Boeing fires CEO over relationship
(CNN) -- Boeing has ordered its Chief Executive Harry Stonecipher to step down because of what the U.S. aircraft giant said was an improper relationship with a female executive.
The Seattle-based company said Monday its board of directors had asked for and received the resignation of Stonecipher after an investigation by internal and external legal counsel into the personal relationship.
Boeing said Chief Financial Officer James Bell would serve as president and CEO on an interim basis. Chairman Lew Platt will assume more executive duties.
The investigation was conducted after an anonymous tip was made to Boeing 10 days ago.
The company said the female executive, who has not been identified, did not report directly to Stonecipher and that the relationship was consensual and had no effect on the conduct of the company's business. But it said the relationship violated Boeing's code of conduct.
Following the probe, "the board concluded that the facts reflected poorly on Harry's judgment and would impair his ability to lead the company," Platt said in a statement.
"The resignation was in no way related to the company's operational performance or financial condition, both of which remain strong," Boeing said in a statement.
"However, the CEO must set the standard for unimpeachable professional and personal behavior. And the board determined this was the right and necessary decision under the circumstances.
Stonecipher, who is 69, married with two children and two grandchildren, was appointed in 2003 when competition between Boeing and its European rival Airbus was heating up.
His predecessor Phil Condit resigned amid a scandal involving Michael Sears, then the company's chief financial officer, illegally hiring an Air Force procurement officer. Condit never faced criminal charges in that case; Sears was sentenced to four months in prison last month.
Boeing's eligibility to compete for billions of dollars in satellite-launch contracts for the military was only reinstated by the U.S. Air Force on Friday, ending a suspension imposed after it was caught with a competitor's documents.
Shares of Boeing fell to $57.84 in early afternoon trading Monday in New York, after closing at $58.38 on Friday.
One analyst said he believed that because questions about Boeing company ethics in recent years had cost it a chance to capture some military contracts, the company's board had no choice but to take a hard line.
But Cai Von Rumohr, SG Cowen aerospace analyst, said the move was bad news for the company, given Stonecipher's record over his brief tenure.
"I think under other circumstances it's possible this is something the board might have overlooked," Von Rumohr told CNN.
"They're going to get good points for that. But I think the issue is that Harry had done enough good things in terms of commercial (aircraft) marketing and cash redeployment that it will be difficult to maintain that momentum in this transitional period."
In a phone call with analysts and reporters, Platt said the company was alerted to the relationship by a letter from an anonymous employee who had apparently seen correspondence between Stonecipher and the female employee.
Platt said that when he confronted Stonecipher he admitted the affair. He added that the woman was a long-time Boeing employee who is still with the company, although he did not know if she planned to stay.
Stonecipher had been CEO of two previous defense contractors, Sundstrand and McDonnell Douglas. He came to Boeing when it bought McDonnell Douglas in 1997. He retired in June 2002, but stayed on the board of Boeing.
When he came out of retirement in December 2003 at age 67 to assume the top job, his comments suggested he intended an extended stay.
"We're not here on an interim basis," he said. "I have a lot of work to do before I start looking for a successor. I didn't come here to start looking for a successor."
But Platt said Stonecipher had been intending to leave in May 2006, which had prompted the board to discuss a succession plan, including possible candidates to be CEO. He said that while there is a plan in place, there had not been discussions with any of the potential candidates. Both internal and external candidates will be considered, Platt said.
Boeing has not recaptured the lead in production of commercial aircraft that it lost under Condit, according to CNN Money.
But it had seen its stock rally 52 percent since he took over, the third best performer among Dow industrial components in 2004, as its earnings per share increased to $2.31 from $1 in 2003. Last month, it said it expected 2005 and 2006 sales to top Wall Street expectations.
Platt did not reveal the amount of severance or separation pay involved in Stonecipher's departure. Boeing's most recent proxy statement showed that Stonecipher had a base pay of $1.5 million as CEO, and annual incentives equal to up to 120 percent of base pay, or an additional $1.8 million.
On top of that he continued to received the pension payments of $631,000 a year from his first retirement from the company. That annual pension payment will now increase slightly because of his additional year of service.
CNN/Money contributed to this report.