Profitable year for Boeing execs

Boeing released details Monday of its 2005 compensation awards to executives, and the big winner was Harry Stonecipher.

The former chief executive worked only two months of last year before being forced out March 6, 2005, over an extramarital affair with another executive. He then retired as of April 1.

For his transgression, Stonecipher lost his job and his annual bonus. But he still got almost half a million dollars in 2005 salary and $11 million in a payout from the company's long-term incentive plan.

The payout was from performance shares awarded Stonecipher in 2004 and was tied to the stock price, which has zoomed steadily up since it hit bottom in December 2002.

The company's filing with the Securities and Exchange Commission (SEC) shows that, over the five-year period since 2000, Boeing's stock has lagged its peers in the Standard & Poor's 500 aerospace and defense index. One hundred dollars invested in Boeing in December 2000 would have been worth just over $115 in December 2005, compared with $129 for the index.

Stonecipher's successor at Boeing, Jim McNerney, received $3.47 million in annual compensation for his half year's work in 2005.

McNerney also received more than $25 million in a stock grant to compensate him for a similar asset he forfeited when he left 3M, where he was CEO, to take over at Boeing.

The compensation committee gave extra credit to James Bell, the chief financial officer who was acting chief executive for the four-month period before McNerney was hired.

Bell got an additional $1.5 million in stock "in recognition of Boeing's outstanding performance (strong economic profit and shareholder returns) during this transitional period."

Altogether Bell got $1.3 million in annual compensation, $1.93 million in a long-term incentive-plan payout and a total $2.02 million in stock awards.

Alan Mulally, chief executive of the commercial-airplanes division, took home $1.68 million in annual compensation; $7.58 million from long-term incentive plan payouts; and $679,000 in stock awards.

Jim Albaugh, chief executive of the defense and space-systems division got $1.61 million in annual compensation; $6.95 million from long-term incentive-plan payouts; and $703,000 in stock awards.

The SEC filing notes that among the perks Boeing offers top executives is the use of company aircraft for personal travel as well as for business. "Certain executives are encouraged to use company-owned aircraft for business and personal travel for security reasons," the filing states.

McNerney's perks in 2005 included more than $74,000 for personal use of company aircraft associated with his relocation from 3M headquarters in Minnesota and $137,500 more for further personal use of aircraft.

Mulally's 2005 perks included $83,650 for personal travel on company jets.

Last week, McNerney announced details of a new long-term incentive plan that is much less tied to the stock price, with a large portion of the payout determined by internal financial targets linked to profits. That system allows executives to look forward to incentives for good performance even when the market is down.

In 2002 and 2003, with Boeing stock depressed, the long-term incentive plan paid nothing despite continued profits.

Under the new plan, if the company's targets are met, McNerney will get up to $11 million at the end of 2008, as well as 261,000 stock options.

Fred Whittlesey, principal with Seattle-based executive-pay consultancy Compensation Venture Group, takes a dim view of the change.

"They're saying, 'We're going to make money no matter what happens to the shareholders," he said.

Boeing spokesman Todd Blecher said the stock-option part of the new plan will keep executives focused on the stock.

"While [the incentive plan] is no longer completely dependent on the stock price, the stock options maintain a large connection to the stock price," said Blecher.

One Boeing worker in an e-mail offered another critique, from a very different perspective.

"What do the people that actually build the best airplanes in the world get?" he asked.

"Every three years at contract time they make us beg to keep our health insurance, beg for a few dollars more in pension, beg they don't offload our jobs. Move over, fellas, let us have a few scraps."

Dominic Gates: 206-464-2963 or dgates@seattletimes.com