Editor's Note: This column was co-authored by Matt Cole.
Boeing’s misaligned priorities have caused yet another high-profile spectacle — this time marooning two astronauts in space — as faulty parts and critical errors have put lives at risk, illustrating that heavily-prioritized social and environmental goals lead to dangerous situations and financial losses.
Specifically, by politicizing the once-storied company’s executive compensation policies, Boeing has removed focus on quality and safety and led to this disastrous situation where the first astronauts to fly in its Starliner, Barry Wilmore and Sunita Williams, have been stranded for two months due to numerous mechanical failures. Now NASA is suggesting that they may not get home until next year.
This is a sad chapter in a story of what can happen when a company loses sight of its mission. Boeing, once admired and trusted across the globe, has had a string of self-inflicted wounds in recent years, because it eschewed safety in favor of DEI. Of course it is right to treat everyone equally with dignity and respect, but at Boeing and many other companies, DEI has morphed into an ideology that has supplanted common sense and decency with political agendas.
Boeing’s website is filled with references to politicized DEI, from diversity quotas, to ESG reports full of DEI mandates, to supplier diversity programs, to funding race-based organizations, to press releases where the recently-ousted CEO David Calhoun claimed that advancing DEI is “one of the most important things we can do.” Preventing the critical thruster failures and helium leaks that have plagued the Starliner deserve such focus.
DEI permeates Boeing’s corporate culture. As one Boeing whistleblower stated, “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 . . . it became part of the culture and was tied to compensation.”
The late Charlie Munger once quipped “if you have a dumb incentive system, you get dumb outcomes.” This is precisely what has happened at Boeing.
Boeing pays its executives, in part, based on five equally weighted factors: stability, quality (its two product safety metrics), employee safety, climate, and DEI. In other words, ESG is just as important to Boeing as product safety. In fact, Boeing’s own ratings suggest that its leaders are working more on ESG and DEI than on their failing products.
In its most recent proxy statement, Boeing gave its executives a score of 0 to 40 on these metrics on the five factors. On stability, the company’s executives scored 16 out of 40 (an F), 0 out of 40 on quality (an F) but managed a perfect 40 of 40 (an A+) on both climate and DEI.
It is likely of little comfort to astronauts Wilmore and Williams that Boeing is reducing its carbon emissions. The terrified passengers on a recent Alaska Airlines flight in which an improperly installed Boeing door blew out midflight were not reassured by the fact that the company is hiring and promoting folks based on gender and skin color. And it is doubtful that the families of those who perished in the two 737 Max crashes take any comfort in the fact that Boeing spends as much time focused on greenhouse gases and inclusion policies as it does on the stability and quality of its airplanes.
Strive penned a letter to Boeing’s new CEO Robert “Kelly” Ortberg, urging him to right the ship. That begins by recommitting to a culture of safety and rejecting DEI.
Boeing needs to get back to basics: improve their products by hiring the best people for the job and compensating based on their successes. It is as simple as that.
Boeing’s executive compensation policy is reckless. Mr. Ortberg and the board of directors must immediately overhaul the entire executive compensation structure. Boeing’s mission is to “to protect, connect and explore our world and beyond.” It can’t do the latter well if it doesn’t prioritize the former.
Justin Danhof, EVP, Corporate Governance of Strive Asset Management
Matt Cole, CEO of Strive Asset Management
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