Boeing Bolsters Board's Expertise -- WSJ
February 25 2020 - 3:02AM
Dow Jones News
By Andrew Tangel and Doug Cameron
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 25, 2020).
Boeing Co. said it has nominated two new outside directors with
safety and engineering experience and stiffened conditions on
bonuses for new Chief Executive David Calhoun by including a range
of programs beyond the crisis-hit 737 MAX.
The aerospace giant said Monday the new board nominees are Akhil
Johri, who until recently was finance chief at aerospace
manufacturer United Technologies Corp., and Steve Mollenkopf, chief
executive of chip maker Qualcomm Inc. The two would replace
longtime directors Edward Liddy and Mike Zafirovski, who Boeing
said would step down after the company's annual meeting in
April.
Boeing's board has come under scrutiny from U.S. lawmakers and
investors for its role overseeing the launch of the MAX nearly a
decade ago and its reaction to two crashes that claimed 346
lives.
Aviation industry officials and some shareholders have asked why
it took the board until late December to oust Dennis Muilenburg as
CEO, nine months after the second MAX crash in Ethiopia last
March.
The additions announced on Monday, along with the arrival in
2019 of former United Nations Ambassador Nikki Haley and retired
Navy Admiral John Richardson as directors, would mean a third of
Boeing's 13-person board has turned over since last spring.
The board decided against other potential changes, such as
adding seats or imposing tenure limits. Chairman Larry Kellner said
the new board members would bring fresh perspective while retaining
the experience of long-tenured directors.
"We just feel like this is the right balance after a lot of
debate," Mr. Kellner said in an interview.
Regulators banned the MAX from flying last March. The protracted
grounding as Boeing works on software fixes and establishing a
training protocol that will win the approval of regulators has
plunged the company into turmoil. Boeing halted the aircraft's
production in January, and potential costs and charges have
approached $20 billion.
Mr. Kellner defended the board's handling of the MAX crisis,
noting it established a safety committee after the second crash and
later ousted Boeing's commercial-airplane division chief and then
Mr. Muilenburg.
The Chicago-based company, in a regulatory filing, also said it
had extended bonus measures for Mr. Calhoun beyond the return of
the 737 MAX to service. Some $17 million in potential bonus
payments are now also tied to such headaches and opportunities at
Boeing as its KC-46A military tanker and other high-profile
military programs, the Starliner space taxi, the planned Embraer SA
joint venture and deliveries of the delayed 777X jetliner, as well
as unspecified efforts to "strengthen engineering."
About half of the company's 13 directors have held board seats
for about a decade or longer, including Mr. Calhoun, a director
since 2009. Mr. Kellner has been a member since 2011 and six were
in place when Boeing decided in 2010 to launch the MAX.
Mr. Calhoun, who took the helm last month, once ran General
Electric Co.'s aircraft-engine business, and Mr. Kellner was CEO of
Continental Airlines before the merger that created United Airlines
Holdings Inc. Others on the board hail from other heavily regulated
industries such as insurance and energy.
Boeing's board is likely to be a focus during proxy season in
coming weeks, according to some investors and advisory firms. The
company is expected to file its latest governance documents with
securities regulators next month ahead of the April shareholder
meeting.
No one filed nominations for a competing slate of directors this
year, but the board could nonetheless face symbolic actions.
Last year proxy advisory firm Glass Lewis recommended voting
against Mr. Kellner, the head of the board's audit committee. The
firm said the MAX accidents "indicate a potential lapse in the
board's oversight of risk management."
"They're doing their best to put this controversy behind them,
but it remains to be seen if that will be accomplished," Kern
McPherson, a vice president of research and engagement at Glass
Lewis, said in a recent interview.
Last fall, Boeing's board added a board-level safety committee
as part of a broader revamp of how the company handles design and
safety matters. The change is aimed at giving senior company
leaders and directors tighter oversight, as well as reduce the
influence of schedules and cost pressures on engineering
decisions.
Write to Andrew Tangel at Andrew.Tangel@wsj.com and Doug Cameron
at doug.cameron@wsj.com
(END) Dow Jones Newswires
February 25, 2020 02:47 ET (07:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
United Technologies (NYSE:UTX)
Historical Stock Chart
From Jul 2024 to Aug 2024
United Technologies (NYSE:UTX)
Historical Stock Chart
From Aug 2023 to Aug 2024