Boeing’s Stonecipher Ousted Due to Affair With Employee

Boeing Company yesterday ousted its chief executive, Harold Stonecipher, for having an affair with an employee, 15 months after he returned from retirement to lead the no. 2 American defense contractor’s recovery from a purchasing scandal.The chief financial officer, James Bell, will replace Mr.Stonecipher, 68, on an interim basis. Chairman Lewis Platt, who ordered a review after receiving an anonymous tip 10 days ago, said on a conference call today that “poor conduct and judgment” by Mr. Stonecipher “would impair his ability to lead.”Mr. Stonecipher required employees to sign a code of conduct designed to restore Boeing’s reputation after the illegal hiring of a U.S. Air Force weapons chief led to the downfall of his predecessor, Philip Condit. His efforts helped lift Boeing’s shares 54%, and the company on March 4 won reinstatement as a contractor for Air Force space-rocket launches.“These are unfortunate circumstances given the positive momentum of the past few weeks with resolving issues with the Air Force and good news on the business,” said JB Groh, an analyst in Portland, Ore., at D.A. Davidson, who has a “neutral” rating on the stock.Shares of Chicago-based Boeing fell 8 cents to $58.30 in New York Stock Exchange composite trading. They had risen 37% in the past year.Boeing spokesman John Dern declined to identify the other executive, other than saying she didn’t report directly to Mr. Stonecipher. Mr. Stonecipher is married, with two children and two grandchildren, according to the company’s Web site.The employee who informed Mr. Platt of the relationship, which began in January, learned of it through correspondences, Mr. Platt said. Under the code of conduct, employees must report suspected violations and express concerns regarding compliance with the policy and related procedures, according to the Web site.“The Boeing board should be congratulated,” said an attorney at Jones, Day in San Francisco, Richard Koppes. “They are setting a precedent and demonstrating how good corporate governance works.”Mr. Platt will assume an expanded role in his capacity as nonexecutive chairman, and Mr. Stonecipher will also leave the company’s board. Mr. Bell, 56, has been with the company for 32 years and will continue his duties as CFO and was named president. Mr. Bell won’t be considered as a CEO candidate.Mr. Stonecipher worked for 27 years at General Electric Company, rising to lead the company’s aircraft-engine unit. He later headed aircraft-parts maker Sundstrand Corporation, and in 1994 became the first non-family member to lead McDonnell Douglas.He joined Boeing after its 1997 purchase of McDonnell Douglas Corporation, where he was president and CEO. The acquisition of McDonnell Douglas was Mr. Condit’s entry into the defense contracting business, making Boeing the second-largest supplier to the military after Lockheed.Mr. Stonecipher retired as vice chairman of Boeing in June 2002. He owned 187,000 shares of Boeing as of March and was paid a salary and bonus of $200,000 in 2003.Financial misconduct has been a more common reason as of late for the ouster of executives at companies such as WorldCom and Adelphia Communications. Office affairs have brought down chief executives such as William Agee of Bendix Corporation in 1980.Mr. Bell became chief financial officer after Michael Sears stepped down in November 2003 amid allegations he sough to hire former Air Force weapons chief Darleen Druyun as they negotiated a $23 billion contract for up to 100 refueling aircraft tankers. Sears was sentenced to four months in prison on February 18 for deceiving the government. Druyun is serving nine months in jail.The company was suspended in July 2003 from receiving new rocket launch contracts because the Air Force said Boeing improperly obtained documents from Lockheed Martin that helped Boeing win a 1998 contract for a booster rocket program.The Justice Department is reviewing a “global settlement” with Boeing to settle a number of outstanding cases, including the rocket document theft, Acting Air Force Secretary Peter Teets said March 4.“I don’t think this will be viewed that negatively,” said Paul Nisbet, an analyst with Newport, R.I.-based JSA Research. “If anything, it may prove they’re going overboard on ethics.”Alan Mulally, head of commercial airplanes and James Albaugh, head of Boeing’s defense business, are the most likely internal candidates for the CEO position, said George Shapiro, an aerospace analyst in New York at Citigroup, who has a “sell” recommendation on Boeing. 3M’s chief executive, James McNerney, who serves on Boeing’s board, is also a candidate, he said.“We want someone with a track record,” Mr. Platt said in an interview. “Not someone that’s on training wheels. And industry experience is a always a plus.”Mr. Platt said because a search had already been started, naming a replacement may be done within six to nine months.Whoever is named chief executive faces changes in American defense spending that may eliminate the aircraft tanker program and increased competition from Airbus SAS, which has surpassed Boeing as the world’s largest maker of commercial aircraft in 2003.Boeing has relied more on its defense work, which includes F-18 fighters and C-17 cargo planes, with demand for commercial aircraft down since 2001. Military sales were more than half of 2004’s total revenue of $52.5 billion.Commercial plane deliveries will grow as much as 20% in 2006, Boeing said last month. Boeing executives have been making sales calls in India and the Middle East, Mr. Platt said.

Boeing’s Stonecipher Ousted Due to Affair With Employee

Boeing’s Stonecipher Ousted Due to Affair With Employee

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