In a second day of hearings to question Boeing (BA) executives about the design and certification its grounded 737 Max, Democratic House representatives skewered CEO Dennis Muilenburg over his receipt of millions in annual compensation in the wake of two Max crashes that killed 346 people.
In 2018, Boeing paid Muilenburg an annual salary of $1.7 million, plus $7.3 million in stock awards, $13.1 million in incentive compensation, and $1.3 million in other compensation for total compensation of approximately $23.4 million. That pay goes up to $30 million when delayed stock payouts received that year are included.
“Are you giving up any money?” Rep. Steve Cohen (D-TN) a member of the House Transportation Committee, asked Muilenburg in a heated exchange Wednesday during the hearing. “You're not giving up any compensation at all? You're continuing to work and make $30 million a year after this horrific two accidents that caused all these people's relatives to ... disappear, to die?”
Questions about forgoing compensation were raised by multiple lawmakers as one way Muilenburg and senior executives could show accountability for fatal crashes on his watch. Shortly after takeoff from Jakarta, Indonesia on October 29, 2018 Lion Air Flight 610 crashed into the Java Sea, killing all 189 people on board.
Less than five months later on March 10 Ethiopian Airlines Flight 302 crashed shortly after takeoff from Addis Ababa and killed all 157 people on the flight — which prompted the FAA to ground the MAX on March 13.
It’s not unprecedented for CEOs to forgo compensation in the wake of scandals or tragedy, either voluntarily or not. In 2016, Wells Fargo’s then-CEO was forced to relinquish $40 million in pay after its fake-accounts scandal. The next year, then-Yahoo CEO Marissa Mayer lost her bonus and and equity awards after a security breach hit millions of accounts. (At the time, Mayer also oversaw Yahoo Finance, which was part of Yahoo.)
In Wednesday’s hearing, lawmakers suggested that Muilenburg should consider relinquishing some of his own pay.
"What does accountability mean?” Cohen asked. “These people's relatives are not coming back, they're gone. Your salary is still on — is anybody at Boeing taking a cut or working for free to try to rectify this problem, like the Japanese would do?"
Muilenburg repeated that he did not take on Boeing’s top position for money, but he did not acquiesce to any of the lawmakers’ requests to voluntarily reduce his pay. Instead, he said, he would defer to the company’s board to determine his fate.
"It's not about the money for me,” Muilenburg said. “My company and I are accountable. That accountability starts with me. And our board recently took some actions regarding my position.” Boeing’s board recently stripped Muilenburg of his chairmanship, though he remains a director.
A $15 million bonus after the Lion Air Crash
Lawmakers also took issue with the timing of a bonus paid after the Lion Air crash in October 2018.
“You received, after that crash, a $15 million bonus,” Committee Chairman Peter DeFazio (D-OR) said. “What are the consequences? Who is taking principal responsibility? Who is going to be held accountable, fully accountable?”
Muilenburg said he was personally responsible for Boeing aircraft, along with his company, and later reminded lawmakers that last week Boeing announced that for 2019 it expects its annual executive bonus cycle to be a “zero payout.”
“I'm not sure what accountability means if accountability means [if] you received a $15 million bonus after these planes crashed,” Rep. Daniel Lipinski (D-IL) added.
Another compensation concern — stock options
Rep. Angie Craig (D-MN) raised a third compensation concern, asking Muilenburg for assurance that he would not profit based off expected swings in Boeing’s stock price.
“If I look at Morgan Stanley’s report, they expect, once these planes are ungrounded, your stock potentially to reach $500 a share,” she said, explaining that the scenario would garner Muilenburg approximately $30 million based on his current holdings that include non-vested stock options and restricted and performance-based stock units.
“If your board in February when they meet...awards you stock options for the 2019 time period, will you commit to this committee that you will decline those rewards?” Rep. Craig asked.
Muilenburg reiterated that Boeing no longer issues stock options, and left up to the board whether to alter his pay.
“I don’t care about your [bonus] or any management teams’ bonuses. What you’re compensated is up to your board,” Republican congressman Rep. Paul Mitchell said, before asking Muilenburg if he had submitted his letter of resignation to the board.
“Congressman, I have not. I'm responsible. This these two accidents happened on my watch. I feel responsible to see this through,” Muilenburg said.
In addition to compensation that victims’ families may be awarded through litigation, Boeing established a $100 million fund, $50 million of which will be evenly distributed between the families. Under the rules administered by a third party, each family is entitled to approximately $144,500, which represents about 0.5% of Muilenburg’s 2018 compensation.
Alexis Keenan is a reporter for Yahoo Finance and a former litigation attorney. Follow her on Twitter @alexiskweed.
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