Boeing's high-flying stock showers riches on top execs

Boeing's jet-propelled share price is blowing past a series of thresholds for executive bonus awards, triggering large stock payouts to about 2,000 company officials.

Monday, when the stock's 20-day average price rose past $79.20, Boeing Commercial Airplanes Chief Executive Alan Mulally received a bonus of stock worth $780,000.

That brings his total bonuses for the year under Boeing's stock-incentive plans to $6.7 million during a giddy seven-week ride that has taken the stock to record highs.

Last month, Mulally received bonuses worth $1.2 million, $1.4 million, $1 million and $770,000. Earlier this month, he got a payout of $1.5 million. The bonuses are all in the form of Boeing stock.

The ride is far from over. Boeing shares closed at $83.30 Tuesday, and if the 20-day average reaches $91.41, it will trigger nine further stock payouts.

Mulally is a hairbreadth from another $1.1 million payout. Then he's set to get another $10 million from the following eight trigger points. And there are more beyond that.

Lower-level executives typically would get bonuses much smaller than Mulally's, in the range of $5,000 to $50,000 per payout.

Because the share grants in the incentive plans extend for five years, retirees are also reaping the benefits of grants awarded during their employment.

These include ex-CEO Phil Condit, who received at least $9.1 million worth of stock this year from his 2002 performance-plan grant, and ex-CEO Harry Stonecipher, who got at least $8.6 million worth from his 2004 grant.

Meanwhile, Boeing's rank-and-file workers are beginning to eye the share-incentive plan designed for them. That plan pays out just once every two years, if the stock performs well enough.

This June it should pay out hundreds of millions of dollars worth of shares. At current stock levels, workers with four years of service will each get shares worth more than $5,000. The amount will be pro-rated for those with less time at the company.

Boeing shares have gained more than 18 percent since January.

The stock's rapid rise is based largely on the perception that Mulally's commercial-airplanes unit is set to storm past rival Airbus, which appears to be in strategic trouble.

Boeing won the lion's share of lucrative wide-body jet sales last year. And major customers have publicly told Airbus it needs to spend $3 billion to $5 billion to develop an all-new design for its proposed rival to Boeing's 787.

Airbus parent company European Aeronautic Defence & Space (EADS) may be pinched for cash to complete current development programs as well as a pre-existing commitment to buy out BAE Systems' one-fifth stake in Airbus.

If Boeing can only execute its plan to deliver the 787 in 2008, it looks set to seize back its spot as the No. 1 airplane manufacturer in the world.

Last week, one Wall Street analyst, Heidi Wood of Morgan Stanley, raised her projection for the stock price from $80 to $110 a share, and wrote to clients of the "breathtaking" potential for it to go even higher, to as much as $140 within two to three years.

That bullishness immediately boosted the stock further.

The executive share payouts come through Boeing's share-performance plans, which were awarded each year from 1998 until 2005 to about 2,000 top executives.

Fred Whittlesey, principal with Seattle consulting firm Compensation Venture Group, regards such plans as the best way to reward executives while ensuring their goals are aligned exactly with those of Boeing shareholders.

"They're a public corporation," Whittlesey said. "Their job is shareholder value."

Beginning this year, new CEO Jim McNerney changed the incentive plan. Future awards will be partly cash and partly stock options — and they'll be triggered not by the stock price alone but by profit milestones as well.

This displeased shareholder advocates such as Whittlesey. The new plan ensures that executives who generate profits will still get bonuses even when the stock declines.

Michael Esser, managing director of executive-compensation consulting firm Pearl Meyer & Partners, said there's a trend away from incentive plans based solely on stock performance. That's because of recent accounting-rules changes that require companies to record stock-based awards as an expense even if targets are never reached.

Still, Boeing's existing share-performance plans must run their course — and are doing so as the stock runs with the bulls.

The 2003 plan has already paid out in full, with the stock long ago soaring beyond the targets set back then, when the price was at its lowest point in the past 10 years.

But the 2002, 2004 and 2005 plans still have plenty of life in them, each of them paying out independently of the others.

In all of 2005, Mulally received $7.6 million in performance-share payouts and took home $1.7 million in annual compensation.

In addition to the stock-performance payouts this year, Mulally got two separate awards.

In March, as part of his 2006 annual bonus, he got 6,600 shares of stock that he can access in three years. In February, as part of McNerney's new long-term incentive plan, he got 66,000 stock options that vest over three years.

Incentive plans for the rank and file pay out more modestly. There are two such plans.

The annual employee-incentive plan for salaried staff pays out based on internal financial-performance targets, not the stock price. In February, that gave about 45,000 salaried Boeing workers in the Puget Sound region, including members of the engineering union, an average pre-tax payout of just over $4,000 each.

There's a separate share-based incentive plan for all rank-and-file workers. If pre-set stock-price targets are reached, that plan pays out once every two years. The next payout is due this summer if the price stays above $47.

A stock price June 30 of $80 will trigger a payout of about $5,100 for every worker who's been at Boeing for four years.

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