Board issues add to Boeing's on-board issue
Boeing has spent the past week talking to regulators as it struggles to fix the grounded 787 Dreamliner, while the Securities and Exchange Commission is demanding that the company let investors vote on splitting the roles of chief executive and chairman.
Qantas has already cancelled its order for 35 Boeing 787-9 Dreamliners, and is working with Boeing on the battery issues that could affect its order of 14 Dreamliners for low-budget offshoot Jetstar.
The vote proposal - submitted by a shareholder agitating for change - would let Jim McNerney, who holds the titles now, concentrate on challenges such as production delays that stalled the 787's debut, according to the proposal.
Boeing sought to block a vote, messages to the SEC show.
"This proposal is important to focus our CEO on Boeing," Ray Chevedden, the shareholder who submitted the plan, wrote in letter to the company. "When our CEO serves as our board chairman, this arrangement can hinder our board's ability to monitor our CEO's performance."
Boeing's SEC correspondence on the measure provides an early look at the aircraft maker's annual-meeting agenda before proxy materials are sent to investors. The 787's troubles have only deepened since Mr Chevedden's letter, with all 49 of the jets in service grounded by regulators in January after two battery faults. Regulators are now considering Boeing's proposed fixes.
Mr Chevedden and his son John were behind a similar proposal last year at Sempra Energy, which shareholders approved. John Chevedden advanced a plan to allow shareholder action outside of annual meetings that Boeing shareholders rejected in 2011.
Ray Chevedden's plan would require that an independent director lead Boeing's board instead of the CEO, according to SEC documents.
The proposal gives the company the option to put off separating the roles until Mr McNerney, 63, leaves.
Shareholders rejected a similar initiative in 2011, with 35 per cent of votes cast for the proposal, 64.2 per cent against and less than 1 per cent abstaining, according to an SEC filing.
Boeing spokesman John Dern pointed to the company's argument against the failed proposal in its 2011 proxy. Boeing's board "believes it is in the best interest of shareholders for the board to have flexibility to determine the appropriate leadership structure," the company said then.
SEC spokesman Florence Harmon declined to comment on the agency's correspondence with Boeing and Mr Chevedden.
While Boeing's proxy did not include such a measure last year, 56 other companies held votes on independent chairmen, according to Patrick McGurn, special counsel at Institutional Shareholders Services. In addition to Sempra, shareholders at KeyCorp, Kindred Healthcare and McKesson Corp approved the initiatives, while the rest failed, he said.
Boeing shares rose 0.5 per cent to $US77.28 in New York trading. The shares have climbed 2.5 per cent this year, trailing the S&P 500 Index's 6.5 per cent gain as the Dreamliner's woes mounted.
The Dreamliner entered service in 2011 after a three-year delay caused by supply-chain disruptions, assembly problems and a strike by its machinists' union. Airlines including Qantas and Air India sought compensation after delivery of their planes was pushed back.
"When you're concerned about the power and performance of the CEO, you should get oversight," said Charles Elson, director of the University of Delaware's John Weinberg Centre for Corporate Governance. "The person being monitored shouldn't be the chair of the group doing the monitoring."
The proposal cites Mr McNerney's service as Procter & Gamble's lead director and as a member of IBM's board as potential distractions from his work at Boeing. His participation on board committees at both companies have left him overextended, Mr Chevedden wrote.
Mr Chevedden reiterated his concerns in a letter to the SEC on January 16, when the Dreamliner was grounded, saying that, given the crisis, the company should withdraw its opposition.
Boeing had sought SEC approval to omit the proposal because the references to Mr McNerney's P&G and IBM roles rendered it "materially misleading", according to a December 19 letter from Michael Lohr, Boeing's assistant general counsel, to the SEC.
Shareholders voting on the proposal might be confused as to whether they were being asked to separate the chairman and CEO duties or prohibit the company's chief executive from serving on outside boards, Mr Lohr wrote.
SEC attorney Tonya Aldave rejected Boeing's argument in a January 29 letter. The correspondence between the company and regulators is posted on the SEC website. "We do not believe Boeing may omit the proposal or portions of the supporting statement from its proxy materials," Ms Aldave wrote.