Boeing takes streamlined approach to scandal
The surprise ouster of Chief Executive Officer Harry Stonecipher tells us one thing about Boeing Co.: The company’s ethical antennae are fully deployed, internally and externally.
Although Chairman Lew Platt skipped back and forth Monday over whether or not Stonecipher’s consensual affair with another executive had violated Boeing’s internal code of conduct, he made it clear the board of directors will no longer tolerate behavior that might further embarrass a company still rosy-cheeked from past mistakes.
The Pentagon, for example, continues to investigate possible irregularities in the letting of several military contracts to Boeing. Evidence the bidding process for a new generation of refueling tankers was compromised led to guilty pleas by a former high-ranking U.S. Air Force procurement official and former Boeing chief financial officer.
Just Friday, the Air Force lifted a 2003 ban on Boeing bids for satellite launch contracts. Boeing employees, subsequently indicted, had stolen sensitive documents regarding Lockheed Martin’s satellite programs. The agreement letting Boeing back into the launch game requires disclosure of any internal investigations. A Boeing spokesman said that deal and the review of Stonecipher’s behavior were unrelated, despite the coincidental timing.
Stonecipher was ousted just 10 days after Platt and a few other Boeing officials were clued into the affair, which began as recently as January. The CEO apparently acknowledged his philandering when confronted by Platt, but an investigation into the circumstances was certainly in order given the company’s sensitivity to ethical transgressions. There were questions, too, about whether Stonecipher had showed any favor toward his paramour, who did not report to him.
Those concerns proved unfounded. Nor was there any indication the relationship had exposed internal Boeing information to outsiders.
But if knowledge about the affair were already circulating internally, word would have leaked to Wall Street and the Pentagon sooner or later. Platt and the rest of the board did the smart thing getting out in front of the story. Boeing has much better things to talk about.
The company’s stock has increased in value more than 40 percent in the last year, and rebounded nicely Monday after the shock over Stonecipher’s ouster wore off. Orders for commercial aircraft are climbing, and the satellite launch agreement indicates Boeing and the Air Force are patching up their relationship.
Ironically, much of the rebound is Stonecipher’s doing. His predecessor, Phil Condit, was bounced because Boeing had no flight plan, ethically or financially. Stonecipher, the head of McDonnell Douglas before its purchase by Boeing in 1997, came out of retirement to restore the Chicago company’s reputation and, as a salesman, help turn the tide of aircraft orders after an onslaught by European competitor Airbus. He also refocused Boeing on ethics.
His advocacy doubtless came back to haunt him when the affair came to light. If he did not think the affair was an ethics breach, he should have understood it would be the stuff of damaging commentary when it was exposed. That Platt was a former CEO of Hewlett Packard Co., a company consistently rated among the most ethical in the United States, should have increased his mindfulness. And what, sadly, was a married 68-year-old thinking?
Platt told one interviewer Americans expect their business leaders to be held to a high ethical standard. And in a separate interview on CNBC, Platt said he was not concerned a second upheaval at the top of Boeing would discourage executives who might be interested in heading Boeing. Quite the opposite, he said.
“We stand for the very highest in business ethics and we will tolerate no less,” Platt responded. “I would hope that would be attractive to a potential CEO.”
Sad to think the opposite might be true.