Boeing execs reap stock's gains in 2009 pay

Boeing's top executives saw modestly smaller bonuses and flat salaries in 2009. But though their pay as a result nominally fell, they were also granted blocks of company shares and options that — thanks to the rise in Boeing's stock price — make their total compensation for 2009 much higher than it was in 2008.

In 2009, Chairman and CEO Jim McNerney received take-home pay of $10.1 million, plus $3.1 million in stock grants that will vest in 2012 and stock options vesting over the next three years valued for accounting purposes at $3.1 million. That brought his nominal total 2009 compensation to $16.3 million.

A year earlier the corresponding total was $21.3 million.

Although that looks like a pay cut, it's not.

According to accounting rules, the options McNerney received in 2008 are more valuable than those from last year, because the share price was $84 at the time of the 2008 award, and down to almost $36 in 2009.

But Fred Whittlesey, executive-compensation expert with the Hay Group, said the accounting valuation is grossly misleading. With Boeing's share price now at $69, the 2008 options are currently worthless, while the 2009 options are each worth $33.

"That piece of his pay went way up," Whittlesey said. "It's hugely more pay than the prior year."

Boeing grants its executives both stock and stock options each year in late February, pegged to the stock's price at the time. In 2009, that came near the early March lows for the stock market and for Boeing shares.

In 2008 McNerney got 252,000 options, and last year he received just over 282,000.

Though the 2009 options can't be fully exercised yet, currently they are worth more than $9 million, rather than the $3.1 million accounting value.

The figures are based on a Seattle Times analysis of executive-compensation figures reported Monday in Boeing's proxy filing with the Securities and Exchange Commission (SEC).

Jim Albaugh, chief executive of the commercial-airplanes division, had 2009 take-home pay of $2.7 million, plus $1 million in stock grants, and stock options valued for accounting purposes at $0.9 million — for a total nominal value of $4.6 million.

That compares with $5.7 million a year earlier. In Albaugh's case as well, though, the 2009 stock options are in fact more valuable.

Albaugh's predecessor, Scott Carson, who in January retired from Boeing, had 2009 take-home pay of $2.9 million, plus $0.7 million in stock grants, and stock options valued for accounting purposes at $0.7 million, for a total nominal value of $4.3 million.

That compares with $4.6 million a year earlier, with the same stock-option caveat.

The Boeing filing does not include recent bonuses and stock awards given to McNerney, Albaugh and Carson, which will be reported in the 2010 proxy filing.

Last month, Albaugh was given $4.3 million in stock, including a special $3 million bonus on top of his regular annual bonus. At the same time, McNerney received $3.3 million in stock.

And last week, Carson was paid $1.5 million in advance for two years of consulting work, not to exceed 75 hours of work per month.

In an interview with The Times the week after being awarded his recent bonus, Albaugh called for moderation of future wage demands from the Machinists union. That drew a sharp retort from Machinists District 751 President Tom Wroblewski.

"I found it interesting that he'd say something like that just days after he and CEO Jim McNerney both collected $3 million bonuses," Wroblewski wrote his members.

McNerney's 2009 take-home pay includes $1.9 million in base salary, $4.5 million in cash bonuses, $2.6 million in stock granted him in previous years and vested last year, and $1 million in other compensation.

It doesn't include a $5.7 million increase in the value of his pension, primarily an accounting change triggered by lower interest rates in the way the present value of the pension is calculated.

Part of McNerney's incentive bonus is calculated over a three-year period, and this portion fell by more than half compared with 2008.

But Boeing spokesman Charles Bickers said the 2009 portion of McNerney's bonus rose almost 60 percent compared with 2008, because Boeing's overall business performance, though below target, was better last year.

For comparison, the company's white-collar employees in February received incentive payouts equal to seven days' extra pay, compared with six days in 2008.

Boeing executive compensation also depends upon an assessment of individual performance. Bickers said the compensation committee of the board of directors gave McNerney a higher individual performance score than in 2008.

Doug Kilgore, executive director of the Worker Owner Council of Washington, which represents the Boeing shareholder interests of building trades' union pension funds, said his group questions why Boeing is paying bonuses at all, given the repeated problems with its airplane programs in 2009.

"We're critical of bonus payments that seem to function as a form of salary and are not contingent on superior performance," Kilgore said.

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