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This is Jim McNerney.
To me, he is symbolic of a much broader change that occurred in the American economy starting after 1980.
Companies that had historically been run by engineers, operators, and people who spent their careers working their way up through the organization increasingly began to be run by MBA and finance-oriented executives brought in from the outside.
Boeing is one of the best examples.
Boeing was once considered one of the great American companies. One reporter described it as almost less of a conventional business than an association of engineers devoted to building extraordinary flying machines.
In a sense, almost like a co-op of engineers.
Then, in 2005, Boeing hired Jim McNerney as CEO.
Under McNerney, Boeing increasingly emphasized cost reduction and financial performance.
Engineering labor costs were cut. Significant portions of engineering and manufacturing work were outsourced. The intention was to save money, but critics have argued that outsourcing ultimately created additional costs through coordination problems, repairs, redesigns, and rework.
At the same time, Boeing increasingly returned billions of dollars to shareholders through stock buybacks.
When a company generates large amounts of cash, it has choices.
It can:
- invest in research and development
- invest in new products and manufacturing capacity
- pay employees more
- build financial reserves
- acquire other businesses
- return money to shareholders through dividends or stock buybacks
The criticism of Boeing is that it increasingly chose the last option.
And that matters.
Every dollar devoted to financial engineering is a dollar that cannot simultaneously be invested in engineering, employees, manufacturing capability, or R&D.
Meanwhile, employees were raising concerns about the quality of Boeing’s products and engineering processes.
Some engineers and employees who raised concerns said they faced retaliation, harassment, or termination. Some subsequently filed whistleblower complaints with the FAA.
Years later, the Boeing whistleblower story became even darker and more controversial when two prominent whistleblowers died, fueling intense public discussion around the company and its safety culture.
Then the airplanes started crashing.
In 2018 and 2019, two Boeing 737 MAX aircraft crashed, ki-ling hundreds of people.
What is particularly striking is what happened financially.
After the first crash, Boeing’s stock would still reach an all-time high before the second crash.
Think about that.
A company could be experiencing an emerging engineering and safety catastrophe while the financial markets were simultaneously signaling extraordinary success.
Around the same period, economist Daron Acemoglu and his co-authors studied what happens when companies hire managers with business-oriented backgrounds.
One of their important findings was that worker pay tends to decline after these managers take control.
And critically, those wage reductions were not necessarily accompanied by corresponding improvements in productivity, output, investment, or efficiency.
In other words, the company was not always becoming fundamentally better.
It was becoming better at transferring value.
Less to workers.
More to executives and shareholders.
Research like this suggests that changes in corporate management philosophy may explain a meaningful portion of the rise in American income inequality.
There are several possible policy responses.
Stronger antitrust enforcement.
Greater union power.
More competition.
But another idea deserves more discussion: stakeholder capitalism.
One proposal already introduced in Congress is the Accountable Capitalism Act.
Among other reforms, it would require very large corporations to give employees representation on their boards, with workers electing 40% of directors.
The principle is simple.
If employees help create the long-term value of a company, they should have some representation in determining how that company is governed.
That changes the incentives.
Instead of corporate leadership being overwhelmingly focused on quarterly earnings, stock prices, executive compensation, and financial extraction, employees would have a formal voice representing engineering capability, institutional knowledge, product quality, long-term investment, and the durability of the company itself.
Boeing is therefore about more than Boeing.
It represents a much larger question about American capitalism:
What happens when companies stop being run primarily by people obsessed with making the product better and start being run primarily by people obsessed with making the financial metrics better?
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