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After 737 Max, Boeing Separates CEO, Chairman Jobs

Bill Koenig
By Bill Koenig Senior Editor, SME Media

COMMENTARY Boeing Co.’s 737 Max crisis just had one impact on the aircraft maker — its board opted to separate the jobs of chief executive officer and chairman.

The company announced the move on Friday. CEO Dennis Muilenburg no longer is chairman of the board. Instead, its lead independent director,  David L. Calhoun, is now non-executive chairman.

The action occurs as Boeing tries to return the 737 Max, one of its most important aircraft, back into service. The plane was grounded following two crashes that killed 346 people.

“The board said splitting the chairman and CEO roles will enable Muilenburg to focus full time on running the company as it works to return the 737 MAX safely to service, ensure full support to Boeing’s customers around the world, and implement changes to sharpen Boeing’s focus on product and services safety,” Boeing said in its statement.

The grounding of the 737 Max has hit Boeing’s bottom line. The aircraft maker reported a second-quarter loss of $2.94 billion, its worst quarterly loss in 10 years.  That compared with a year-earlier profit of almost $2.2 billion.

Earlier on Friday, a group of regulators from various agencies criticized both Boeing and the Federal Aviation Administration concerning the certification of the 737 Max. The group said in a report that Boeing withheld some information from pilots and regulators. (For more details, see stories by The New York TimesThe Associated Press and Reuters.)

The 737 Max grounding threatens not only Boeing’s finances but its image. Once trust is lost, it can be difficult to regain. The company has been working on a software fix. It wants to get the 737 Max back into the air before the end of the year.

An Old Debate

Boeing’s revamping of its management structure is a reminder of a long-standing debate.

There has long been a school of thought in corporate governance that the same person should not be CEO and chairman of the board. The argument is a board chairman should be independent of the CEO. And, to some extent, companies have acted on the idea.

The percentage of S&P 500 companies with the same individual held the CEO and chairman posts slipped to 45.6 percent in 2018, down from 48.7 percent in 2017, according to data compiled by ISS Analytics for The Wall Street Journal earlier this year.

One high-profile example was Tesla Inc., the electric-car maker. In 2018, CEO Elon Musk agreed to relinquish the chairman title for three years as part of a settlement with the U.S. Securities and Exchange Commission. The SEC had filed a securities fraud lawsuit after Musk posted a tweet saying he was considering taking Tesla private and financing had been arranged.

GM, Ford

In the auto industry, General Motors Co., at times, separated the CEO and chairman jobs. Current CEO Mary Barra spent the first two years of her tenure without the chairman title. However, in 2016, the board elected her as chairman.

At Ford Motor Co., the two jobs have been separated since 2006. Bill Ford, a great-grandson of company founder Henry Ford, had held both positions. But he yielded the CEO post to Alan Mulally in September 2006 as the automaker struggled. Bill Ford’s title was tweaked at that time to executive chairman. He has kept that post while two others, including current chief Jim Hackett, have held the CEO title since Mulally retired.

Boeing’s Friday announcement revives the debate about keeping the CEO and chairman posts separate. It also focuses even more attention on CEO Muilenburg’s efforts to get the 737 Max off the ground.

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