Jan 2, 2020 - Economy & Business

Why firing the CEO of a company doesn't change anything

An illustration of a desk chair with springs on the seat in front of a red background.

Illustration: Aïda Amer/Axios

When a CEO is forced out of a company, a lot of people hope and expect big changes. Much like Inigo Montoya in "The Princess Bride," those people are going to have to get used to disappointment.

Why it matters: It's big news when names like Dennis Muilenburg of Boeing and Travis Kalanick of Uber are forced out of their jobs. But that doesn't mean the company is going to change. The reality is that corporate cultures change slowly if at all.

  • How it works: Managers tend to like, hire and promote people with personalities similar to their own. Corporations therefore have a natural tendency towards monoculture.

The mystery of how and why Muilenburg held on to his job for as long as he did can be explained in large part by seeing him less as the cause of the problems at Boeing, and more as a symptom of a bottom-line-oriented corporate culture that dates back to the early 2000s.

  • Jerry Useem has an excellent explanation in The Atlantic of how Boeing's engineering-led culture was supplanted by McDonnell Douglas' finance-led culture after the companies merged in 1997. "The present 737 Max disaster can be traced back two decades," he writes.
  • When the Boeing board fired Muilenburg they replaced him with David Calhoun, a Blackstone financier who "studied accounting at Virginia Tech and began his career in GE’s corporate audit team," per the FT. He is very unlikely to change Boeing's cost-cutting culture, or even move its headquarters back to Seattle, where the company's planes are built.

Travis Kalanick has now fully severed his ties with Uber, selling all his stock in the company and stepping down from its board — but his influence in the company remains incredibly strong.

  • Kalanick's hand-picked board members, Ursula Burns and John Thain, remain on the company's board, while longtime Thain lieutenant Nelson Chai is CFO.
  • Change agent Bozoma Saint John, who was charged with reinventing the Uber brand, lasted only one year at the company.
  • CEO Dara Khosrowshahi was similarly tasked with rebooting the company. He has survived, partly because he is happy to make statements praising not only Kalanick but also Saudi Arabia's Yasir Al-Rumayyan, who's also on Uber's board. He also continues to claim with a straight face that Uber's drivers are not core to the company.

Adam Neumann hired almost everybody at WeWork on the basis that it was an exciting and fast-growing technology company rather than a fundamentally stodgy real-estate company. If it is now trying to concentrate on boring things like cash flows, it has a comically ill-suited employee base.

Roger Ailes, the founding CEO of Fox News, was fired in 2016 and died in 2017. Since then, the network has moved even further to the right, and plays a more important role than ever in Republican politics. The Ailes legacy, far from being repudiated, has been strengthened.

The bottom line: Most of the time, executive defenestrations are theatrical events designed to avoid true corporate accountability.

Go deeper: What to know about the Softbank fixers parachuting into WeWork

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