- The Washington Times - Monday, March 7, 2005

CHICAGO (AP) — Boeing Co. Chief Executive Officer Harry Stonecipher, brought back from retirement 15 months ago to boost the aerospace manufacturer’s tainted image, has been forced out because of a new ethics scandal involving an affair he had this year with a female company executive.

In a stunning announcement that left the exact circumstances behind the ouster vague, Boeing said yesterday the 68-year-old president and CEO had resigned at the board’s request a day earlier for improper behavior while carrying out the consensual relationship.

Chairman Lew Platt said the affair by itself did not violate the code of business conduct at the company, where a string of defense scandals has raised questions about the way Boeing obtains its lucrative contracts. But an internal investigation that started because of an employee’s complaint discovered “some issues of poor judgment” involving Mr. Stonecipher, who is married.

Mr. Platt refused repeated requests to be more specific and did not identify the female executive, whom he said remains with Boeing.

“The board concluded that the facts reflected poorly on Harry’s judgment and would impair his ability to lead the company,” he said.

Chief Financial Officer James Bell, 56, will serve as acting CEO until a successor is found but is not a candidate for the permanent job, the company said. Analysts named Boeing executives Alan Mulally and Jim Albaugh as potential choices, along with 3M Co. CEO James McNerney Jr., who is a Boeing board member. Mr. Mulally heads Boeing’s Seattle-based commercial airplane business, and Mr. Albaugh heads its more than $30 billion-a-year defense business.

Boeing insisted the move has nothing to do with its operational performance or financial condition. Mr. Bell even praised “Harry’s forceful leadership” as leaving the company in strong shape.

Wall Street took the news in stride. Boeing shares, which had been trading at 3-year highs, dropped 8 cents to close at $58.30 on the New York Stock Exchange.

“Boeing’s primary customers, the airlines and the Pentagon, are still going to keep on buying Boeing’s airliners and weapon systems based on performance and price, not on palace intrigues,” said Robert Friedman, senior aerospace defense analyst for Standard and Poor’s.

Nevertheless, the emergence of another ethical flap is an embarrassing jolt to a company that had been trying to put two years of scandal to rest.

Mr. Stonecipher’s predecessor, Phil Condit, resigned Dec. 1, 2003, as a result of the defense contracting controversies that ultimately sent two Boeing executives — ex-Air Force procurement official Darleen Druyun and Chief Financial Officer Mike Sears — to prison.

Analysts appeared split over the decision to oust Mr. Stonecipher.

Morningstar analyst Chris Lozier said in a note to investors that “the board has done the right thing inasmuch as the firm still needs a moral rudder to return it to its storied reputation.”

Paul Nisbet of JSA Research took the opposing view. “It’s a board that’s become overly sensitized by all the negative publicity about Boeing employees and their ethics, and they reacted more strongly than I think was appropriate,” he said.

Mr. Platt said during a conference call with analysts and reporters that Boeing executives learned of the affair Feb. 25 after a worker saw correspondence between the two.

He said the company’s investigation found that some claims made by that employee were untrue, such as claims that Mr. Stonecipher had influenced the woman’s career or salary.

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