By Scott Hamilton
March 20, 2020, © Leeham News: Before the Trump Administration hands $60bn over to Boeing for its own purposes and to serve as a conduit to aid the supply chain, there are just one or two issues to address.
Terms and conditions
- Eliminate dividends and stock buybacks. Boeing suspended buybacks when the 737 MAX was grounded, but dividends remain. These must be terminated unless associated with the government (taxpayer) support to Boeing. And these can’t be reinstated until the government support is repaid.
David Calhoun, CEO, The Boeing Co. Source: CNBC.
- The salary of CEO David Calhoun should be zeroed out, as should compensation for the Board of Directors. Compensation for every officer earning seven figures in salary or stock awards should be reduced. The CEOs of Alaska, Delta and United airlines zeroed out their salaries. The Board of Delta zeroed out their compensation for six months. Where is the sacrifice at Boeing?
- How does Boeing choose which suppliers get aid, and how much? Many suppliers are co-suppliers to Airbus. Will these be eligible, by Boeing rules? Money is fungible. There’s little doubt Boeing would not like to see money go to the Airbus operations. No doubt, members of Congress (except those from Alabama), would agree.
- If Congress demands the government receives an equity stake, whether through common stock, warrants or a convertible instrument, how will Lockheed Martin and Northrop Grumman view government ownership in a company seeking a government contract? How will the European Union view US government ownership of Boeing in the midst of sorting out the World Trade Organization trade and tariff war over Airbus?
When Calhoun was named CEO, he was awarded a seven figure salary and a $7m bonus if certain goals were achieved. Calhoun later said he isn’t sure he would have taken the job as CEO without a salary.
Lee Iacocca took $1 to rescue Chrysler, with government support. Calhoun certainly is rich enough to provide a service to Boeing and the United States aerospace system for $1. If he succeeds, a later Board could always reward him handsomely.
But now: the greedy, good-old-boys club at the Board remains intact.
Calhoun is part of the problem: he’s been on the Board since 2009. Despite his incredible assertion that he was only in the front row watching a movie, he was an insider. He was the lead director. He was on the Compensation Committee. Suck it up and work for $1 and nothing, at this time, on the come. You owe it to the company, to the employees, to the shareholders, to the supply chain and to the USA to fix the problems you helped create.
The bailout still makes sense
The bailout of Boeing, the supply chain and, separately, the airlines still make sense for the reasons detailed here. For Boeing, it should come at a stiff price.