Boeing at X-Roads?
- was an engineer that moved up through the ranks...
As a college drop-out, somehow Bill Boeing managed to muddle along at the helm of his company for a decade and a half. I’m guessing he counted a few beans along the way.
You are underselling the myth of Phil. By resume, Phil should have been the most successful Boeing CEO ever. He had the most robust engineering education credentials. He held all the right engineering jobs. Yet, he made some poor business decisions as CEO. Having an engineer as CEO will not inoculate Boeing against further failure.
As a college drop-out, somehow Bill Boeing managed to muddle along at the helm of his company for a decade and a half. I’m guessing he counted a few beans along the way.
As a college drop-out, somehow Bill Boeing managed to muddle along at the helm of his company for a decade and a half. I’m guessing he counted a few beans along the way.
This finally culminating with the MacDac merger (worked out in a hotel room over a weekend with almost no expert input) - not realizing that 'buying' closely held MacDac with Boeing stock would turn MacDac into the largest shareholders is the 'new' Boeing and hence putting MacDac in charge of the merged company.
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Interesting discussion. Makes one wonder how much foresight was available at the time of the merger, warning or at least cautioning about a looming slide down from greatness, the sometimes slow, sometimes dramatic slide to the current state of affairs.
Regardless here we are ("we" meaning Boeing and the various constituencies such as the taxpayers, the U.S. Federal Government and its many roles as customer and regulator (and recently, investigator), and customers in air transport, and even the educational system with its need for placement slots for newly minted engineers - especially engineers - seeking situations of gainful employment)). Of particular urgency (as SLF/atty) is that there's a re-acquisition pending, bringing Spirit AeroSystems back into the Boeing corporate entity.
It appears there exists a perhaps necessarily ambiguous divide between a CEO who is trained as an engineer and leads and strategizes using and within an engineering mindset on one hand, and a CEO who is an engineer by training but is more attuned to financial considerations in the leadership and strategy direction of such a mammoth multi-billion-dollar business organization on the other hand.
Perhaps a fling against the Spirit re-acquisition could clarify where the focus needs to be, and how to delineate it. In the Spirit re-acquisition, there will need to be a deal term concerning the production work the company performs for Airbus. How would an ideal CEO taking the top job at Boeing envision the main deal terms with respect to the Airbus production at Spirit at the present time?
I'm wondering if there is precedent for a major subcontractor getting acquired (for this purpose, I don't think the "re" of re-acquired is a material deal factor) when the sub produces major components for a direct competitor, let alone the only major competitor, of the acquiring company. Lurching into anti-trust law on the international level, if those legal rules are relevant, the solution doesn't seem obvious. What about any proprietary information of Airbus held by Spirit for its Airbus production work, or Intellectual Property with legal protection even stronger than run-of-the-mill proprietary information? (Drawing that distinction because principles of aeronautics through which aircraft design methods and techniques are derived wouldn't seem to be so different when derived in Toulouse as compared to Greater Seattle - but some stuff undoubtedly is more closely held than the mere proprietary. Obviously I'm not an I.P. lawyer, though.)
And what about labor relations? The complications presented would lengthen any post . . .
The re-acquisition is kind of a real-time case study. My inclination would be to construct a solid, sturdy "ethical wall", "walling off" the Airbus business entirely; make it a separate subdivision of the Spirit entity which will be rolled back into Boeing. In law firms, when there are potential conflicts of interest, but those potential conflicts result from factors which can be prevented from materializing into actual conflict of interest, firms determine, distribute internally, and observe pretty rigorously "ethical walls". These separate one group of lawyers from the rest, preventing contact of any sort about the legal matter which could, if contacts or communicaitons occurred, cause the potential conflict of interest to materialize. Law firms used to call these "Chinese walls" but I guess that went out of fashion sometime around or before 1990.
Wall the Airbus portion of Spirit off. It's not based on an engineering mindset, and it also isn't said in pursuit of any of Wall Street's sophisticated numbers games. Of course, as it is suggested here by an SLF/non-engineer/attorney, probably it proves why the CEO role must not be given to any lawyer.
Regardless here we are ("we" meaning Boeing and the various constituencies such as the taxpayers, the U.S. Federal Government and its many roles as customer and regulator (and recently, investigator), and customers in air transport, and even the educational system with its need for placement slots for newly minted engineers - especially engineers - seeking situations of gainful employment)). Of particular urgency (as SLF/atty) is that there's a re-acquisition pending, bringing Spirit AeroSystems back into the Boeing corporate entity.
It appears there exists a perhaps necessarily ambiguous divide between a CEO who is trained as an engineer and leads and strategizes using and within an engineering mindset on one hand, and a CEO who is an engineer by training but is more attuned to financial considerations in the leadership and strategy direction of such a mammoth multi-billion-dollar business organization on the other hand.
Perhaps a fling against the Spirit re-acquisition could clarify where the focus needs to be, and how to delineate it. In the Spirit re-acquisition, there will need to be a deal term concerning the production work the company performs for Airbus. How would an ideal CEO taking the top job at Boeing envision the main deal terms with respect to the Airbus production at Spirit at the present time?
I'm wondering if there is precedent for a major subcontractor getting acquired (for this purpose, I don't think the "re" of re-acquired is a material deal factor) when the sub produces major components for a direct competitor, let alone the only major competitor, of the acquiring company. Lurching into anti-trust law on the international level, if those legal rules are relevant, the solution doesn't seem obvious. What about any proprietary information of Airbus held by Spirit for its Airbus production work, or Intellectual Property with legal protection even stronger than run-of-the-mill proprietary information? (Drawing that distinction because principles of aeronautics through which aircraft design methods and techniques are derived wouldn't seem to be so different when derived in Toulouse as compared to Greater Seattle - but some stuff undoubtedly is more closely held than the mere proprietary. Obviously I'm not an I.P. lawyer, though.)
And what about labor relations? The complications presented would lengthen any post . . .
The re-acquisition is kind of a real-time case study. My inclination would be to construct a solid, sturdy "ethical wall", "walling off" the Airbus business entirely; make it a separate subdivision of the Spirit entity which will be rolled back into Boeing. In law firms, when there are potential conflicts of interest, but those potential conflicts result from factors which can be prevented from materializing into actual conflict of interest, firms determine, distribute internally, and observe pretty rigorously "ethical walls". These separate one group of lawyers from the rest, preventing contact of any sort about the legal matter which could, if contacts or communicaitons occurred, cause the potential conflict of interest to materialize. Law firms used to call these "Chinese walls" but I guess that went out of fashion sometime around or before 1990.
Wall the Airbus portion of Spirit off. It's not based on an engineering mindset, and it also isn't said in pursuit of any of Wall Street's sophisticated numbers games. Of course, as it is suggested here by an SLF/non-engineer/attorney, probably it proves why the CEO role must not be given to any lawyer.
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Bloomberg suggest a solution resembling my Engineer CEO / Wall Street savvy CFO duo. They say why not 2 CEOs?
I say why not an Engineer who has advanced grasp of business affairs (and Shanahan IS such a person) in tandem with a CFO who can look after the bottom line and restructuring of the company and who can speak to the shareholders and the investors in clear cut language?
And I'd say an equally powerfull COO, someone who will be able to make decisions in regard to who's gonna go in the middle ranks, what kind of remedial programs will be out in place, ensuring quality control is optimal etc..
Boeing needs a powerful triad of persons in my opinion not an all-encompassing, Napoleonic CEO like a Condit or a Jack Welch. The one man rule of corporate governance is over
I say why not an Engineer who has advanced grasp of business affairs (and Shanahan IS such a person) in tandem with a CFO who can look after the bottom line and restructuring of the company and who can speak to the shareholders and the investors in clear cut language?
And I'd say an equally powerfull COO, someone who will be able to make decisions in regard to who's gonna go in the middle ranks, what kind of remedial programs will be out in place, ensuring quality control is optimal etc..
Boeing needs a powerful triad of persons in my opinion not an all-encompassing, Napoleonic CEO like a Condit or a Jack Welch. The one man rule of corporate governance is over
The greatest challenge is going to be to convince investors that the days of ever rising stock prices and dividends is over. Boeing needs to spend a lot of money now, on the kinds of changes that will depress profitability in the short term, but will deliver the long term production stability essential to the future of the company.
My 22 year old daughter who has zero interest in aviation and even less knowledge of aeronautical matters expressed concern about whether she’d be flying on a Boeing for an upcoming short holiday.
If Boeing have trashed their reputation to this level, they need to be worried.
If Boeing have trashed their reputation to this level, they need to be worried.
A CFO who will be able not only to carry the company in the eyes of wall street, but will also support a CEO who's an Engineer in this regard. You either have a wall street oriented CEO or an Engineer. To have both is a tall order. So if the most likely scenario is that Boeing will have an Engineer-first, MBA-second CEO then the CFO will need to be their right hand person. And to help the company carry on until it can streamline the process adequately enough to get back in the black. In my opinion an Engineer as CEO will go a long way to bringing back customers and restoring confidence.
I woudl agree with that- CFO is a ahrd one to find if hes got the guts to hold his ground against pack of rabid Wall Steer Analysts who re mostly looking for unrealistic returns in an unrealistic time frame for an industry like this . becuas ethere are no competitors except AB who cannot behave like Boeing because of government pressures analyst cant compare Boeing with other entities so they have to push the line that Boeing needs to use its money better than it would like to itself . So fending those vultures off is a real challenge
Bloomberg suggest a solution resembling my Engineer CEO / Wall Street savvy CFO duo. They say why not 2 CEOs?
I say why not an Engineer who has advanced grasp of business affairs (and Shanahan IS such a person) in tandem with a CFO who can look after the bottom line and restructuring of the company and who can speak to the shareholders and the investors in clear cut language?
And I'd say an equally powerfull COO, someone who will be able to make decisions in regard to who's gonna go in the middle ranks, what kind of remedial programs will be out in place, ensuring quality control is optimal etc..
Boeing needs a powerful triad of persons in my opinion not an all-encompassing, Napoleonic CEO like a Condit or a Jack Welch. The one man rule of corporate governance is over
I say why not an Engineer who has advanced grasp of business affairs (and Shanahan IS such a person) in tandem with a CFO who can look after the bottom line and restructuring of the company and who can speak to the shareholders and the investors in clear cut language?
And I'd say an equally powerfull COO, someone who will be able to make decisions in regard to who's gonna go in the middle ranks, what kind of remedial programs will be out in place, ensuring quality control is optimal etc..
Boeing needs a powerful triad of persons in my opinion not an all-encompassing, Napoleonic CEO like a Condit or a Jack Welch. The one man rule of corporate governance is over
No doubt there are still excellent people within the company, but unless they are led to clean up the mess and institute, for real, the right practices and enforce them at the factory floor level, it won’t matter.
i wouldn’t put too much stock in the form of the leadership office, single, double, triple etc. But there needs to be accountability, checks and balances, etc.
What torques my jaws and should torque the jaws of every shareholder is the magnitude of the compensation packages and golden parachutes for people that failed miserably, in spite their “brilliance”.
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The problem you run into with trying to take away the 'golden parachutes' is that - in most cases - the retirement packages are contractually agreed to ahead of time (usually when they are hired or promoted). The only way you can legally not pay the golden parachute is to demonstrate intentional malfeasance (I suspect WillowRun can elaborate if needed). Unless you have something pretty blatant and obvious (stealing comes to mind) that results in criminal prosecution, trying to take away someone's contractual retirement package is usually just a way to make some lawyers a lot of money without accomplishing anything.
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In my law firm career I worked on several (and a few more were at the heart of litigation files when various types of things went bad); there are legal specialists in tax law and employee benefits who go after chapter and verse about technicalities, sometimes abstruse, in tax deferral, vesting, et cetera. Despite verging into the pedantic, I'm noting this because invariably this SLF/attorney reflects on the fact that while I might be "running" 6 or 8 or ten good-sized legal files in a firm, do I have any idea, any notion, of what it's like to get out of bed every morning and "get to work as CEO of", for instance, let's say as relevant here, RTX? So right, wrong or indifferent, the rather quite large contractual compensation packages of senior management at massive companies doesn't rile me up; with massive responsibilities come massive rewards.
But wait. Is it not widely acknowledged, by the aviation sector cognescenti as well as sensationalist and diligent press, that in the case of Boeing, very lucrative financial rewards flowed to executives with minimum (if any) claim to having produced great results throguh their leadership and direction of strategy? How to solve for a form of agreement which would protect against (just to pick on him here ) a Dennis Muilenburg walking away rather "fully loaded" while also providing incentives for honest-to-god superb engineering insight and business judgment producing great results? - that's the question, in my view. (I'll stand to be corrected if the ex-CEO in fact didn't exit with great financial take-aways.)
The solutions will not be found in contortions of the defintions of conditions for levels of severance payments. If the executive leaves under a discharge "for cause", little or no severance - but "cause" is a very high bar. And there often are complications when the resigning , or discharged, employee has potential legal claims to bring against the company (or a clever attorney who can conjure up the appearance of such potential claims). This leads to a cat-and-mouse thing of "we will pay more severance but you have to sign a valid release and waiver of all claims against the company." This truncated (and pedantic, sorry) overview leaves out several layers of complications.
But something else from private equity transactions might help, might even work pretty well. Let's say you own a business, and it's profitable and stable, and you find a buyer for it. The buyer wants to keep you on as an employee post-closing (of the transaction) because, after all, it was your smarts, drive, moxie, skills and abilities, and good will toward the business from customers and suppliers that made it profitable. So, .... buyer and seller agree on a sale price BUT only part is paid at closing, and two or three tranches are paid annually ONLY if the business, in each of those successive years, meets certain target financial results. The deferred sale price is often referred to as an "earn-out" - seller keeps working the business to targeted results, which continues to earn profits, and so does seller earn each annual tranche of the deferred sale price.
Why not adapt this form? The executive gets something under the contract for taking on a huge job, but the biggest parts of the financial package all are deferred, depending upon achievement of defined results.
Downside: if anyone thinks this would be easy to draft into an actual corporate agreement format, let alone for Boeing, I'll stand to be corrected. I mean, talk about making lawyers work hard, and lawyers sometimes earn what they receive, too.
Ultimately isn't this just a particularly egregious example of what happens when markets are unregulated ? I say this not as some rabid left winger but as a student of these things. Even the most extreme milton freedman type economists (even Hayek) recognised that markets had to regulated to work properly and have done so for for over 150 years. They plainly don't at the moment with for example the salary packages of CEOs are now at historically (and ridiculously) high levels when compared to average salary levels.
A further thing would be to ban companies from owning their own shares. I am sure this was the case in England when I did my bar exams 50-years ago. This would stop what is in effect a pyramid selling scam which leads to share prices becoming ever more inflated which of course boosts the salary packages of executives and so on and so on... Of course what I'm saying is that perhaps these things are inevitable in our current system where it seems the only that matters is profit and short termism.
A further thing would be to ban companies from owning their own shares. I am sure this was the case in England when I did my bar exams 50-years ago. This would stop what is in effect a pyramid selling scam which leads to share prices becoming ever more inflated which of course boosts the salary packages of executives and so on and so on... Of course what I'm saying is that perhaps these things are inevitable in our current system where it seems the only that matters is profit and short termism.
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But isn't that exactly the current situation - and the problem? Those "results" are almost always defined in financial terms: increased earnings, higher share prices, etc. Those quantitative measures drive behaviour that leads to offshoring, contracting out, share buybacks, etc., which in the near term may have positive financial benefits, but is ultimately detrimental to long-term success. Quantitatively measuring things like engineering prowess and corporate reputation is much tougher. I bet having a claw-back clause that cancelled half of your deferred incentives if there was a "quality control" failure under your watch (such as fuselage plug unexpectedly departing mid-flight) would certainly drive different leadership behaviour. Unfortunately, I just can't see corporate America adopting (or a prospective applicant accepting) such terms.
Executive employment agreements, which are the vehicle for tax-deferred compensation, stock,option incentive comp., and severance payments under various categories of reasons for termination of employment, unquestionably are not the norm in the American economy and workforce. Even highly educated and technical occupational or professional roles - such as Engineering - rarely see these types of agreements.
In my law firm career I worked on several (and a few more were at the heart of litigation files when various types of things went bad); there are legal specialists in tax law and employee benefits who go after chapter and verse about technicalities, sometimes abstruse, in tax deferral, vesting, et cetera. Despite verging into the pedantic, I'm noting this because invariably this SLF/attorney reflects on the fact that while I might be "running" 6 or 8 or ten good-sized legal files in a firm, do I have any idea, any notion, of what it's like to get out of bed every morning and "get to work as CEO of", for instance, let's say as relevant here, RTX? So right, wrong or indifferent, the rather quite large contractual compensation packages of senior management at massive companies doesn't rile me up; with massive responsibilities come massive rewards.
But wait. Is it not widely acknowledged, by the aviation sector cognescenti as well as sensationalist and diligent press, that in the case of Boeing, very lucrative financial rewards flowed to executives with minimum (if any) claim to having produced great results throguh their leadership and direction of strategy? How to solve for a form of agreement which would protect against (just to pick on him here ) a Dennis Muilenburg walking away rather "fully loaded" while also providing incentives for honest-to-god superb engineering insight and business judgment producing great results? - that's the question, in my view. (I'll stand to be corrected if the ex-CEO in fact didn't exit with great financial take-aways.)
The solutions will not be found in contortions of the defintions of conditions for levels of severance payments. If the executive leaves under a discharge "for cause", little or no severance - but "cause" is a very high bar. And there often are complications when the resigning , or discharged, employee has potential legal claims to bring against the company (or a clever attorney who can conjure up the appearance of such potential claims). This leads to a cat-and-mouse thing of "we will pay more severance but you have to sign a valid release and waiver of all claims against the company." This truncated (and pedantic, sorry) overview leaves out several layers of complications.
But something else from private equity transactions might help, might even work pretty well. Let's say you own a business, and it's profitable and stable, and you find a buyer for it. The buyer wants to keep you on as an employee post-closing (of the transaction) because, after all, it was your smarts, drive, moxie, skills and abilities, and good will toward the business from customers and suppliers that made it profitable. So, .... buyer and seller agree on a sale price BUT only part is paid at closing, and two or three tranches are paid annually ONLY if the business, in each of those successive years, meets certain target financial results. The deferred sale price is often referred to as an "earn-out" - seller keeps working the business to targeted results, which continues to earn profits, and so does seller earn each annual tranche of the deferred sale price.
Why not adapt this form? The executive gets something under the contract for taking on a huge job, but the biggest parts of the financial package all are deferred, depending upon achievement of defined results.
Downside: if anyone thinks this would be easy to draft into an actual corporate agreement format, let alone for Boeing, I'll stand to be corrected. I mean, talk about making lawyers work hard, and lawyers sometimes earn what they receive, too.
In my law firm career I worked on several (and a few more were at the heart of litigation files when various types of things went bad); there are legal specialists in tax law and employee benefits who go after chapter and verse about technicalities, sometimes abstruse, in tax deferral, vesting, et cetera. Despite verging into the pedantic, I'm noting this because invariably this SLF/attorney reflects on the fact that while I might be "running" 6 or 8 or ten good-sized legal files in a firm, do I have any idea, any notion, of what it's like to get out of bed every morning and "get to work as CEO of", for instance, let's say as relevant here, RTX? So right, wrong or indifferent, the rather quite large contractual compensation packages of senior management at massive companies doesn't rile me up; with massive responsibilities come massive rewards.
But wait. Is it not widely acknowledged, by the aviation sector cognescenti as well as sensationalist and diligent press, that in the case of Boeing, very lucrative financial rewards flowed to executives with minimum (if any) claim to having produced great results throguh their leadership and direction of strategy? How to solve for a form of agreement which would protect against (just to pick on him here ) a Dennis Muilenburg walking away rather "fully loaded" while also providing incentives for honest-to-god superb engineering insight and business judgment producing great results? - that's the question, in my view. (I'll stand to be corrected if the ex-CEO in fact didn't exit with great financial take-aways.)
The solutions will not be found in contortions of the defintions of conditions for levels of severance payments. If the executive leaves under a discharge "for cause", little or no severance - but "cause" is a very high bar. And there often are complications when the resigning , or discharged, employee has potential legal claims to bring against the company (or a clever attorney who can conjure up the appearance of such potential claims). This leads to a cat-and-mouse thing of "we will pay more severance but you have to sign a valid release and waiver of all claims against the company." This truncated (and pedantic, sorry) overview leaves out several layers of complications.
But something else from private equity transactions might help, might even work pretty well. Let's say you own a business, and it's profitable and stable, and you find a buyer for it. The buyer wants to keep you on as an employee post-closing (of the transaction) because, after all, it was your smarts, drive, moxie, skills and abilities, and good will toward the business from customers and suppliers that made it profitable. So, .... buyer and seller agree on a sale price BUT only part is paid at closing, and two or three tranches are paid annually ONLY if the business, in each of those successive years, meets certain target financial results. The deferred sale price is often referred to as an "earn-out" - seller keeps working the business to targeted results, which continues to earn profits, and so does seller earn each annual tranche of the deferred sale price.
Why not adapt this form? The executive gets something under the contract for taking on a huge job, but the biggest parts of the financial package all are deferred, depending upon achievement of defined results.
Downside: if anyone thinks this would be easy to draft into an actual corporate agreement format, let alone for Boeing, I'll stand to be corrected. I mean, talk about making lawyers work hard, and lawyers sometimes earn what they receive, too.
Personally, and I realize I am being hopelessly naive here but the solution is to incentivize investment in products over short term profits. Banning stock buybacks would IMO be a good first step. Boeing said they need 50 Billion for their next product, but they spent 40 Billion in the last 10 years on stock buybacks. Seems to me we probably wouldn't be having this conversation if that 40 Billion had been spent on airplanes rather than used to juice the stock price to inflate C suite bonuses.