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Crisis-ridden Boeing prepares for turbulence at annual meeting

By AFP

May 17, 2024 04:07 PM


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Boeing's annual meeting on Friday comes amid an exceptionally difficult period for the crisis-ridden company, creating potential for drama at an event that is usually a snooze-fest.

The company, under heavy regulatory scrutiny following recent safety and quality control problems, has defeated shareholder proposals at past annual meetings that usually have lasted an hour or less.

While Boeing brass no doubt wishes for another low-key affair on Friday, the company faces at least a greater chance of a shareholder rebuke following recommendations from leading shareholder advisory firms that take aim at outgoing CEO Dave Calhoun.

Calhoun, who has faced tough questioning in the wake of a near-catastrophic Alaska Airlines flight in January, will step down as CEO at the end of 2024, but has been renominated to the board of directors.

But the advisory services firm Glass Lewis wants shareholders to reject Calhoun's nomination, while Investor Shareholder Services (ISS) has recommended a "no" vote on Calhoun's compensation package, which came in at about $33 million for 2023.

A recent Boeing presentation highlighted the broadened role of new Chair Steve Mollenkopf, the former head of Qualcomm who will oversee the CEO search.

"We are committed to ensuring every Boeing airplane meets the highest safety and quality standards," said a Boeing shareholder presentation that reiterated support for Calhoun and his pay package.

- Sending a message -

Glass Lewis said shareholders should use the annual meeting to send a message to Boeing.

"We have significant concerns regarding the board's oversight of the Company's safety culture and attempts to overhaul it," said a report that urged investors to vote against the reelection of Calhoun, and Akhil Johri and David Joyce, who chair the audit and aerospace safety committees respectively.

The board "will understand the implication of shareholders voting against the company's outgoing CEO and key directors with oversight of the safety culture and risks," the report said. "Shareholders will be sending a clear indication of discontent regarding the Company's recent oversight and handling of safety issues and safety culture."

The Glass Lewis report recognized that other Boeing board members on the safety committee have "extensive, critical expertise in risk management and aviation safety" and that voting down the whole group "would not be conducive to long-term shareholders' interests."

ISS meanwhile urged a no vote on Calhoun's executive pay package.

Under the plan, Calhoun received a base salary of $1.4 million, plus more than $30 million coming in stock awards. Calhoun declined a potential $2.8 million bonus in light of the Alaska Airlines accident, the company said in a securities filing.

In setting Calhoun's package, Boeing alluded to earlier crises he navigated as CEO, including winning regulatory approval to return the 737 MAX to the skies after two fatal crashes and the upheaval of the Covid-19 pandemic.

"While the Alaska Airlines Flight 1282 accident shows that Boeing has much work yet to do, the Board believes that Mr. Calhoun has responded to this event in the right way by taking responsibility for the accident, engaging transparently and proactively with regulators and customers and taking important steps to strengthen Boeing's quality assurance," Boeing said in the filing.

But ISS said the executive pay package should be rejected because it included an increase in Calhoun's potential long-term incentive award for the third consecutive year.

Boeing said the boost was "designed to focus our leadership team at a pivotal moment in our Company's recovery," including enabling Boeing to meet its long-term financial targets.

But ISS dismissed the argument as "not particularly compelling... especially given two other recent increases since Calhoun became CEO in 2020."

After Friday's meeting, Calhoun will face a full plate of issues, including a late May deadline to present a plan required by the Federal Aviation Administration, which has capped MAX production until the company shows progress on safety and quality control.

In July, the Justice Department will make a final determination on whether to criminally prosecute Boeing.

Then in September, the company faces a potential strike of 30,000 workers if it is unable to reach a contract with the International Association of Machinists and Aerospace Workers.


AFP


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