Monday, April 22, 2024
HomeFinanceInside the cockpit at Boeing: Here are the top 5 candidates for...

Inside the cockpit at Boeing: Here are the top 5 candidates for CEO as Dave Calhoun exits


Having known the past six CEOs of Boeing personally across multiple corporate governance crises, my phone has been ringing off the hook since the abrupt announcement of a massive shakeup in Boeing’s leadership ranks, including the retirement of CEO Dave Calhoun at the end of the year, the replacement of Board Chair Larry Kellner, the immediate resignation of Boeing Commercial Airplanes CEO Stan Deal, and the appointment of Stephanie Pope as the new head of Commercial.

There should be no question that this governance carnage at Boeing is tragic for all involved. Not only is this revered, iconic pillar of American greatness badly hobbled amidst safety crises, but now its senior executive ranks have been hollowed out, with the board urgently searching for a leadership reset amidst a lack of obvious successors.

If Boeing is to succeed, the board must get its choice of the next CEO right. Here’s what we hear from Boeing insiders about Dave Calhoun’s legacy at Boeing, and who could pilot the company next amidst a wide-open field of potential candidates.

The end of an era after Calhoun reinvented Boeing and its top ranks in his image

I should make it clear that I have known and liked Calhoun for decades, dating back to his time at Nielsen. I have previously given Calhoun credit for some things he did well, such as when he returned many Boeing 737 MAXs to the skies after the tragic 2018/2019 accidents, his transparent public communications, and restoring Boeing’s deliveries to China after a years-long hiatus. Even his detractors can point to instances in which they admired his leadership, such as when he chose the difficult but right path of permanently and fully exiting Russia when his main competitor Airbus continued on with Russian sourcing and even stepped into Boeing’s vacated Russian supply chain. But as Calhoun exits, we cannot ignore the equally frequent complaints we heard throughout the duration of his tenure.

Some of Calhoun’s challenges grew out of his unique path to Boeing’s top job, as well as his efficiency and profit-hyperfocused leadership style. Calhoun is nobody’s definition of a warm and fuzzy personality, nor was he seen internally as a culture carrier of excellence and safety. From the beginning, many Boeing employees eyed Calhoun suspiciously after he came off the board to assume the reins as CEO in 2020. Despite rumors that he wielded disproportionate influence since he joined the Boeing board in 2009, developing a close working relationship with previous CEO Jim McNerney and successor Dennis Muilenburg, one of Calhoun’s first moves as CEO was to give a widely-panned interview to David Gelles of The New York Times, throwing his predecessors under the plane and claiming ignorance of the extent of the company’s woes, which shocked many Boeing employees and alienated them from the outset.

From there, Calhoun’s detractors argue that he consolidated control by methodically pushing out dissenters, replacing Boeing veterans with decades of service with loyalists who had followed him from GE to Nielsen to Boeing, and layering over holdover senior executives with surprise internal promotions, plucking favored mid-level executives out of obscurity and plopping them directly into some of the company’s most senior positions while hollowing out Boeing’s ranks of veteran executives. No wonder one former Boeing executive described Calhoun’s brain trust to me as a “good ‘ole boys club” of GE castaways.

Molded by his formative GE years, I heard over and over that Calhoun’s prioritization of execution, to the point of arguably neglecting all else, inspired chilling visions of Jack Welch coming back to life in many of his employees. As one insider put it to me, under Calhoun and his handpicked deputies, Boeing became so consumed by production goals that they’re missing them, as Calhoun failed to lead a needed cultural change from one of production efficiency and profit to one of excellence and safety, and tripled down on that approach. Sadly, the spillover cannot be reversed overnight: Even now, amidst heightened safety focus, stunningly, when FAA Chairman Mike Whitaker toured the Renton, Washington factory this month, he was surprised by how little focus there was on safety and quality.

No quick fixes for governance turbulence: The pros and cons of top CEO candidates

Now, the Boeing board is having to reckon with the difficult consequences of the tradeoffs made by Calhoun as their neglect of culture, safety, and quality catches up to them–a task made doubly hard by the depletion of the ranks of potential internal successor candidates. The proof is in the pudding: The board has allowed Calhoun to stay on as CEO until the end of the year, with presumably at least some ability to influence his own succession, which speaks to how completely the senior executive ranks have been hollowed out on his watch. If there were a more obvious successor candidate with genuine operational expertise, Calhoun would probably already be out. But that does not mean the Board does not still need to make a change sooner.

There is similarly no obvious external successor candidate, leaving the Boeing CEO race wide open for the first time in decades. Each of some of the top candidates floated bring their own pros and cons. We evaluate five of them with deep aviation and aerospace backgrounds–but the field could not be more fluid and new entrants will surely emerge in the weeks and months ahead, including possible entrants from outside the aviation industry.  

1. Stephanie Pope, the newly appointed CEO of Boeing Commercial Airplanes

Stephanie PopeStephanie Pope
Boeing named insider Stephanie Pope as the new CEO of its commercial airplanes division.

Geoffroy Van Der Hasselt—AFP/Getty Images

Pope is widely rumored to be the leading internal candidate as Calhoun’s handpicked successor, but many insiders we’ve spoken to question whether she has the genuine operational expertise to run Boeing. For decades, Pope was a midlevel finance executive working under Greg Smith, the longtime Chief Financial Officer of Boeing, but her career was turbocharged after Calhoun arrived. In the span of four short years, she leapfrogged legions of more experienced executives with rapid successive promotions to CFO of Boeing Commercial, president of Boeing Global Services, Boeing COO, and now CEO of Boeing Commercial, her most challenging assignment yet.

Pope’s prospects could not be more directly aligned with how well and how soon Boeing can address the immediate safety crises and restore the faith of the flying public, customers, and regulators. If Boeing continues to struggle, it is hard to see the board going for anyone internal as Calhoun’s successor. Furthermore, any internal candidates could find themselves distracted by the ongoing criminal inquiry into Boeing, regardless of their own personal culpability or lack thereof.

2. Greg Smith, the former Chief Financial Officer of Boeing

ERIC PIERMONT – AFP – Getty Images

In all our conversations with Boeing insiders, current and former, we kept hearing one name over and over again: Greg Smith. I’ve never met Smith, but was surprised to find how his popularity uniquely transcends divisions and ranks across the Boeing workforce.

A three-decade veteran of Boeing who served as Chief Financial Officer until his retirement in 2021, Smith is now chair of American Airlines, providing him a continued front-row seat to Boeing’s operational woes.

Despite coming from a financial background, we hear Smith has deep knowledge of the operational side of the business. Other dynamo CFOs with deep grounding in their organization such as Indra Nooyi at Pepsi, Safra Catz at Oracle, and James Gorman at Morgan Stanley successfully navigated the transition from CFO to CEO painlessly. Like them, Smith could be seen as a genuine Boeing veteran and insider without being too closely attached to the incumbent Calhoun regime, though whether this is a good or a bad thing for Smith’s prospects will depend on how well Boeing can navigate its way back to public credibility in the months ahead. A return to Boeing for Smith would be akin to the highly successful return to Coca-Cola of Neville Isdell as CEO in 2004.

3. David Gitlin, the CEO of Carrier Global

Al Drago – Bloomberg – Getty Images

Gitlin’s key advantage doubles as the key knock against him. He has been a member of the Boeing board for two years, and he could almost be too knowledgeable about Boeing’s safety challenges given his prior experiences even before joining the Boeing board. He has impressive credentials as the very effective president of Aerospace Customers & Business Development; president of Auxiliary Power, Engine & Control Systems; VP and general manager of Hamilton Sundstrand Power Systems; VP of Pratt & Whitney programs, and general manager of Rolls-Royce/General Electric programs. Gitlin also served in roles at the corporate office of United Technologies Corporation and Pratt & Whitney.

As the former president of Collins Aerospace before joining Carrier Global, Gitlin’s candidacy may be questioned, whether rightly or wrongly, due to his perceived association with the MCAS system manufactured by Collins and notorious for its role in two fatal accidents of the 737 MAX in 2018 and 2019, which killed nearly 350 people.

Gitlin’s supporters argue that his intimate experience with Boeing’s woes across the entire supply chain makes him the most qualified for the job, but Gitlin’s detractors argue that his prior track record hardly inspires confidence that he can clean up Boeing’s safety culture.

4. Raymond Conner, the former CEO of Boeing Commercial

Tomohiro Ohsumi – Bloomberg – Getty Images

One candidate whose name we have heard is Raymond Conner, who was the revered longtime CEO of Boeing Commercial until his retirement in 2017, after he was passed over in the CEO succession sweepstakes.

Conner has indisputable operating knocks as the last truly successful CEO of Boeing Commercial–the last two CEOs, Kevin McAllister and Stan Deal, both left amidst troubled situations–but the biggest knock on Conner will surely be his age as he approaches septuagenarian status. If Boeing is looking for a transitional CEO who can bring continuity and credibility from the pre-Calhoun era, few would be better suited than Conner.

5. Marc Allen, the former president of Boeing International

Another promising candidate whose name we heard floated, but of a very different type, was Marc Allen, the former president of Boeing International and Chief Strategy Officer. A star lawyer who came up through the ranks of Boeing’s legal organization after a Supreme Court clerkship, Allen was widely seen as a rising star until Calhoun’s ascension, at which point he was effectively cast into the wilderness with his Strategy division marginalized before being effectively disbanded.

Allen is polished, and interfaces seamlessly with the government and public stakeholders whose confidence will be so vital to the restoration of Boeing’s reputation, but even Allen’s boosters acknowledge he may not have the operational background and expertise Boeing is seeking at a moment of such heightened scrutiny.

Calhoun, an honorable man, wanted the CEO position when his predecessor was removed–and he is not leaving on his own schedule. Given his complex sentiments and agenda, the board should not have involved him in the selection of a successor, which should be on an accelerated schedule. The airlines have already shown their diminished regard for Calhoun by demanding meetings with the board without his presence. That is not an endorsement from Boeing’s customers. Calhoun is also not revered among his employees. Having studied patterns of CEO succession for 45 years, I can assert that Calhoun’s agenda may not be in perfect alignment with the board and shareholders at this point in time.

While all of these candidates have their own strengths and drawbacks, one thing is clear: Ultimately, no matter who is selected, their #1 priority will be to fortify the weakened safety culture and reassure airline customers, regulators, and the flying public that Boeing is once again trustworthy. Ironically for a company long accustomed to managing for financial results, the company’s financial viability is on the line, with approximately $100 billion in revenues tied up due to the FAA holding up approval for the 737 Max 7s and 10s.

Getting governance right will be a strong step in the right direction as Boeing tries to get their planes off the ground and their heads out of the clouds.

Jeffrey Sonnenfeld is the Lester Crown Professor in Management Practice and Founder and President of the Yale Chief Executive Leadership Institute. In 2023, he was named “Management Professor of the Year” by Poets & Quants magazine.

Steven Tian is the director of research at the Yale Chief Executive Leadership Institute and a former quantitative investment analyst with the Rockefeller Family Office.

More must-read commentary published by Fortune:

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.



Source link

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Recent Comments

Translate »