as well as reaching settlements with families of the crash victims.
The stock and bonus make up the overwhelming majority of Muilenberg’s pay. In 2018, he received total compensation of $23.4 million, of which $20.4 million was in the form of stock and bonuses.
Calhoun added that the Boeing board believes Muilenburg has done everything right during this crisis and that the CEO still has the board’s confidence, and thus is the right person to continue to lead the company.
“He has set us up for a return to service,” Calhoun said.
Last week, Muilenburg faced two days of harsh questioning on Capitol Hill from House and Senate committee members, some of whom questioned whether he should resign or give up his pay.
“You said you’re accountable. What does accountability mean? Are you taking a cut in pay? Are you working for free from now on until you can cure this problem,” said Rep. Steve Cohen, a Democrat from Tennessee, in the second day of hearings.
Pointing to family members of the crash victims in the hearing room, he continued, “These people’s relatives are not coming back. They’re gone. Your salary is still on…You’re continuing to work and make $30 million a year after…two accidents that caused all these people’s relatives..to die.”
“Congressman, it’s not about the money for me,” responded Muilenburg.
Questioned about whether he would give up any pay, he responded, “My board will conduct a comprehensive review.”
Calhoun said that Boeing would not seek the return of any of Muilenburg’s past pay. But he said the reduced pay would continue throughout next year. Muilenburg will receive no stock grants until the plane is fully back in service.
That process includes not only certification from aviation authorities around the globe, but also delivery of about 400 jets that Boeing has built during the grounding but not yet delivered. Those deliveries won’t be completed until early 2021, according to the company.
“That’s a long program. It’s at least a year,” said Calhoun. “It’s a tough, important task. And we believe he’s up to it. He is an asset.”
But he also said that the Boeing board would continue to make assessments as to whether or not Muilenburg is the right person to lead the company.
Asked if Muilenburg would still be on the job once the plane returns to the air, Calhoun said, “Why speculate on that?” He added that “the board deliberates every single meeting on the subject of our leaders and how well they’re doing and do they have our confidence. As recently as Sunday evening, he has our confidence.”
Boeing just replaced Kevin McAllister, who had been president and CEO of Boeing Commercial Airplanes, the unit of Boeing that builds the Max and other passenger jets. McAllister joined Boeing in November 2016 when the Boeing 737 Max was well on its way to certification and after the flawed safety feature at issue in the crashes was already part of the jet’s design.
Muilenburg was named president of Boeing in 2013 and CEO in 2015, coming to the job from the defense business side of the company.
“Remember, Dennis didn’t create this problem,” Calhoun said Tuesday.
Calhoun said that Muilenburg met with families of crash victims last week when he was in Washington for the two days of hearing, an experience that “changed him for life,” according to Calhoun.