In the aftermath of the two disasters involving 737 MAX aircraft which led to the tragic death of over 300 passengers, Boeing CEO Dennis Muilenburg was recently forced out in. Despite the problems that have plagued Boeing under his management, Muilenburg is departing with a significant severance package – potentially upwards of $60 million -because of a “golden parachute” provision in his employment contract which is to provide a “soft landing” for the young CEO.
The amount of Muilenburg’s severance is largely dependent on how Boeing characterizes the context of his departure. Muilenburg receives more if his departure is deemed to be a retirement or layoff, but he gets less if the departure is designated as a simple resignation. Either way, according to public filings, Muilenburg may be entitled to a significant amount, including more than $20 million of vested stock, a pension worth more than $11 million, a severance payment approximately worth $7 million, and a benefit plan worth more than $30 million.[1] This windfall is in addition to the over $70 million in compensation already pocketed by Muilenburg during his relatively brief tenure as Boeing CEO.
On December 23, 2019, Boeing announced that it intended to classify the CEO’s departure as a resignation, suggesting that Muilenburg’s severance will be more like a termination-based severance. He would, as such, likely not receive the most lucrative of the severance benefits. Nevertheless, the news of this severance has stirred public outrage, especially among the families of those killed in the two 737 MAX crashes. This anger stems largely from the fact that Muilenburg could potentially walk away with approximately 270 times what Boeing is paying to those families that lost a loved one in the crashes (on average these families receive a mere $144,000 as compensation for their loss).
In the coming weeks, Muilenburg will negotiate with Boeing to determine a final number and shareholders will vote on compensation proposals. In these politically volatile times, especially for C-Suite executives, what are your thoughts on Boeing’s severance options for Muilenburg? To what extent should his contract terms govern, and to what extent should such contracts really be re-negotiated after a termination simply because someone might need to be blamed or because of public relations concerns?
Many of our executive clients do not really take the time to review their contracts and consider how a severance, especially one that is politically complicated, might be negotiated. Are you dealing with a severance negotiation with your employer or negotiating a new contract and considering these issues? We can help! #BLG#Csuitecontracts#letustaketheworryoutofyourwork
[1] https://www.cnn.com/2019/12/24/tech/boeing-ceo-dennis-muilenburg-severance/index.html