Re:FAA Finds New Risk on 737 Max, Orders Boeing to Make Changes
by rossdavidh on Thursday June 27, 2019 @11:38AM
(#20295370)
Actually, I think it's worse than that. If it were all about making money for shareholders, they would have made sure this PR nightmare (which will likely result in many lost sales) didn't happen. The long term monetary incentive is to avoid crashes.
The more fundamental problem is that corporations are run by people who, mostly, care more about themselves than the company they are running, and more about this year than the future. Boeing needed to suck it up and accept a couple years' poor sales, in order to get an effective competitor to Airbus' latest. In the long run, or even the medium run, this would give the best monetary results, as well as save lives.
But, it would mean bad financial results this year and next year, and the corporate business environment is biased against that. If the CEO makes decisions which give worse results this year and next, but better results later, he will not be around in his job to enjoy those better results. So, he optimizes for the near term, and rolls the dice (with other people's lives).
The biggest exception to this would be companies where the CEO is the founder, who usually has the ability to retain his job through a bad year or two.
Of course, the CEO should have made the right decision anyway, and accepted the consequences, because people's lives are at stake and anyway it's not like he would starve if he got fired next year. But, if we're talking about incentives and conflicts of interest, that's the real issue, not money vs. lives (because both point in the same direction, of making the plane safe), but short term vs. long term and CEO vs. the company as a whole.
The more fundamental problem is that corporations are run by people who, mostly, care more about themselves than the company they are running, and more about this year than the future. Boeing needed to suck it up and accept a couple years' poor sales, in order to get an effective competitor to Airbus' latest. In the long run, or even the medium run, this would give the best monetary results, as well as save lives.
But, it would mean bad financial results this year and next year, and the corporate business environment is biased against that. If the CEO makes decisions which give worse results this year and next, but better results later, he will not be around in his job to enjoy those better results. So, he optimizes for the near term, and rolls the dice (with other people's lives).
The biggest exception to this would be companies where the CEO is the founder, who usually has the ability to retain his job through a bad year or two.
Of course, the CEO should have made the right decision anyway, and accepted the consequences, because people's lives are at stake and anyway it's not like he would starve if he got fired next year. But, if we're talking about incentives and conflicts of interest, that's the real issue, not money vs. lives (because both point in the same direction, of making the plane safe), but short term vs. long term and CEO vs. the company as a whole.