ISS Opposes Boeing CEO's $32.8M Pay Amid Stock, Safety Woes

Key Takeaway

• ISS recommends voting against Boeing CEO Calhoun's $32.8M pay amid a 29% stock decline and recent safety incidents.
• Criticism focuses on the 45% pay increase, mainly from long-term bonuses, and excessive personal jet use costs.
• Despite financial struggles and a $4B cash burn in Q1, ISS supports Calhoun's re-election to the board.

Executive Compensation Concerns

Institutional Shareholder Services (ISS), a leading shareholder advisory firm, has recommended that Boeing investors vote against CEO David Calhoun's $32.8 million pay package during the company's annual meeting on May 17. This recommendation comes amidst a challenging period for Boeing, marked by a mid-air incident in January involving a door plug blowout on one of its planes. Despite not receiving an annual cash bonus for 2023, Calhoun's compensation saw a 45% increase year-on-year, primarily due to a significant rise in long-term bonuses for the third consecutive year. ISS criticized the board's rationale for this increase as not "particularly compelling," especially considering the recent hikes since Calhoun took the helm in 2020.

Shareholder Advisory Firm's Stance

ISS has expressed concerns over Calhoun's compensation structure, including a large share grant that pays out over a relatively short period. This grant was intended to match shares Calhoun purchased in late 2022. However, ISS pointed out that the combination of this time-based grant with the increase in long-term incentive award opportunity might raise questions among investors. Additionally, Calhoun's personal use of private jet flights, valued at $514,285, was noted to "significantly exceed" the median pay for such expenses among CEOs of S&P 500-listed companies.

Boeing's Financial Struggles

Boeing's financial performance has been under scrutiny, with the company's share price closing at $179.79 on Friday, reflecting a 29% decline since the beginning of the year. In January, an emergency landing by an Alaska Airlines Boeing 737 Max aircraft, due to a door plug blowout, brought further challenges. The Federal Aviation Administration temporarily grounded some 737 Max aircraft following the incident. Boeing reported a cash burn of almost $4 billion in the first quarter and compensated aircraft customers $443 million due to the Alaska Airlines incident.

Board and Leadership Recommendations

Despite the recommendation against Calhoun's pay package, ISS advised shareholders to support his re-election to the Boeing board, along with other directors facing a vote, including aerospace safety committee chair David Joyce. ISS acknowledged that Boeing "unquestionably has much work still to do to regain the confidence of airlines, passengers, and regulators," but deemed support for Joyce, albeit with caution, as warranted.

Management Quotes

• David Calhoun, CEO of Boeing:

  "Calhoun said in March he would step down at the end of the year and a succession process was under way."