Hagen was incredibly smart, but he doesnt have the stones to be the boss. Plus he wasnt Italian. It was even said in the book by the god himself Mario Puzzo. Hagen had no false hopes of being the boss, simply because of his background, and in the Mothers And Fathers ITALIAN Association, the boss needs to be Italian.

"You can shear a sheep many times, but you can skin him only once."
-Amarillo Slim