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Extra
Boeing fires CEO over affair
The airplane maker where Harry Stonecipher led turnaround says relationship with another executive would impair his effectiveness.
By MSN Money wire and staff reports
Boeing Monday said it fired Chief Executive Harry Stonecipher after a probe into a personal relationship he had with a female executive that it said "reflected poorly'' on the No. 1 U.S. aircraft maker.
Boeing's (BA, news, msgs) board "asked for and received'' Stonecipher's resignation, taking action following an investigation into "a personal relationship between Stonecipher and a female executive of the company who did not report directly to him,'' the commercial jet manufacturer and defense contractor said.
Stonecipher, who took the helm at Boeing in December 2003 in a bid to put a series of scandals behind the company, had been credited with a more aggressive marketing approach that had seen a revival in commercial jet orders at the Chicago-based company.
Stonecipher, 68, is married and has two children and two grandchildren.
Led a turnaround
The unexpected ouster makes Stonecipher, who spent just 15 months in the top job, the second consecutive CEO to depart the Chicago-based airplane maker and defense contractor in disgrace.
His predecessor, Phil Condit, resigned Dec. 1, 2003, as a result of the defense contracting scandals that ultimately sent two Boeing executives -- ex-Air Force procurement official Darleen Druyun and Chief Financial Officer Mike Sears -- to jail.
Boeing shares, which are up nearly 30% from a year ago, are indicated to open slightly lower. Stonecipher presided over a revitalization of Boeing, helping to clean up the company after it was embroiled in misconduct procuring U.S. defense contracts.
"The ironic thing is that he was brought in to clean up the government ethics issues and it looks like he's pretty well done that," Cai von Rumohr, defense analyst at S.G. Cowen, told CNBC's "Squawk Box." "He was doing a good job. He sort of reinvigorated their commercial marketing."
On Friday the Air Force lifted a 20-month ban on the company from bidding on satellite launch contracts, determining that Boeing fixed problems that led to accusations it stole documents from rival Lockheed Martin (LMT, news, msgs), the Associated Press reported.
The announcement is a "total shock," but Boeing probably felt it had no choice given its recent ethics troubles, von Rumohr said. The stock likely will trade lower because there's no obvious candidate in the company to take over, he added.
A 'hard line'
Boeing Chief Financial Officer James Bell, 56, will succeed Stonecipher on an interim basis, the company said.
The company also said Chairman Lew Platt would assume an expanded role at the top U.S. aircraft maker.
"The board concluded that the facts reflected poorly on Harry's judgment and would impair his ability to lead the company,'' Platt said in a statement, adding that the resignation was unrelated to the group's operational performance or financial condition.
The company said that the unnamed female executive did not report directly to Stonecipher, but said the board decided "his actions were inconsistent with Boeing's Code of Conduct.''
The relationship was consensual and did not affect the career or compensation of the female employee, Boeing said.
Boeing said its board ordered a comprehensive investigation into the matter after getting an anonymous tip about the relationship 10 days ago.
Stonecipher, who had been president and CEO of McDonnell Douglas Corp. until its merger with Boeing in 1997 and also Boeing's president and chief operating officer from 1997 until 2001, will also leave the company's board.
"Boeing definitely has had issues with violations of conduct and, as a result, are having to take a very hard line,'' said Rick Meckler, president of investment firm Libertyview Capital Management.
"Let's face it, the environment for companies has changed,'' he added. "Boards are taking a more active role in dealing with problems at their companies.''
Bell, a 32-year veteran of the company, is not a candidate to permanently replace Stonecipher as CEO, the company said. Boeing is accelerating its search for a permanent successor.
The plain-spoken Stonecipher had said in a recent analyst conference call that he was willing to stay at the company at least until its 2006 annual meeting.
"I'm going to be around for awhile, but if they find somebody they like to run this job better, then I'm ready to leave tomorrow if they want me to,'' he said last month.
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