– December 23, 2019
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Dennis Muilenburg is now the former CEO of Boeing. His $24 million per year salary package is no more. This comes about due to the fiasco over the 737 MAX jetliner, which crashed twice and cost 346 lives. 

Maybe it seems unfair. 

No one thinks Muilenburg was directly responsible for the technical/software issues that led to the two crashes, issues that are now (most likely) fixed while Boeing awaits approval to get these hugely expensive (and quite glorious) planes back in the air. But because there is such uncertainty over the date, the company was forced to suspend production, bringing about as much as $22 billion in losses. 

Muilenburg himself started working at Boeing in 1985 as an engineering intern. He worked his way up the company. Thirty years later, he was CEO, having inherited the 737 which was already in production. He has himself said that he was kept in the dark about the software issues or even the upgrade that led to the problem. 

During his tenure, he had done great things. As the Wall Street Journal summarized, “Mr. Muilenburg focused on weak spots in Boeing’s sprawling operations. He secured long-term labor deals, addressed a pension deficit and reversed slowing defense sales.”

So the question is: why should he be tossed out, even if none of his actions were responsible for the problem? 

The answer is that he nonetheless bears responsibility. If Boeing’s stock were rising, sales were increasing, supply chains gaining efficiencis, the whole world would be prepared to credit Muilenburg for all things, even those for which he bore no responsibility. That’s the perk of being the CEO. 

But that is not why CEOs get paid so much. The point of genuine leadership is not only to bask in the glory of successes whether or not the CEO is actually responsible. The point is that the CEO must also bear responsibility for failures, even those that were not his doing. 

This, in fact, is the whole point of leadership at any level of enterprise, from the manager of the flower section at the grocery store to the CEO of Boeing. The job entails being prepared to accept all the costs of every bad decision at every level of the company. That means something utterly and completely implausible: one man bears the cost of every screwup of any one of 153,000 employees. 

This reality speaks to a gigantic confusion about the nature of corporate leadership. It is not about being a big shot, getting paid more than you could spend in a lifetime, being celebrated and deferred to every day. What it’s really about is sleepness nights, endless stress, unrelenting anxiety, nonstop fear that something is going wrong, and a profound awareness that the adulation of Friday could – for no reason connected to your performance – turn into a humiliating termination on Monday. 

People think that being the CEO of such a company is a glorious privilege that comes with oceans of money being dumped on your head. Who wouldn’t want such a job? Surely it means that you have made it. But this popular view overlooks the actual point of leadership. Real leadership means having the humility to serve not only employees but customers and stockholders, meaning millions and billions of people, plus being willing to accept all blame for every inevitable mistake. 

The CEO never gets to “pass the buck.” This phrase comes from poker in the frontier days, when a buck knife would be stuck in the table next to the person who is slated next to deal the cards. If he chooses not to, he can pass the knife. Harry Truman picked up on it with his famous declaration that the “buck stops here,” which is to say that he bears full responsibility for all failures in his tenure. 

This sounds easier than it is in real life. In a typical company, there are managers and directors at every level, and mistakes are made every day. A bad manager/director/leader will try to find the culprit and out the person to the people ahead of him in the pecking order. “That wasn’t my fault; that was Judy in the mailroom; she is terrible.” 

People who do this – we’ve all known them – do not actually succeed over the long term. They sew suspicion, promote gossip, instill fear, and breed widespread resentment. This works for a while until someone more sophisticated figures out the game. Then they get the axe and everyone celebrates. This is the way bad character works itself out in a company setting. 

A good manager/director/leader should be willing to assure everyone under him that he will assume responsibility for every error made under his watch. This should be stated explicitly. This has three effects: 1) it relieves employees of fear of being unjustly blamed, 2) it motivates employees to take risks, 3) it causes people to respect the character of a person who is willing to say this and act on it. 

Truth is that such managers are very rare. Those who are able to bear responsibility – and do so sincerely and consistently – tend to rise up in competitive environments. Here is the real skill of the CEO, that ability to carry the weight of the whole success or failure of a company on his or her back, and not complain or otherwise go insane as a normal person would. 

The failure of the 737 was a disaster for Boeing. There were many people to blame: regulators, technicians, flight trainers, quality assurance teams. But in the end, the buck stops with the CEO. It is entirely right that Muilenburg should bear the responsibility. That’s what it means to be a CEO. That’s what is right and just. 

Jeffrey A. Tucker

Jeffrey A. Tucker is Editorial Director for the American Institute for Economic Research. He is the author of many thousands of articles in the scholarly and popular press and eight books in 5 languages, most recently The Market Loves You. He is also the editor of The Best of Mises. He speaks widely on topics of economics, technology, social philosophy, and culture. He is available for speaking and interviews via his emailTw | FB | LinkedIn
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