By Andrew Tangel and Emily Glazer
Boeing Co. has made several changes to the membership and
structure of its board since a second 737 MAX crashed two years
ago. Investors will soon decide whether the company has done
Shareholders ahead of Boeing's April 20 annual meeting are
weighing whether to re-elect the company's slate of 10 board
members or follow a proxy advisory firm's recommendation to vote
against longtime directors Chairman Larry Kellner and Edmund
The vote comes as Boeing and its board face major challenges:
restoring confidence in the 737 MAX; navigating the Covid-19
pandemic's slowdown in air travel; and overcoming quality and
engineering problems in its commercial, defense and space
Seven directors on the board when the second MAX jet crashed
have since left or will soon depart. The board has four new
members. Mr. Kellner said earlier this year that the board would
work to identify "diverse candidates with appropriate expertise who
bring qualified perspectives." However, those efforts have taken
longer than expected, people familiar with the matter said. And
Boeing's business challenges have hampered the company's ability to
attract directors, one of these people said.
Companies across industries are under pressure to diversify
their boards, especially following racial-justice protests last
summer as well as California legislation and a Nasdaq proposal
requiring board diversity, recruiters and board members said.
Boeing says its slate of 10 directors up for re-election includes
two women and two people of color.
The aerospace giant has made changes to its board's oversight of
management since the two fatal crashes claimed 346 lives and led to
a nearly two-year global grounding of MAX jets that is expected to
cost the company an estimated $20 billion. Chief Executive David
Calhoun has overseen what he has described as a "top-to-bottom
overhaul" of how the company handles safety and engineering
following the MAX debacle.
Mr. Calhoun, a board member since 2009, was lead director and
chairman before taking over as CEO in January 2020. The board last
year also put in place a policy calling for an independent
chairman, a move proxy advisory firms deemed responsive to
shareholders. It also has a new committee focused on safety.
Boeing has made progress in overcoming some of its problems. It
reached a deal to sell 100 more 737 MAX jets to Southwest Airlines
Co., fending off an attempt by European rival Airbus SE to poach an
exclusive customer. Boeing also resumed deliveries of the wide-body
Dreamliner in March after a five-month halt. The company's shares
have risen about 24% this year, lifted by optimism that growing
vaccinations will spur more air travel.
Challenges remain. U.S. airlines removed dozens of newly-built
737 MAX jets from service after Boeing on Friday flagged a
potential electrical problem, just months after carriers began
flying them again. Boeing said it was working with the Federal
Aviation Administration on resolving the issue.
Ahead of the company's annual meeting, Institutional Shareholder
Services Inc., gives Boeing credit for "significant board and
management changes and reforms to the company's safety and
compliance processes," as well as the 737 MAX's return to
commercial service last year. ISS recommends investors re-elect the
But Glass Lewis, another proxy-advisory firm, has recommended
shareholders vote against the re-election of Messrs. Kellner, the
chairman, and Giambastiani, who leads the board's safety panel.
Both previously served on the board's audit committee, which
oversees major risks facing Boeing.
"We believe they are in part responsible for the board's
failings in regard to its risk assessment and management," Glass
Lewis wrote in a March 26 report. "We question whether these
directors should continue to serve on the company's board."
In response, the Boeing spokesman pointed to a new investor
presentation that cites the company's four new directors as
evidence of the board's "deep commitment to refreshing its
membership." The presentation says its "highly qualified, diverse
board" has a mix of experiences needed to oversee management
effectively. It also notes the appointment of a new chief aerospace
safety officer who regularly reports to the board and the company's
linking safety and quality to executive compensation.
Messrs. Kellner and Giambastiani declined to comment through the
In coming months, the company's board is expected to consider
whether to extend Mr. Calhoun's tenure beyond a mandatory
retirement age of 65 next year, people familiar with the matter
said. Mr. Calhoun has floated the possibility of staying longer,
these people said. Last year, he told reporters: "The board can
have me as long as they want me." Mr. Calhoun declined to comment
through the Boeing spokesman.
Among the directors who have asked tough questions of Mr.
Calhoun and other executives is Akhil Johri, a former chief
financial officer of United Technologies Corp. who joined the board
last year, according to people familiar with the matter. Mr. Johri
is slated to lead the board's audit committee. Mr. Johri declined
to comment through the Boeing spokesman.
There is no competing slate of directors that shareholders can
vote for, but substantial opposition to directors can have
consequences. Under board policies, directors who fail to win a
majority of shareholder votes must tender their resignations but
can continue to serve until the next annual meeting if the board
declines to accept their resignations. Boeing directors last year
earned as much as about $400,000, and the board held 10 meetings,
according to a regulatory filing.
Last year, five longtime directors drew substantial opposition
from some institutional shareholders including investing giants
BlackRock Inc., Vanguard Group and State Street Corp., according to
shareholder data provider Insightia. Two of those directors, who
secured backing from less than 60% of shareholder votes last year,
are stepping down from the board at this year's annual meeting.
Representatives of BlackRock, Vanguard and State Street declined
to comment about how the firms would vote this year.
Boeing's board oversight is the subject of a shareholder lawsuit
in Delaware that claims directors failed to oversee management's
handling of the 737 MAX's development and subsequent crashes.
Boeing, in a recent court filing seeking to have the suit
dismissed, said the board "has long had effective reporting and
oversight systems in place, and it actively and appropriately
oversaw the company's response" to safety matters including the 737
Write to Andrew Tangel at Andrew.Tangel@wsj.com and Emily Glazer
(END) Dow Jones Newswires
April 12, 2021 07:14 ET (11:14 GMT)
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