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Boeing forces resignation of CEO

Boeing Co. on Monday said its board forced out President and Chief Executive Officer Harry Stonecipher because of a relationship Stonecipher had with a female executive at the company.
Boeing Rolls Out First KC-767 Aerial Tanker
Boeing CEO Harry Stonecipher's unexpected ouster makes him the second consecutive CEO to depart the huge airplane maker in disgrace.Larry W. Smith / Getty Images
/ Source: The Associated Press

Boeing Co. abruptly forced out its president and chief executive officer, Harry Stonecipher, for what the company said Monday was a violation of the company’s code of business conduct stemming from a relationship the married, 68-year-old Stonecipher had with a female Boeing executive.

The stunning ouster makes Stonecipher the second CEO to depart the Chicago-based airplane maker and defense contractor in disgrace in the past 15 months.

His predecessor, Phil Condit, resigned Dec. 1, 2003, as a result of the defense contracting scandals that ultimately sent two Boeing executives — ex-Air Force procurement official Darleen Druyun and chief financial officer Mike Sears — to jail.

Boeing declined to identify the executive or discuss specifics of Stonecipher’s actions, which it said were linked to a consensual relationship that began in January. Newly named interim president and CEO James A. Bell, 56, insisted on a conference call that the announcement “has and will have no impact on our outlook. ... Boeing’s overall financial condition is very strong.”

“Boeing’s primary customers, the airlines and the Pentagon, are still going to keep on buying Boeing’s airliners and weapon systems based on performance and price, not on palace intrigues,” said Robert Friedman, senior aerospace defense analyst for Standard and Poor’s.

Regardless, the unexplained ouster is a jolt to a company that had been trying to put two years of scandal behind it.

“This raises a lot more questions than it answers,” said analyst Richard Aboulafia of the Fairfax, Va.-based Teal Group.

Boeing said an internal investigation prompted by information sent anonymously to chairman Lew Platt and the company’s legal and ethics leaders 10 days ago revealed a consensual relationship between Stonecipher and the female executive that the board determined was in violation of the company’s code of conduct.

“The board concluded that the facts reflected poorly on Harry’s judgment and would impair his ability to lead the company,” said Platt, who is to assume an expanded role at Boeing.

Platt said on a conference call with analysts and reporters that the relationship came to light after the worker who informed the company saw correspondence between the two. He emphasized that the relationship alone was not the reason the company sought to dismiss Stonecipher, who is married.

“It’s not the fact he was having an affair — that is not a violation of our code of conduct,” the chairman said. As the company explored the circumstances surrounding the relationship, however, it discovered “some issues of poor judgment” that impaired Stonecipher’s ability to lead the company, he said.

The code in question states that Boeing employees will not engage in conduct or activity that might raise questions as to the company’s honesty, impartiality or integrity. But Platt refused repeated requests to be more specific.

“We think Harry is entitled to some privacy concerning the details of this relationship,” he said.

Stonecipher had been an outspoken advocate on behalf of adhering to ethical conduct and defending Boeing’s code.

“He let everyone know that even minor violations would not be tolerated, and when one does that you have to look at that standard,” Platt said.

By accepting Boeing’s request to resign, Stonecipher became entitled to what Platt called a “standard retirement package.” Details were not disclosed.

The woman involved in the affair remains with the company, although Platt said “I don’t know what she will decide to do.”

Stonecipher also was dismissed from Boeing’s board, which he had been a member of since joining the company from McDonnell Douglas when the two companies merged in 1997.

The tough-talking son of a Tennessee coal miner, Stonecipher had been credited with helping Boeing to clean up its ethical behavior and with improving its sullied reputation in Washington. The company’s stock surged 52 percent during his tenure.

He also is one of its largest stockholders as a result of the McDonnell Douglas deal.

Stonecipher failed, however, to win back the tainted $23 billion air-refueling tanker contract that the Pentagon pulled from Boeing because of conflict-of-interest violations involving Druyun and Sears.

He had been expected to retire by his 70th birthday in May 2006.

Attempts to reach Stonecipher for comment were unsuccessful. His telephone number is unlisted and Boeing spokesman John Dern said the company did not know his whereabouts.

Bell is a 32-year veteran of the company who has served as chief financial officer and as a member of the company’s executive council since November 2003. He will continue to oversee the company’s financial matters.

Platt gave no time frame for selecting a permanent CEO. Two likely candidates are Alan Mulally, who heads the company’s Seattle-based commercial airplane business, and Jim Albaugh, head of Boeing’s more than $30 billion-a-year defense business.

Aerospace analyst Paul Nisbet of JSA Research questioned the need to get rid of Stonecipher. “It’s a board that’s become overly sensitized by all the negative publicity about Boeing employees and their ethics, and they reacted more strongly than I think was appropriate,” he said.

He said he expects the company to choose one of its strong internal candidates, Mulally or Albaugh, but expressed concern that ethics might become a preoccupying factor in the CEO search.

“The one possible impact is that in their quest to find a squeaky-clean guy, they may have to take someone who’s not as well-qualified,” he said.