Boeing, maker of airplanes, has paid $160 million to Alaska Air Group to compensate that customer for lost profits following the midair blowout of a door plug on a Boeing plane sold to that company. The accident and subsequent forced grounding of Alaska Air’s jets had a negative impact on Alaska Air’s income. Alaska Air said it expects more compensation from Boeing in the future.
Now that’s a great way to make a profit: sell your customers poor quality products and then compensate them for the inconvenience. What was Boeing thinking? What went wrong? We get an answer from a recent interview by Chrisopher Rufo with a Boeing employee. In short, Boeing’s corporate culture and its values drove it to acting stupidly, not taking care of stakeholders and in so doing, failing at capitalism 101.
Christopher Rufo: In general terms, what is happening at Boeing?
Insider: At its core, we have a marginalization of the people who build stuff, the people who really work on these planes.
So, right now, we have an executive council running the company that is all outsiders. The current CEO is a General Electric guy, as is the CFO, whom he brought in. And we have a completely new HR leader, with no background at Boeing. The head of our commercial-airplanes unit in Seattle, who was fired last week, was one of the last engineers in the executive council.
The headquarters in Arlington is empty. Nobody lives there. It is an empty executive suite. The CEO lives in New Hampshire. The CFO lives in Connecticut. The head of HR lives in Orlando. We just instituted a policy that everyone has to come into work five days a week – except the executive council, which can use the private jets to travel to meetings. And that is the story: it is a company that is under caretakers. It is not under owners. And it is not under people who love airplanes.
In this business, the workforce knows if you love the thing you are building or if it’s just another set of assets to you. At some point, you cannot recover with process what you have lost with love. And I think that is probably the most important story of all. There is no visible center of the company and people are wondering what they are connected to.
Rufo: If they have lost the love of building airplanes, what is the love, if any, that they bring to the job?
Insider: Status games rule every boardroom in the country. The DEI narrative is a very real thing and at Boeing, DEI got tied to the status game. It is the thing you embrace if you want to get ahead. It became a means to power.
The radicalization of HR doesn’t hurt tech businesses like it hurts manufacturing businesses.
Service means you are spending the extra time to understand what’s really happening in the factory and in your supply chain. There should be some honor in understanding that we inherited something beautiful and good and worth loving.
Boeing’s outgoing CEO, David Calhoun, for his leadership in 2023, received from the company $33 million in compensation, mostly from awards of stock and not company cash – only $1.4 million in salary. But as discipline for the door plug blowout on a 737 MAX jet this past January, for 2024, Calhoun and other senior executives will get 22% less in shares of Boeing stock than originally proposed. Calhoun also gave up a cash bonus for 2023 in the amount of $2.8 million.
Even with such reduced compensation, Calhoun is not hurting financially, but the company surely is.