ISS Urges No Vote on Boeing CEO's $32.8M Pay Amid Stock Fall

Key Takeaway

• ISS advises Boeing investors to vote against CEO David Calhoun's $32.8 million pay package due to concerns over a significant pay rise and personal jet use costs.
• Boeing's stock has fallen 29% YTD, amid financial struggles and safety incidents, including a 737 Max door blowout.
• Despite compensation concerns, ISS supports Calhoun's re-election to the board, emphasizing the need for leadership stability.

Executive Compensation Concerns

Institutional Shareholder Services (ISS), a prominent shareholder advisory firm, has voiced its recommendation for Boeing Co. investors to vote against the proposed $32.8 million compensation package for CEO David Calhoun during the upcoming annual meeting on May 17. This stance is primarily due to concerns over a special equity award and a significant increase in Calhoun's long-term incentive grant, marking a 45% pay rise from the previous year. Despite not receiving an annual cash bonus for 2023, the board's decision to substantially raise his long-term bonuses for the third consecutive year has drawn criticism. ISS has questioned the board's justification for such a notable increase, especially following two other recent raises since Calhoun assumed the CEO role in 2020.

Shareholder Advisory Firm's Stance

ISS's report highlights several issues with Calhoun's compensation, including a large share grant that vests over a relatively short period, intended to match shares Calhoun purchased in late 2022. This grant, coupled with the significant increase in his long-term incentive award opportunity, may raise concerns among investors. Furthermore, Calhoun's personal use of private jet flights, which cost $514,285, was noted to significantly exceed the median pay for such expenses among CEOs of S&P 500-listed companies. These factors contribute to ISS's recommendation against approving Calhoun's pay package.

Boeing's Financial Struggles

Boeing's financial performance and stock price have been under significant pressure, with the company's shares closing at $179.79 on Friday, marking a 29% decline since the start of the year. The aerospace giant has faced a series of challenges, including a mid-air door plug blowout on an Alaska Airlines Boeing 737 Max aircraft in January, leading to a temporary grounding of some 737 Max jets by the Federal Aviation Administration. This incident, among others, has heightened scrutiny over Boeing's safety culture and operational challenges. In the first quarter, Boeing reported a cash burn of almost $4 billion and compensated aircraft customers $443 million due to the Alaska Airlines incident.

Board and Leadership Recommendations

Despite the concerns over Calhoun's compensation, ISS has recommended that shareholders support his re-election to the Boeing board, along with other directors up for a vote, including aerospace safety committee chair David Joyce. ISS acknowledges the significant work Boeing must undertake to regain the confidence of airlines, passengers, and regulators. The advisory firm's stance reflects a nuanced view, supporting leadership continuity with caution amid ongoing efforts to address quality control and safety culture issues within the company.

Management Quotes

• David Calhoun, CEO of Boeing Co.:

  "Calhoun said in March that he would step down at the end of 2024."