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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THE BOEING COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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[LOGO OF BOEING APPEARS HERE]
NOTICE OF 1997 ANNUAL MEETING
OF SHAREHOLDERS
AND PROXY STATEMENT
THE BOEING COMPANY
APRIL 28, 1997
11:00 A.M.
7755 EAST MARGINAL WAY SOUTH
2-22 BUILDING
SEATTLE, WASHINGTON
<PAGE>
THE BOEING COMPANY
March 10, 1997
Dear Shareholder:
You are invited to attend the Company's 1997 Annual Meeting of
Shareholders.
It will be held on Monday, April 28, 1997, in the second-floor
auditorium of the Company's 2-22 Building, located at 7755 East Marginal Way
South, Seattle, Washington. The meeting will begin at 11:00 a.m., Seattle time.
A map and directions to the 2-22 Building are on the back of this proxy
statement. The Annual Meeting will be accessible through the use of a sign
language interpreter.
The matters we will address at the Annual Meeting are described in the
attached notice and proxy statement. There will also be reports on the
activities of the Company and an opportunity to submit questions or comments on
matters of interest to shareholders generally.
Whether or not you attend the Annual Meeting in person, it's important
that your shares be voted on matters that come before the meeting. I urge you to
specify your choices by completing the accompanying proxy card and returning it
promptly. If you sign and return your proxy card without marking choices, it
will be understood that you want your shares voted in accordance with the
directors' recommendations.
The proposed merger with McDonnell Douglas Corporation is not on the
agenda for the Annual Meeting. Boeing plans to hold a Special Meeting of
Shareholders in July 1997 in Seattle to ask shareholders to approve the issuance
of Boeing common stock required for the merger. Shareholders will receive a
notice of that meeting and a proxy statement this summer.
Very truly yours,
/s/ Philip M. Condit
Philip M. Condit
Chairman of the Board
and Chief Executive Officer
<PAGE>
THE BOEING COMPANY
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1997
The Annual Meeting of Shareholders of The Boeing Company will be held on April
28, 1997, at 11:00 a.m., Seattle time, in the second-floor auditorium of the
Company's 2-22 Building, at 7755 East Marginal Way South, Seattle, Washington.
Shareholders at the close of business on February 27, 1997 will be entitled to
vote at the Annual Meeting. The items on the agenda, as described in the
attached proxy statement, are as follows:
1. To elect four people to the Board of Directors, three for three-year terms
expiring in 2000 and one for a one-year term expiring in 1998;
2. To consider and vote on a proposal to amend the Restated Certificate of
Incorporation to increase the number of authorized shares of the Company
from 610,000,000 to 1,220,000,000 shares, in order to permit, among other
things, a 2-for-1 stock split;
3. To consider and vote on a proposal to approve adoption of "The Boeing
Company 1997 Incentive Stock Plan for Employees";
4. To consider and vote on a proposal to approve amendments to the "Incentive
Compensation Plan for Officers and Employees of The Boeing Company and
Subsidiaries";
5. To consider and vote on three shareholder proposals, concerning military
contracts, doing business with China, and annual election of all
directors; and
6. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
So far as management is aware, no business will properly come before the Annual
Meeting other than the matters listed above.
/s/ Heather Howard
Heather Howard
Corporate Secretary and Corporate Counsel
March 10, 1997
If you cannot attend the meeting, please sign, date, and return the
enclosed proxy card appointing Philip M. Condit,
Donald E. Petersen, and Charles M. Pigott as your proxies.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
General Information for Shareholders......................................... 1
Outstanding Securities..................................................... 1
Attendance at the Annual Meeting........................................... 1
Voting at the Annual Meeting or by Proxy................................... 2
Voting by Fund E Participants.............................................. 2
Vote Required and Method of Counting Votes................................. 3
Confidential Voting Policy................................................. 4
Expenses of Solicitation................................................... 4
Independent Auditors....................................................... 4
Proposal 1: Election of Directors........................................... 4
Nominees for Three-Year Terms.............................................. 5
Nominee for One-Year Term.................................................. 6
Continuing Directors....................................................... 6
Compensation of Directors.................................................. 8
Retirement Policy.......................................................... 9
Committees of the Board of Directors....................................... 10
Board and Committee Meetings............................................... 11
Related Party Transactions................................................. 11
Section 16(a) Beneficial Ownership Reporting Compliance.................... 11
Security Ownership......................................................... 12
Executive Compensation..................................................... 14
Summary Compensation Table.............................................. 14
Option Grants in 1996 Table............................................. 16
Aggregated Option/SAR Exercises in 1996 and Year-End Option/SAR Values
Table................................................................. 16
Pension Plan Table...................................................... 17
Compensation Committee Report on Executive Compensation................. 18
Shareholder Return on Performance Graphs................................ 22
Proposal 2: Amendment of Restated Certificate of Incorporation
to Increase Authorized Capital Stock....................................... 23
Proposal 3: Adoption of The Boeing Company 1997
Incentive Stock Plan for Employees......................................... 27
Proposal 4: Amendment of the Incentive Compensation Plan for Officers
and Employees of The Boeing Company and Subsidiaries....................... 31
Proposal 5: Shareholder Proposal on Military Contracts...................... 34
Proposal 6: Shareholder Proposal on Doing Business with China............... 36
Proposal 7: Shareholder Proposal on Annual Election of Directors............ 39
Annual Report and Form 10-K.................................................. 42
Shareholder Proposals for 1998............................................... 42
Appendix A: 1997 Incentive Stock Plan for Employees......................... A-1
Appendix B: Incentive Compensation Plan For Officers and Employees of the
Boeing Company and Subsidiaries, as Amended and Restated................... B-1
</TABLE>
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THE BOEING COMPANY
P.O. BOX 3707
SEATTLE, WASHINGTON
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1997
This proxy statement is issued in connection with solicitation of a proxy on the
enclosed form by the Board of Directors of The Boeing Company (the "Company" or
"Boeing") for use at the Company's 1997 Annual Meeting of Shareholders (the
"Annual Meeting"). The approximate date on which this proxy material is first to
be sent to shareholders is March 18, 1997.
GENERAL INFORMATION FOR SHAREHOLDERS
OUTSTANDING SECURITIES
The Company's only class of capital stock outstanding is common stock with
voting rights. The Board of Directors has fixed the close of business on
February 27, 1997, as the record date for identifying shareholders of the
Company entitled to vote at the Annual Meeting. On February 27, 1997, there were
347,534,326 shares of common stock outstanding and entitled to vote. The last
sale price of the Company's common stock for that date, as reported in The Wall
Street Journal, was $101.75 per share.
ATTENDANCE AT THE MEETING
For admission to the Annual Meeting, shareholders who own shares in their own
names should come to the Registered Shareholders check-in tables, where their
ownership will be verified. THOSE WHO HAVE BENEFICIAL OWNERSHIP OF STOCK THAT IS
HELD BY A BANK OR BROKER (OFTEN REFERRED TO AS "HOLDING IN STREET NAME") SHOULD
COME TO THE BENEFICIAL OWNERS TABLES; THEY MUST BRING ACCOUNT STATEMENTS OR
LETTERS FROM THEIR BANKS OR BROKERS INDICATING THAT THEY OWNED BOEING STOCK AS
OF FEBRUARY 27, 1997.
The doors to the 2-22 Building will be opened at 9:30 a.m. and the Annual
Meeting will begin at 11:00 a.m. It is expected to be finished no later than
12:30 p.m. A map and directions to the meeting facility are on the back of this
proxy statement.
The Annual Meeting will be accessible through the use of a sign language
interpreter. Anyone who wishes to bring a translator to provide simultaneous
translation of the proceedings into another language is asked to contact the
Assistant Secretary of the Company no later than April 14, 1997, at The Boeing
Company, P.O. Box 3707, Mail Stop 10-13, Seattle, Washington 98124-2207.
<PAGE>
VOTING AT THE ANNUAL MEETING OR BY PROXY
Shares represented by a properly executed proxy card will be voted at the
Annual Meeting and, when instructions are given by the shareholder, will be
voted in accordance with those instructions. If no instructions are given, the
shares will be voted according to the recommendations of the Board of Directors.
Those recommendations are reported later in this proxy statement.
The enclosed proxy card gives discretionary authority to the persons named on
the proxy card to vote the shares in their best judgment, if any matters other
than those shown on the proxy card are properly brought before the Annual
Meeting.
A shareholder who executes a proxy card may revoke it at any time before
its exercise by delivering a written notice of revocation to the Secretary of
the Company or by signing and delivering another proxy card that is dated later.
If the shareholder attends the Annual Meeting in person, either giving notice of
revocation to an inspector of election at the Annual Meeting or voting by ballot
at the Annual Meeting will revoke the proxy.
VOTING BY FUND E PARTICIPANTS
Many Boeing employees participate in The Boeing Company Voluntary Investment
Plan (the "VIP Plan"), which is a retirement plan established under Section
401(k) of the Internal Revenue Code. One of the funds into which employees may
direct their investments is Fund E, which invests in Boeing common stock. The
shares of stock held in that fund are registered in the name of The Chase
Manhattan Bank, N.A., which is the trustee of the VIP Plan. The participants do
not acquire ownership of the shares and therefore are not eligible to vote the
shares directly or attend the Annual Meeting (unless they are also registered or
beneficial owners of Boeing common stock). However, Fund E participants are
allocated units in the fund and may instruct the trustee how to vote the shares
represented by their units.
The proxy card that is being sent with this proxy statement to registered
shareholders is also being sent to Fund E participants. (Beneficial owners
receive proxy cards from their brokers or other agents; some brokers use the
Company's proxy card and some prepare their own proxy cards.) The number of
shares of Boeing common stock held is shown on the back of the proxy card,
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above the boxes to be marked, with the notation "COM." The number of Fund E
shares, if any, is shown with the notation "VIP." If one person has both common
shares and Fund E shares, both will appear on the card and that person may vote
both the common and Fund E shares by signing and returning the single card. Fund
E shares can be voted only by signing and returning the enclosed proxy card;
they cannot be voted at the Annual Meeting and prior voting instructions cannot
be revoked at the Annual Meeting.
Fund E shares will be voted by the trustee according to each participant's
instructions. The trustee has advised the Company that if a card is signed and
returned but no voting instructions are given, it intends to vote such shares in
accordance with the recommendations of the Board of Directors.
VOTE REQUIRED AND METHOD OF COUNTING VOTES
Under Delaware law and the Company's Restated Certificate of Incorporation, the
presence at the Annual Meeting, in person or by duly authorized proxy, of the
holders of one-third of the outstanding shares of stock entitled to vote
constitutes a quorum for the transaction of business. Each share of Boeing
common stock entitles the holder to one vote on each matter presented for
shareholder action.
With respect to the election of directors, shareholders may vote in favor of all
nominees, or withhold their votes as to all nominees, or withhold their votes as
to specific nominees. Checking the box that withholds authority to vote for a
nominee is the equivalent of abstaining. The four nominees who receive the
greatest number of votes cast for the election of directors by shares entitled
to vote and present in person or by proxy at the Annual Meeting will be elected
directors. In an uncontested plurality election, such as this, abstentions have
no effect, since approval by a percentage of shares present or outstanding is
not required.
With respect to each of the proposals other than the election of directors,
shareholders may vote in favor of the proposal, or against the proposal, or
abstain from voting. The affirmative vote of the majority of shares present in
person or by proxy and entitled to vote at the Annual Meeting is required for
approval of Proposals 2, 3, 5, 6 and 7. The affirmative vote of two-thirds
of the shares present in person or by proxy and entitled to vote at the Annual
Meeting is required for approval of Proposal 4. A shareholder who signs and
submits a ballot or proxy is "present," so an abstention will have the same
effect as a vote against the proposal.
Brokers who hold shares for the accounts of their clients may vote such shares
either as directed by their clients or in their own discretion if permitted by
the stock exchange or other organization of which they are members. Members of
the New York Stock Exchange are permitted to vote their clients' proxies in
their own discretion as to the election of directors if the clients have not
furnished voting instructions within ten days of the meeting. Certain proposals
other than the election of directors are "non-discretionary" and brokers who
have received no instructions from their clients do not have discretion to vote
on those items. When a broker votes a client's shares on some but not all of the
proposals at a meeting, the missing votes are referred to as "broker non-votes."
Those shares will be included in determining the presence of a quorum at the
Annual Meeting, but are not considered "present" for purposes of voting on the
non-discretionary proposals. They have no impact on the outcome of such
proposals. The New York Stock Exchange has advised the Company that Proposals
2, 5, 6 and 7 are non-discretionary proposals.
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CONFIDENTIAL VOTING POLICY
It is the policy of the Company that all proxy, ballot, and voting materials
that identify the vote of a specific shareholder on any matter submitted for a
vote of shareholders will be kept secret from directors and executive officers
of the Company except (a) when disclosure is required by applicable law or
regulation, (b) when a shareholder expressly requests such disclosure, and (c)
in a contested proxy solicitation. If the shareholder is an employee of the
Company or a participant in Fund E of the Company's VIP Plan, the information
will not be disclosed to management unless (a) or (b) above applies.
Proxies and ballots will be received and tabulated by the Company's transfer
agent, an independent entity that is not affiliated with the Company. The
inspectors of election also will be independent of the Company. Subject to the
above exceptions to the confidential voting policy, comments written on Company
proxy cards will be provided to the Secretary of the Company without disclosing
the vote unless the vote is necessary to understand the comment.
EXPENSES OF SOLICITATION
All expenses for soliciting proxies will be paid by the Company. The Company has
retained D.F. King & Co., Inc., 77 Water Street, New York, New York 10005, to
aid in the solicitation of proxies, for a fee of $17,500, plus reasonable out-
of-pocket expenses. Proxies may be solicited by personal interview, mail, and
telephone. D.F. King has contacted brokerage houses, other custodians, and
nominees to ask whether other persons are the beneficial owners of the shares
that they hold in street name and, if that is the case, will supply additional
copies of the proxy materials for distribution to such beneficial owners. The
Company will reimburse such parties for their reasonable expenses in sending
proxy materials to the beneficial owners of the shares.
INDEPENDENT AUDITORS
As recommended by the Audit Committee of the Board of Directors, the Board has
appointed Deloitte & Touche LLP as independent auditors to audit the financial
statements of the Company for the fiscal year ending December 31, 1997. Deloitte
& Touche LLP and predecessor firms have served continuously since 1934 as
independent auditors for the Company. Representatives of Deloitte & Touche LLP
will be present at the Annual Meeting to respond to appropriate questions and to
make a statement if they so desire.
PROPOSAL 1:
ELECTION OF DIRECTORS
The Board of Directors currently consists of eleven people. Nine of them are
independent directors, one is a member of management, and one is a retired
member of management. In accordance with the Company's By-Laws, directors are
divided into three classes, each of which is composed of approximately one-third
of the directors. At the Annual Meeting, four directors will be elected. Three
will be elected to serve for terms of three years, expiring on the date of the
annual meeting of shareholders in 2000. One will be elected for a term of one
year, expiring on the date of the annual meeting of shareholders in 1998. Each
director elected will continue in office until a successor has been elected or
until resignation or removal in the manner provided by
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the By-Laws of the Company. The nominees for the Board of Directors, recommended
by its Organization and Nominating Committee, are all currently Board members.
The nominees for re-election and the directors whose terms will continue after
the Annual Meeting are listed below. Shares represented by a properly executed
proxy card will be voted for the nominees unless such authority is withheld.
Should any nominee become unavailable for election, the Board of Directors may
vote all proxies given in response to this solicitation for the election of a
substitute nominee of its choice, or may in its discretion reduce the size of
the Board of Directors rather than nominate a substitute.
The Board of Directors has adopted a policy requiring a nonmanagement director
to resign at the annual meeting of shareholders following that director's 72nd
birthday. Accordingly, Stanley Hiller, Jr. has announced his intention to retire
from the Board effective on the date of the Annual Meeting. The Board has, in
accordance with the By-Laws, reduced the size of the Board to ten, to be
effective at the time of the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
NOMINEES FOR THREE-YEAR TERMS
PAUL E. GRAY Director since 1990
CHAIRMAN OF THE CORPORATION, MASSACHUSETTS INSTITUTE OF
TECHNOLOGY. Age 65. Dr. Gray served as President of
Massachusetts Institute of Technology (education)
from 1980 until he retired in 1990. He was Chancellor [PHOTO]
of MIT from 1971 to 1980 and Dean of the School of
Engineering from 1970 to 1971. Dr. Gray is a director
of Eastman Kodak Company, New England Life Insurance Co.,
New England Investment Co. L.P., and Arthur D. Little,
Incorporated.
Shares and share equivalents................... 1,350
FRANK SHRONTZ Director since 1985
CHAIRMAN EMERITUS, THE BOEING COMPANY. Age 65. Mr. Shrontz
served as Chairman of the Board of The Boeing Company
from 1988 until his retirement on January 31, 1997. He was
Chief Executive Officer from 1986 until 1996 and President [PHOTO]
from 1985 until 1988. Mr. Shrontz is also a director of
Boise Cascade Corporation, Chevron Corporation, Citicorp,
and 3M Corporation.
Shares and share equivalents................... 75,722
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NOMINEES FOR THREE-YEAR TERMS
GEORGE H. WEYERHAEUSER Director since 1962
CHAIRMAN OF THE BOARD, WEYERHAEUSER COMPANY. Age
70. Mr. Weyerhaeuser has been Chairman of the
Board of Weyerhaeuser Company (forest products)
[PHOTO] since 1988. He joined Weyerhaeuser Company in
1949, became its President in 1966, and was its
Chief Executive Officer from 1966 to 1991. He
has been a director of that corporation since
1960 and is also a director of Chevron
Corporation and SAFECO Corporation.
Shares and share equivalents.............. 9,162
NOMINEE FOR ONE-YEAR TERM
HAROLD J. HAYNES Director from 1974 to 1982 and
since 1984
RETIRED CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER, CHEVRON CORPORATION. Age 71.
Mr. Haynes served Chevron Corporation (petroleum
products) as President from 1969 to 1974 and as
[PHOTO] Chairman of the Board and Chief Executive
Officer from 1974 until his retirement in 1981.
He currently serves as a director of and Senior
Counselor to Bechtel Group, Inc. Mr. Haynes is
also a director of PACCAR Inc and Saudi Arabian
Oil Company.
Shares and share equivalents.............. 8,050
CONTINUING DIRECTORS
JOHN E. BRYSON Director since 1995
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER OF EDISON INTERNATIONAL (FORMERLY
SCECORP). Age 53. Mr. Bryson has served as
Chairman of the Board and Chief Executive
Officer of Edison International and its
[PHOTO] principal subsidiary, Southern California Edison
Company (electric utility), since 1990. He is a
director of The Times Mirror Company and the
Council on Foreign Relations, and a trustee of
Stanford University. Mr. Bryson is also Chairman
of the California Business Roundtable. His
current term as a Boeing director expires in
1998.
Shares and share equivalents............. 2,480
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CONTINUING DIRECTORS
PHILIP M. CONDIT Director since 1992
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER,
THE BOEING COMPANY. Age 55. Mr. Condit was elected
Chairman of the Board effective February 1, 1997.
He has been Chief Executive Officer since April 29,
1996, and served as President from August 1992 until [PHOTO]
becoming Chairman. From 1989 to 1992, he was Executive
Vice President of Boeing Commercial Airplane Group and
General Manager of its 777 Division. Mr. Condit is also
a director of Fluke Corporation and Nordstrom Inc. His
current term as a Boeing director expires in 1999.
Shares and share equivalents.................... 32,059
JOHN B. FERY Director since 1989
RETIRED CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER,
BOISE CASCADE CORPORATION. Age 67. Mr. Fery served as
Chairman of the Board of Boise Cascade Corporation (wood
and paper products) from 1978 to 1995, and as Chief
Executive Officer from 1972 until 1994. He is also a [PHOTO]
director of Albertson's, Inc., Hewlett-Packard Company,
and U.S. Bancorp. His current term as a Boeing director
expires in 1999.
Shares and share equivalents.................... 2,300
DONALD E. PETERSEN Director since 1990
RETIRED CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER,
FORD MOTOR COMPANY. Age 70. Mr. Petersen served as
Chairman of the Board and Chief Executive Officer of Ford
Motor Company (automobile manufacturer) from 1985 to 1990. [PHOTO]
He had served as President of Ford Motor Company from
1980 to 1985. Mr. Petersen is also a director of Dow Jones
& Co., Inc. His current term as a Boeing director
expires in 1999.
Shares and share equivalents.................... 5,559
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CONTINUING DIRECTORS
CHARLES M. PIGOTT Director since 1972
CHAIRMAN EMERITUS, PACCAR INC. Age 67. Mr.
Pigott was Chairman of the Board and Chief
Executive Officer of PACCAR Inc (manufacturer of
[PHOTO] transportation equipment) from 1986 through
1996. He served as President of that company
from 1965 to 1987. He is a director of Chevron
Corporation and The Seattle Times Company as
well as of PACCAR. His current term as a Boeing
director expires in 1998.
Shares and share equivalents............. 15,871
ROZANNE L. RIDGWAY Director since 1992
FORMER ASSISTANT SECRETARY OF STATE FOR EUROPE
AND CANADA. Age 61. Ambassador Ridgway served as
Co-Chair of The Atlantic council of the United
States (an association to promote better
understanding of international issues) from 1993
to 1996 and was its President from 1989 through
1992. She served 32 years with the U.S. State
[PHOTO] Department, including service as Ambassador to
the German Democratic Republic and to Finland,
and, from 1985 until her retirement in 1989, as
Assistant Secretary of State for Europe and
Canada. She is also a Director of Bell Atlantic
Corporation, Citicorp, Emerson Electric Company,
RJR Nabisco, Inc., 3M Corporation, The Sara Lee
Corporation, and Union Carbide Corporation. Her
current term as a Boeing director expires in
1998.
Shares and share equivalents.............. 3,243
COMPENSATION OF DIRECTORS
The Company pays each non-employee director an annual board retainer fee of
$36,000, of which $26,000 is paid in cash and $10,000 is paid in Boeing stock
units issued under the Deferred Compensation Plan for Directors.
Additionally, the Company pays each non-employee director an annual committee
retainer, for all committee service, of $10,000 for those who serve as chairman
of a committee and $6,000 for those who do not. Each non-employee director
receives a fee of $2,000 for each day on which he or she attends a Board meeting
and a fee of $1,000 for attendance at one or more committee meetings on a day on
which a Board meeting is not also held.
Directors may also elect to defer all or a portion of their cash retainers and
fees to a cash-based account or to their Boeing stock unit account under the
Deferred Compensation Plan.
The number of Boeing stock units credited to each director's account is the
number of shares of Boeing common stock that could be purchased with the
retainer or fee, based on the Fair Market Value of the stock as of the day on
which the retainer or fee is earned. "Fair Market Value" for a
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single trading day is the mean of the high and low per share trading prices for
Boeing common stock as reported in The Wall Street Journal for the New York
Stock Exchange -- Composite Transactions.
Boeing stock units earn the equivalent of dividends, which are credited as
additional stock units. Directors do not have the right to vote or transfer
Boeing stock units. Cash-based accounts earn interest. Amounts held for a
director under the Deferred Compensation Plan are intended to be distributed
after the director retires from the Board or otherwise terminates service on the
Board. Boeing stock units will be distributed as shares of Boeing common stock.
The Company reimburses non-employee directors for actual travel and out-of-
pocket expenses incurred in connection with service to the Company.
At the time of a non-employee director's first annual meeting, the director
receives an initial option to purchase 1,500 shares of Boeing stock. After each
subsequent annual meeting during the non-employee director's term, the director
receives an option to purchase an additional 1,200 shares. The exercise price of
an option is equal to the average of the Fair Market Values for the fifth
through ninth business days following the date of grant. Options vest
approximately one year after grant, provided the recipient remains a director.
Options become exercisable in installments one, three, and five years after the
date of grant.
Directors who are employees of the Company do not receive any compensation for
their service as directors.
RETIREMENT POLICY
The retirement policy of the Board of Directors is as follows: (a) each director
who is not an officer of the Company will resign permanently as a director at
the annual meeting of shareholders following that director's 72nd birthday, and
(b) each director who is an officer of the Company will tender to the
Organization and Nominating Committee a resignation as a director on the first
to occur of the following: (i) the officer retires under The Boeing Company
Employee Retirement Plan or (ii) the officer no longer fulfills a primary role
in the Company, as determined by the Organization and Nominating Committee. In
any case, such director will retire permanently as a director no later than the
annual meeting of shareholders following that director's 72nd birthday. This
policy applies without regard to whether a director has completed his or her
term.
The Company does not provide any retirement benefits to non-employee directors.
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COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has standing Audit, Compensation, Finance, and
Organization and Nominating Committees. Additionally, from time to time, the
Board establishes special committees for specific purposes. The membership of
the standing committees is usually determined at the organizational meeting of
the Board in conjunction with the annual meeting of shareholders. Only
independent directors currently serve on standing committees. The membership of
the committees is as follows, with the chairman of each committee listed first:
<TABLE>
<CAPTION>
ORGANIZATION
AUDIT COMPENSATION FINANCE AND NOMINATING
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<S> <C> <C> <C>
Stanley Hiller, Jr. Harold J. Haynes John B. Fery Charles M. Pigott
John E. Bryson Donald E. Petersen John E. Bryson Harold J. Haynes
John B. Fery Charles M. Pigott Paul E. Gray Donald E. Petersen
Paul E. Gray George H. Weyerhaeuser Stanley Hiller, Jr. George H. Weyerhaeuser
Rozanne L. Ridgway Rozanne L. Ridgway
</TABLE>
AUDIT COMMITTEE
The Audit Committee selects and engages the independent auditors. The committee
reviews the audit plans and audit findings of both the independent auditors and
the internal auditors, the independent auditors' opinion of the financial
statements, and the internal auditors' reports on the effectiveness of internal
controls. The committee also reviews the Company's compliance with laws,
regulations, and Company policies relating to political contributions, sales
consultants, and government affairs consultants; the Company's ethics and
business conduct program; compliance with the principles of the Defense Industry
Initiative on Business Ethics and Conduct; and the Company's annual disclosure
documents. The committee monitors the adequacy and effectiveness of the
Company's financial controls and financial reporting processes, meets with
counsel as to significant pending and threatened litigation, and assesses the
Company's risk management program. The Audit Committee held four meetings in
1996.
COMPENSATION COMMITTEE
The Compensation Committee establishes and administers the Company's executive
compensation plans. It sets policy for employee benefit programs and plans. The
committee oversees administration of the employee retirement and various other
benefit plans. The Committee makes recommendations to the Board of Directors
concerning the salaries of elected Company officers. The committee determines
the number of stock options awarded to certain officers of the Company and the
terms and conditions on which options will be granted. It administers the
Incentive Compensation Plan, stock option plans, and Deferred Compensation
Plans. The Compensation Committee held six meetings in 1996.
FINANCE COMMITTEE
The Finance Committee reviews and makes recommendations concerning proposed
dividend actions, current and projected capital requirements, and issuance of
debt or equity securities. It reviews the Company's credit agreements and short-
term investment policy. The committee also
10
<PAGE>
reviews the investment policies,administration, and performance of the trust
investments of the Company's employee benefit plans. In 1996, the Finance
Committee held six meetings.
ORGANIZATION AND NOMINATING COMMITTEE
The Organization and Nominating Committee reviews and makes recommendations to
the Board of Directors with respect to the responsibilities and functions of the
Board and Board committees, and with respect to Board compensation. The
committee makes recommendations to the Board of Directors concerning the
composition and governance of the Board, including recommending candidates to
fill vacancies on, or to be elected or reelected to, the Board. The committee
will consider the names and qualifications of candidates for the Board submitted
by shareholders in accordance with the procedures referred to on page 39 of
this proxy statement. The committee oversees evaluation of the directors, Board
committees and the Board. The committee also makes recommendations to the Board
concerning candidates for election as Chief Executive Officer and other
corporate officers, and counsels on succession planning for senior management.
The Organization and Nominating Committee held six meetings in 1996.
BOARD AND COMMITTEE MEETINGS
During 1996, the Board held ten meetings and the committees described above held
22 meetings. Average attendance by incumbent directors at all such meetings was
95%. Each incumbent director attended at least 82% of the total number of Board
and committee meetings he or she was eligible to attend.
RELATED PARTY TRANSACTIONS
The Company and its subsidiaries have transactions in the ordinary course of
business with other corporations of which certain Boeing directors are executive
officers. The Company does not consider the amounts involved in such
transactions to be material in relation to its business and believes that such
amounts are not material in relation to the business of such other corporations
or the interests of the directors involved.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and certain of its officers to send reports of their
ownership of Boeing stock and of changes in such ownership to the Securities and
Exchange Commission (the "SEC") and the New York Stock Exchange. SEC regulations
also require the Company to identify in this proxy statement any person subject
to this requirement who failed to file any such report on a timely basis. Robert
A. Davis, an officer of the Company, inadvertently filed one such report,
reporting one transaction, 19 days late.
11
<PAGE>
SECURITY OWNERSHIP
The table below shows ownership of Boeing common stock as of February 24, 1997,
(a) by each director, (b) by the Chief Executive Officer and the other four most
highly compensated executive officers (collectively, the "Named Executive
Officers"), and (c) by all directors and executive officers as a group.
The first column, "Number of Shares Beneficially Owned," shows for each person
the number of shares of Boeing common stock directly and indirectly owned on
February 24, 1997, including shares owned by, or jointly with, his or her
spouse. The second column shows the number of shares that each person may
acquire on or before April 25, 1997, by exercising stock options awarded by the
Company. The third column shows the number of share equivalents and interests in
shares held pursuant to the Company's compensation and benefit plans, on
February 24, 1997. All numbers in the table are rounded to the nearest whole
shares.
No family relationship exists between any of the directors or executive officers
of the Company.
All amounts shown in the table together represent less than one percent of the
outstanding shares of Boeing common stock. The Company is not aware of any
person who beneficially owns five percent or more of the outstanding Boeing
common stock.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES THAT NUMBER OF
SHARES MAY BE SHARE
BENEFICIALLY ACQUIRED BY EQUIVALENTS
NAME OF BENEFICIAL OWNER OWNED EXERCISING OPTIONS HELD
- ----------------------------------------------------------------------------------------
DIRECTORS
<S> <C> <C> <C>
John E. Bryson 1,000 600 1,480(1)
John B. Fery 2,250 2,850 50(1)
Paul E. Gray 1,300 2,050 50(1)
Harold J. Haynes 8,000 2,850 50(1)
Stanley Hiller, Jr. 10,630 2,850 50(1)
Donald E. Petersen 1,500 2,850 4,059(1)
Charles M. Pigott 15,093 2,850 778(1)
Rozanne L. Ridgway 580 2,370 2,663(1)
George H. Weyerhaeuser 9,112 2,850 50(1)
NAMED EXECUTIVE OFFICERS
(*also serve as directors)
Philip M. Condit* 9,767 174,506 22,292(2)
Frank Shrontz* 44,977 393,250 30,745(1)(2)
Boyd E. Givan 12,903(3) 127,380 12,685(2)
C. Gerald King 10,075 101,594 11,472(2)
Ronald B. Woodard 1,848 67,512 11,524(2)(4)
All directors and executive
officers as a group (19 persons) 161,856(3) 1,121,491 132,410
</TABLE>
12
<PAGE>
Footnotes to Security Ownership Table
- --------------------------------------------------------------------------------
(1) All non-employee directors receive part of their Board retainer in Boeing
stock units. In addition, they may choose to defer all or part of their
cash compensation in the form of Boeing stock units under the Deferred
Compensation Plan for Directors. The owners of such units do not have the
right to vote or to transfer them. See "Compensation of Directors" on page
8. Mr. Shrontz became a non-employee director following his retirement on
January 31, 1997, and received 16 stock units as part of his compensation
for services as a non-employee director in 1997. Those units are included
in the stock unit column of the table in footnote 2, below.
(2) Executive officers receive a portion of their incentive compensation in
the form of units based on Boeing common stock. Beginning with 1994, they
have received Boeing Stock Units ("BSUs"), issued pursuant to the
Company's Incentive Compensation Plan. BSUs are payable in cash or in
shares of stock three years after they are awarded, unless they have been
deferred. For the years 1990 through 1995, the executive officers received
performance shares, issued pursuant to the Long-Term Incentive Program.
Performance shares are converted into shares of Boeing common stock four
years after they are awarded. The officers cannot vote either of these
types of share equivalents or transfer them unless and until they are
converted into Boeing common stock, and they may be forfeited on
termination of employment. For further description of these interests, see
the Compensation Committee Report on Executive Compensation, which begins
on page 18.
Under the Deferred Compensation Plan for Employees, executive officers may
also choose to defer cash compensation into cash accounts that bear
interest or stock unit accounts that earn the equivalent of dividends.
Deferred amounts are not forfeited on termination of employment, but are
intended to be paid out after retirement. They are paid out in cash unless
the officer elects, in accordance with the terms of the Deferred
Compensation Plan, to receive shares of Boeing common stock. The officers
cannot vote deferred stock units or transfer them unless and until they
are converted into Boeing common stock. Mr. Condit has deferred a portion
of his 1996 cash incentive award into a stock unit account; the number
shown for him in the table below includes 4,031 deferred stock units as
well as 5,921 BSUs.
The stock units and performance shares held by each Named Executive Officer
as of February 24, 1997, are as follows:
<TABLE>
<CAPTION>
BSUs and other Performance
stock units shares
- ------------------------------------------------
<S> <C> <C>
Philip M. Condit 9,952 12,340
Frank Shrontz 3,285 27,460
Boyd E. Givan 3,065 9,620
C. Gerald King 2,942 8,530
Ronald B. Woodard 3,007 5,320
</TABLE>
(3) This number does not include 3,815,012 shares for which Mr. Givan has shared
investment power as a member of the Retirement Committee and the Voluntary
Investment Plan Committee, which committees are appointed by the Board of
Directors. Mr. Givan does not have beneficial ownership of these shares.
(4) In addition to the stock units and performance shares shown in footnote 2,
Mr. Woodard has units equivalent to 3,197 shares in Fund E of the VIP
Plan, a 401(k) retirement plan, and may instruct the trustee how to vote his
units. See page 2 for additional information on VIP Fund E.
13
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the annual and long-term compensation of the
Named Executive Officers for fiscal years 1996, 1995, and 1994. All numbers in
the table are rounded to the nearest dollar or whole share. The Compensation
Committee Report on Executive Compensation begins on page 18.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
----------------------------------------------
ANNUAL
COMPENSATION AWARDS PAYOUTS
-----------------------------------------------------------------
SECURITIES
UNDER- ALL
NAME AND RESTRICTED LYING LTIP OTHER
PRINCIPAL SALARY BONUS STOCK OPTIONS PAYOUTS COMPENSATION
POSITION IN 1996 YEAR ($) ($)(3) ($)(4) (#) ($)(5) ($)(6)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Philip M. Condit 1996 $694,829 $639,000 $258,701 75,000 $57,958
President 1995 558,622 373,800 150,739 57,883 $197,921 47,249
& CEO (1) 1994 499,714 292,000 72,608 21,250 139,613 40,514
Frank Shrontz 1996 996,168 852,000 344,935 0 94,038
Chairman of the 1995 944,062 712,000 287,122 120,000 573,881 85,289
Board(2) 1994 844,828 600,000 149,194 31,875 404,813 74,959
Boyd E. Givan 1996 422,606 262,800 111,212 27,000 38,407
Senior Vice President 1995 393,870 213,600 86,137 33,076 186,173 35,315
& CFO 1994 372,874 172,000 42,769 57,750 137,700 31,102
C. Gerald King 1996 399,618 249,300 104,769 27,000 35,599
Senior Vice President- 1995 374,330 206,800 82,946 29,548 195,210 33,049
Pres., Defense & Space Group 1994 333,143 168,000 41,774 57,750 131,325 27,316
Ronald B. Woodard 1996 446,744 279,900 119,042 40,000 34,224
Senior Vice President- 1995 383,755 203,600 86,137 35,000 101,220 29,728
Pres., Commercial 1994 316,476 148,000 36,801 57,750 71,400 22,592
Airplane Group
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Condit was elected Chairman of the Board effective February 1, 1997.
(2) Mr. Shrontz ceased to serve as Chief Executive Officer of the Company on
April 29, 1996 and retired as Chairman of the Board of Directors on January
31, 1997, but continues to serve on the Board of Directors, with the title
Chairman Emeritus.
(3) Incentive compensation (reported in the Bonus and Restricted Stock
columns) is based on performance in the year shown, but is
determined and paid the following year.
(4) The amount reported for each officer for each year is the value of the BSUs
awarded in February of the following year. The number of BSUs awarded is
the number of shares that could be purchased with 30% (20% for 1994) of the
officer's target incentive award, adjusted for Company performance, using
as the purchase price the Fair Market Value (as defined on page 8) of
Boeing common stock on that date. However, in accordance with the SEC's
proxy rules, the value of the BSUs awarded is shown here using the closing
market price of Boeing common stock on the date of the award. For a
discussion of target incentive awards, see the Compensation Committee
Report on Executive Compensation, at page 19.
14
<PAGE>
BSUs earn the equivalent of dividends, which are reinvested in BSUs each
quarter. BSUs vest and are payable three years after the award. The officer
may choose to receive for each BSU one share of Boeing common stock or cash
equal to the Fair Market Value of one share at the time of vesting.
The following table shows all stock units and performance shares held by
each of the Named Executive Officers, including those whose value is shown
in the Summary Compensation Table and those granted in previous years and
not yet converted into common stock. The columns are (a) the aggregate
number of BSUs and other stock units (for discussion of other stock units,
see footnotes 1 and 2 to the Security Ownership Table, at page 13) held as
of February 24, 1997, (b) the value of those BSUs and other stock units,
based on the closing market price of Boeing common stock on February 24,
1997, which was $105.50 per share, (c) the aggregate number of performance
shares held as of December 31, 1996, and (d) the value of those
performance shares, based on the closing market price of Boeing common
stock on December 31, 1996, which was $106.50 per share.
<TABLE>
<CAPTION>
NUMBER 2/24/97 VALUE
OF BSUS OF BSUS NUMBER OF 12/31/96 VALUE
AND OTHER AND OTHER PERFORMANCE OF PERFORMANCE
STOCK UNITS STOCK UNITS SHARES SHARES
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Philip M. Condit 9,952 $1,049,909 12,340 $1,314,210
Frank Shrontz 3,285 346,575 27,460 2,924,490
Boyd E. Givan 3,065 323,334 9,620 1,024,530
C. Gerald King 2,942 310,412 8,530 908,445
Ronald B. Woodard 3,007 317,220 5,320 566,580
</TABLE>
The Long-Term Incentive Program is described in the Compensation Committee
Report on Executive Compensation, at page 20.
(5) The amount reported for each officer on the line for 1995 reflects the award
of performance-based performance shares (under the Long-Term Incentive
Program) by the Compensation Committee in 1996, based on performance in the
three-year period ended December 31, 1995. The amount reported for each
officer on the line for 1994 reflects the award of performance-based
performance shares in 1995, based on performance in the three-year period
ended December 31, 1994. The amount shown in each year is equal to the
number of performance-based performance shares awarded multiplied by the
closing market price of Boeing common stock on the date of the award. The
awards made in 1996 were the last to be made under the Long-Term Incentive
Program. Performance shares earn dividend equivalents and interest on
dividend equivalents, payable after four years, when each performance share
is converted into one share of Boeing common stock.
(6) Amounts of "All Other Compensation" are the sums of the value of (a)
dividend equivalents and interest on dividend equivalents on performance
shares under the Long-Term Incentive Program, (b) Company contributions to
the Company's Financial Security Plan, Supplemental Benefit Plan, and
Voluntary Investment Plan, and (c) premiums paid by the Company for term
life insurance for the benefit of the insured. The amounts described in (a),
(b), and (c) above, for the Named Executive Officers for 1996, are as
follows:
<TABLE>
<CAPTION>
(A) (B) (C)
---------------------------------------------------
<S> <C> <C> <C>
Philip M. Condit $14,177 $42,161 $1,620
Frank Shrontz 33,414 59,004 1,620
Boyd E. Givan 11,645 25,142 1,620
C. Gerald King 10,236 23,743 1,620
Ronald B. Woodard 5,922 26,682 1,620
</TABLE>
15
<PAGE>
OPTION GRANTS IN 1996
- --------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- ----------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT
UNDER- OF TOTAL POTENTIAL REALIZABLE VALUE AT
LYING OPTIONS ASSUMED ANNUAL RATES OF STOCK PRICE
OPTIONS GRANTED TO EXERCISE EXPIRA- APPRECIATION FOR OPTION TERM(2)
GRANTED EMPLOYEES IN PRICE TION ----------------------------------------
NAME (#) (1) FISCAL YEAR ($/SH) DATE 0% ($) 5% ($) 10% ($)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
P.M. Condit 75,000 2.25 82.00 2/26/06 $ 0 $3,867,702 $9,801,516
F. Shrontz 0 -- -- -- 0 0 0
B.E. Givan 27,000 .81 82.00 2/26/06 0 1,392,373 3,528,546
C.G. King 27,000 .81 82.00 2/26/06 0 1,392,373 3,528,546
R.B. Woodard 40,000 1.20 82.00 2/26/06 0 2,062,774 5,227,475
Share price 82.00 133.57 212.69
All optionees (more than 13,300) 0 172 million 436 million
All shareholders(3) 0 17,794 million 45,094 million
Gain of all optionees as % of gain of all shareholders 0 0.97% 0.97%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All options shown for the Named Executive Officers were granted on February
26, 1996, pursuant to the 1993 Incentive Stock Plan for Employees. The per
share exercise price is the Fair Market Value of Boeing common stock (as
defined on page 8) on the date of grant, and the term of each option is ten
years, subject to earlier termination in the event of termination of
employment. The options vest after one year's employment from the date of
the grant. As to each grant, 40% becomes exercisable after one year from
the date of grant, an additional 30% after three years, and the remaining
30% after five years. The exercise price may be paid by cash or by delivery
of shares of Boeing common stock already owned. The schedule on which
options become exercisable is subject to acceleration for retirement,
death, disability or layoff after vesting.
(2) Potential realizable values are based on assumed compound annual
appreciation rates specified by the SEC. These increases in value are based
on speculative assumptions and are not intended to forecast possible future
appreciation, if any, of the Company's stock price.
(3) Each amount represents the increase in total market value of outstanding
Boeing common stock consistent with the stock price appreciation
assumptions above. On the date on which these options were granted,
February 26, 1996, there were 345,056,190 shares of common stock
outstanding.
AGGREGATED OPTION/SAR EXERCISES IN 1996
AND YEAR-END OPTION/SAR VALUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES NUMBER OF
ACQUIRED SECURITIES UNDERLYING VALUE OF UNEXERCISED
ON VALUE UNEXERCISED OPTIONS/ IN-THE-MONEY OPTIONS/
EXERCISE REALIZED SARS AT FISCAL YEAR-END(#) SARS AT FISCAL YEAR-END ($)(2)
------------------------------------------------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Philip M. Condit 55,448 $2,532,699 146,806 133,130 $ 9,441,121 $5,399,550
Frank Shrontz 92,433 5,786,997 524,749 110,251 36,018,417 6,720,254
Boyd E. Givan 16,827 880,002 120,231 62,146 7,712,976 2,812,335
C. Gerald King 34,300 1,962,612 90,884 60,029 5,610,643 2,685,315
Ronald B. Woodard 29,700 1,228,938 45,774 72,476 2,739,265 2,946,735
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------
(1) The value realized is the difference between the Fair Market Value of the
underlying stock at the time of exercise and the exercise price.
(2) Amounts are based on the Fair Market Value of Boeing common stock on the
last trading day of the year, December 31, 1996, which was $106.50. There is
no guarantee that if and when these options are exercised they will have
this value.
PENSION PLAN TABLE
The following table shows the estimated annual benefits payable to an
employee, assuming retirement on January 1, 1997, at age 65 after selected
periods of service, including amounts to be paid pursuant to the Employee
Retirement Plan, the Supplemental Benefit Plan, and the Supplemental
Retirement Plan, based on straight life annuity amounts. The plans also
permit selection of a joint and survivor annuity with reductions in the
benefits shown. The benefits shown in the table are not subject to any
deduction for Social Security or other offset amounts.
YEARS OF CREDITED SERVICE(1)
<TABLE>
Remuneration(2) 15 20 25 30 35 40
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 300,000 $ 65,400 $ 87,200 $109,100 $130,900 $ 152,700 $ 174,500
600,000 132,900 177,200 221,860 265,900 310,200 354,500
900,000 200,400 267,200 334,310 400,900 467,700 534,500
1,200,000 267,900 357,200 446,600 535,900 625,200 714,500
1,500,000 335,400 447,200 559,100 670,900 782,700 894,500
1,800,000 402,900 537,200 671,600 805,900 940,200 1,074,500
2,100,000 470,400 627,200 784,100 940,900 1,097,700 1,254,500
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For pension plan purposes, "credited" service begins after one year of
employment with the Company. Credit for the first year is made up during the
20th, 21st, and 22nd years of employment. The Named Executive Officers have
the following years of credited service:
<TABLE>
<S> <C>
Philip M. Condit 31.5
Frank Shrontz 38.5
Boyd E. Givan 30.9
C. Gerald King 38.5
Ronald B. Woodard 30.4
</TABLE>
(2) Pension benefits are based on earnings in the last ten years of
employment, which equal (a) the average annual salary for the highest
consecutive 60 months, plus (b) the average annual incentive compensation
for the five highest years. The total annual averages for the Named
Executive Officers are currently as follows:
<TABLE>
<S> <C>
Philip M. Condit $1,003,500
Frank Shrontz 1,697,333
Boyd E. Givan 624,500
C. Gerald King 580,750
Ronald B. Woodard 536,633
</TABLE>
In the Bonus column of the Summary Compensation Table on page 14, amounts
shown for 1996 and 1995 are net of approximately 30% of the incentive
award, which was converted into BSUs, and amounts shown for 1994 are net
of approximately 20%, which was converted into BSUs. The values of BSUs
(at the closing market price of Boeing common stock on the day the BSUs
were granted) are shown in the Restricted Stock column. Compensation
covered under the plans referred to above
17
<PAGE>
includes the full incentive award, which is the total of the Bonus and
Restricted Stock columns.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
establishes and administers the Company's executive compensation programs. The
goals of the Company's integrated executive compensation programs are to:
1. Align executive compensation with shareholder interests;
2. Attract, retain, and motivate a highly competent executive team;
3. Link pay to individual, operating group, and Company performance; and
4. Achieve a balance between incentives for short-term and for long-term
results.
The full Board of Directors reviews the Committee's recommendations and approves
the salaries of all elected officers, including the Named Executive Officers
identified on page 12. The Committee is responsible for all other elements of
executive compensation, including annual incentive awards, stock options, and
the Long-Term Incentive Program for key executives.
Boeing executive officers are assigned to pay grades, each with an established
salary range, a percentage of salary that is a norm for the annual incentive
award, and a factor of salary on which stock option grants are based. Assignment
to a pay grade is determined by comparing individual responsibilities with
industry survey data and internal executive job relationships. It is the
Committee's objective to maintain a competitive compensation structure for
Boeing executives.
Boeing executive compensation programs are designed to provide awards based on
individual, operating group, and overall Company performance measures. To the
extent that there is no adverse effect on this performance-related approach or
on the Company's ability to provide competitive compensation, it is the
Committee's policy to minimize executive compensation expense that is non-
deductible by the Company for tax purposes. In 1996, none of the Named Executive
Officers received compensation that was non-deductible by the Company.
Salaries
The Committee annually reviews the salary levels of executive officers, using
data provided by an outside consulting firm and comparing Boeing salaries to
those for comparable jobs in major aerospace and other large industrial
corporations. These companies are selected on the basis of their comparable size
and operating performance, and include approximately half of the aerospace and
defense companies in the Standard & Poor's Aerospace Index used in the
performance comparison graphs on page 22. Boeing executive officer salary
levels are targeted for the median of salaries of corresponding positions at the
benchmark companies.
Executive officer salary adjustments are determined by a subjective evaluation
of individual performance and by comparisons to peers inside and outside the
Company. Survey data indicate
18
<PAGE>
that 1996 base salaries of the Named Executive Officers, including Mr. Condit,
are on average slightly below the median of the benchmark companies.
Annual Incentive Awards
Annual incentive awards are designed to focus management attention on Company
performance. Each pay grade has an assigned incentive award percentage (which is
a percentage of annual salary). That percentage is adjusted based on Company,
operating group, and individual performance. The incentive award percentages
assigned to the Named Executive Officers' pay grades range from 60% to 80% of
salary. The actual incentive award an executive officer is eligible to receive
can range from zero to two times the incentive award percentage assigned to that
officer's pay grade. Annual incentive awards for the Named Executive Officers
are paid out approximately 70% in cash and 30% in BSUs, which are discussed
below.
The incentive awards approved by the Committee are based on evaluation of
Company and operating group performance, coupled with a subjective evaluation of
individual performance. The resulting performance evaluation produces a
percentage factor that may increase or decrease the incentive awards for an
executive officer.
In 1996, Company performance was evaluated based on the Company's overall
profitability and growth, measured by shareholder value over the long-term, and
on quality, measured by customer, employee, and community satisfaction.
Shareholder value is indicated by performance comparisons with the S&P Aerospace
Index companies, the S&P 500 Stock Index, and a select group of premier
companies. Longer-term performance tracking is generally consistent with the
Company's long-term programs and business cycles. In addition to comparison of
the relative shareholder return performances on this basis, the Committee's
final evaluation included subjective and internal analysis of the reasons for
changes in the Company's shareholder value. The decision to merge with McDonnell
Douglas was recognized as an important strategic action to position the Company
as the premier aerospace company in the world.
With regard to the Company's long-term shareholder value measurements, the
Company outperformed both the S&P Aerospace Index and the S&P 500, and was in
the top quartile of the selected premier companies.
Operating group performance was evaluated based primarily on the group's
performance against its goals as to (a) cost performance; (b) profit
contribution; (c) market share or new product orders; and (d) progress on major
initiatives, such as strategic planning and implementation, process
improvements, and employee relations and development.
For 1996, the Committee assessment was that the operating groups performed well,
making progress toward reducing product cost and cycle-time, maintaining the
leading market share in the commercial airplane market, and exceeding new order
goals in the defense and space market. The Company, through its operating
groups, realized near record orders for its products, put plans in place for a
substantial increase in the production rate for commercial airplanes, and
implemented an effective transition for the acquisition of the Rockwell
aerospace and defense businesses. Awards for the Named Executive Officers other
than Mr. Condit, based on the foregoing assessment, averaged 147% of their
assigned percentages.
19
<PAGE>
Cash Awards. The cash portion of each incentive award is shown in the Bonus
Column of the Summary Compensation Table on page 14.
The cash portion of Mr. Condit's annual incentive award was based on his
effective leadership and successful overall contributions to the Company's
positive operating performance, product quality, and customer satisfaction. The
cash portion of the incentive award made by the Committee for Mr. Condit's
outstanding leadership over all operations is shown in the Bonus column of the
Summary Compensation Table on page 14.
Boeing Stock Units. BSUs are phantom Boeing shares, credited in Boeing records
without voting rights but earning dividend equivalents. The number of BSUs
awarded was determined by crediting each executive with the number of shares
that could be purchased with 30% of that officer's target incentive award,
adjusted for Company performance, based on the Fair Market Value of Boeing stock
(as defined on page 8) on the day of the award. The BSUs vest three years after
the award and each executive may choose to have them paid out in either shares
of Boeing stock or cash. The values of the BSUs at the time of grant to Mr.
Condit and the other Named Executive Officers are shown in the Restricted Stock
column of the Summary Compensation Table on page 14.
Stock Options
Stock options are granted to provide a long-term incentive that is directly
linked to shareholder value. To recognize the different levels of
responsibilities within the Company, the number of stock options an executive
officer is granted is based on the officer's pay grade and salary, and the price
of Boeing stock. However, all stock option grants are subject to discretionary
adjustments based on individual performance or for purposes of retention.
Stock options are granted with an exercise price equal to the Fair Market Value
of Boeing stock on the date of grant; they become exercisable in 40%, 30%, and
30% increments after one, three, and five years, respectively. To encourage
stock retention, and consistent with past practice, stock options are granted as
incentive stock options to the extent permitted under the Internal Revenue Code.
Mr. Condit's stock option grant in 1996 was consistent with these guidelines.
In approving annual stock option grants, the number of outstanding stock options
already held by an individual did not influence the Committee's decision.
Long-Term Incentive Program
This program is being phased out. New cycles under this program were
discontinued in 1994. Prior to 1994, certain senior executives were chosen by
the Committee to participate in the Long-Term Incentive Program. Under the
program, executive investment performance shares were allocated in the first
year of a seven-year performance cycle. After completion of the third year of
the cycle, the Committee, in its discretion, could award performance shares in
an amount from zero to 200% of the number of each participant's initial
shares for the cycle, depending on the Committee's assessment of management's
achievement of certain performance goals. Each performance share is converted
into one share of Boeing stock four years after it is awarded and
20
<PAGE>
earns dividend equivalents and interest on dividend equivalents, which are
payable when the performance share is converted into stock.
The size of the performance-based awards were based on an assessment of overall
performance against targets of profitability and growth as measured by return on
equity, real sales growth, and quality improvement as measured by customer,
employee, and community satisfaction, as well as consideration of total
shareholder return. Although the Committee did not assign relative weights to
these factors, each factor has specific targets and measures. For the three-year
period ended December 31, 1995, the Committee concluded that the Company
produced excellent results for that period of the performance cycle, resulting
in an award of performance-based shares at 140% of the number of executive
investment performance shares awarded at the beginning of the cycle. The
percentage awarded is the same for all participants.
The resulting awards for Mr. Condit and the other Named Executive Officers are
shown on the lines for 1995 in the LTIP Payouts column of the Summary
Compensation Table on page 14.
COMPENSATION COMMITTEE:
Harold J. Haynes, Chairman
Donald E. Petersen
Charles M. Pigott
George H. Weyerhaeuser
21
<PAGE>
SHAREHOLDER RETURN ON PERFORMANCE GRAPHS
The following graphs show changes in the value of $100 invested at year-end 1991
and 1986, respectively, in (a) Boeing common stock, (b) Standard & Poor's 500
Stock Index, and (c) Standard & Poor's Aerospace Index. The investment values
are based on share price appreciation plus dividends paid in cash, assuming that
dividends were reinvested on the date on which they were paid.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG BOEING, S&P 500 INDEX AND PEER GROUP
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period S&P S&P
(Fiscal Year Covered) BOEING 500 INDEX AEROSPACE
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 1991 $100 $100 $100
FYE 1992 $ 86 $107 $105
FYE 1993 $ 95 $118 $136
FYE 1994 $106 $119 $147
FYE 1995 $179 $163 $243
FYE 1996 $247 $201 $312
</TABLE>
TEN-YEAR CUMULATIVE TOTAL RETURNS
COMPARISON OF TEN-YEAR CUMULATIVE TOTAL RETURN
AMONG BOEING, S&P 500 INDEX AND PEER GROUP
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period S&P S&P
(Fiscal Year Covered) BOEING 500 INDEX AEROSPACE
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 1986 $100 $100 $100
FYE 1987 $ 75 $105 $ 82
FYE 1988 $126 $123 $103
FYE 1989 $189 $161 $133
FYE 1990 $221 $156 $139
FYE 1991 $237 $203 $165
FYE 1992 $204 $218 $174
FYE 1993 $226 $239 $225
FYE 1994 $251 $241 $243
FYE 1995 $425 $332 $401
FYE 1996 $585 $408 $517
</TABLE>
The Board of Directors and its Compensation Committee recognize that the market
price of stock is influenced by many factors, only one of which is issuer
performance. The Company's stock price is significantly influenced by cyclical
fluctuations in the commercial jet aircraft global market environment and, to a
lesser degree, changes in national defense priorities. The stock price
performance shown in the graphs is not necessarily indicative of future price
performance.
22
<PAGE>
PROPOSAL 2:
AMENDMENT OF RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE AUTHORIZED
CAPITAL STOCK
On February 24, 1997, the Board of Directors approved an amendment (the "Charter
Amendment") to the Company's Restated Certificate of Incorporation (the
"Restated Certificate") to double the authorized capital stock of the Company.
The new total would be 1,220,000,000 shares, consisting of 1,200,000,000 shares
of common stock and 20,000,000 shares of preferred stock. On the same date, the
Board authorized a 2-for-1 split of the issued common stock, subject to approval
by the shareholders of the Charter Amendment. The Board directed that the
Charter Amendment be submitted to shareholders for their consideration and
approval at the Annual Meeting.
The Restated Certificate currently authorizes the issuance of up to 10,000,000
shares of preferred stock and 600,000,000 shares of common stock. No preferred
stock has been issued.
The status and proposed use of the 600,000,000 shares of common stock are as
follows:
. As of February 24, 1997, a total of 360,763,670 shares of common stock were
issued (including 181,423 treasury shares).
. A total of 20,322,000 shares are reserved for stock awards and options
granted or to be granted under the Company's employee and director stock-based
plans, assuming termination of the 1993 Incentive Stock Plan for Employees, as
proposed in Proposal No. 3.
. If adoption of the 1997 Incentive Stock Plan for Employees is approved by
shareholders, an additional 15,000,000 shares will be reserved for issuance
under that Plan and an additional 1,500,000 shares may be reserved in the
event of an acquisition. (See Proposal No. 3, on page 27.)
. On December 15, 1996, the Company and McDonnell Douglas Corporation jointly
announced an agreement for a stock-for-stock merger (the "Merger"). The
proposed Merger contemplates (subject to approval by Boeing shareholders)
issuance of .65 of a share of Boeing common stock for each outstanding
McDonnell Douglas share, which is expected to result in the issuance of
approximately 138,000,000 shares of Boeing common stock to McDonnell Douglas
shareholders.
Therefore, following the Merger, without an increase in the number of authorized
shares of common stock, the Company would have available for future issuance
only approximately 64,415,000 authorized shares of common stock. As this amount
would be insufficient to permit the stock split, the stock split will not be
implemented if the Charter Amendment is not approved.
APPROVAL OF THE CHARTER AMENDMENT WILL NOT CONSTITUTE A VOTE FOR, AND IS NOT A
CONDITION TO THE CONSUMMATION OF, THE MERGER.
The Board believes it is desirable to increase the number of authorized shares.
This action will permit the proposed 2-for-1 split of the issued common stock,
which should result in a market price that will be attractive to a broader
spectrum of investors. The increase will also provide the Company with
flexibility in the future by assuring the availability of sufficient authorized
but unissued common stock for valid corporate purposes such as financings, stock
dividends, mergers and acquisitions. The newly authorized common stock would be
available for issuance without further action by shareholders except as required
by law or applicable stock exchange requirements. For example, the current rules
of the New York Stock Exchange would require approval by the Company's
shareholders if the number of shares of common stock to be issued equaled or
exceeded 20% of the number of shares of common stock outstanding immediately
prior to such issuance.
23
<PAGE>
The Company has no current plan or commitment to issue shares of stock for
purposes other than those discussed above, including any plan or intention to
issue such shares as a takeover defense. Nevertheless, the additional authorized
shares could be used to discourage persons from attempting to gain control of
the Company or make more difficult the removal of management. For example,
additional shares could be used to dilute the voting power of shares then
outstanding or issued to persons who would support the Board in opposing a
takeover bid or a solicitation in opposition to management. Management is not
currently aware of any specific effort to obtain control of the Company by means
of a merger, tender offer, solicitation in opposition to management, or
otherwise.
The Restated Certificate, the Company's By-Laws, its Stockholder Rights Plan and
the laws of both Delaware and Washington contain the following additional
provisions that may also have the effect of delaying, deterring, or preventing a
change in control of the Company.
Restated Certificate and By-Laws. The Restated Certificate contains a fair price
provision that requires the affirmative vote of at least 75% of the voting stock
to authorize a Business Combination (as defined in the Restated Certificate)
unless (a) such Business Combination is approved by the affirmative vote of a
majority of the Continuing Directors or (b) the Continuing Directors determine
that certain price and procedural requirements have been satisfied. In addition,
the Restated Certificate and By-Laws (i) authorize the Board, without further
shareholder approval, to issue shares of preferred stock in one or more series
and to fix the terms and provisions of each series; (ii) provide for staggered
terms for directors of the Company; (iii) eliminate cumulative voting for
directors; (iv) limit action by written consent of the Company's shareholders;
(v) impose a longer notice period for special stockholder meetings when the
Company has a 10% or greater shareholder; (vi) permit directors to be removed
only for cause; (vii) impose heightened requirements for filling vacancies on
the Board when the Company has a 10% or greater shareholder; (viii) set minimum
notice requirements for shareholder nomination of directors and submission of
other business at shareholder meetings; and (ix) in certain instances, require
the vote of at least 75% of the outstanding shares of voting stock to amend or
terminate provisions of the Restated Certificate and By-Laws regarding the fair
price provision, staggered terms, cumulative voting, notice requirements for
meetings, removal of directors, the method of filling vacancies on the Board,
and certain other provisions.
Stockholder Rights Plan. In July 1987, the Company adopted a Stockholder Rights
Plan and declared a dividend distribution of one preferred share purchase right
for each outstanding share of common stock. The rights will be exercised only
(a) if a person or group has acquired, or obtained the right to acquire, 20% or
more of the outstanding shares of common stock; (b) following the commencement
of a tender or exchange offer for 30% or more of such outstanding shares of
common stock; or (c) after the Board declares any person, alone or together with
affiliates and associates, to be an "Adverse Person." If the Board declares a
person to be an Adverse Person, or a person or group acquires more than 30% of
the then outstanding shares of common stock (except pursuant to an offer which
the independent directors determine to be fair to and otherwise in the best
interests of the Company and its stockholders), each right will entitle its
holder to receive, upon exercise, Boeing common stock (or in certain
circumstances, other securities of Boeing) having a value equal to two times the
exercise price of the right. The
24
<PAGE>
Company is entitled to redeem the rights at $.05 per right at any time prior to
the earlier of the expiration of the rights in August 1997 or 10 days following
the time that a person has acquired or obtained the right to acquire a 20%
position. The Company may not redeem the rights if the Board has previously
declared a person to be an Adverse Person. The rights do not have voting or
dividend rights and, until they become exercisable, have no dilutive effect on
the Company's earnings.
The Stockholder Rights Plan expires on August 7, 1997. The Board's current
intention is to permit the Stockholder Rights Plan to expire in accordance with
its terms and not to replace it.
Delaware Business Combination Law. Delaware General Corporation Law ("DGCL")
Section 203 ("Section 203") generally prohibits a Delaware corporation from
engaging in a "Business Combination" (including, for example, mergers, asset
sales, issuance of stock and other transactions resulting in a financial benefit
to an Interested Stockholder) with an "Interested Stockholder" (in general, a
person that is the beneficial owner of 15% or more of a corporation's
outstanding voting stock) for a period of three years following the date that
such person became an Interested Stockholder, unless (a) prior to the date such
person became an Interested Stockholder, the board of directors of the
corporation approved either the Business Combination or the transaction that
resulted in the stockholder becoming an Interested Stockholder, (b) upon
consummation of the transaction that resulted in the stockholder's becoming an
Interested Stockholder, the Interested Stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding shares held by directors who are also officers of the
corporation and certain employee stock ownership plans), or (c) on or subsequent
to the date such person became an Interested Stockholder, the Business
Combination is approved by the board of directors of the corporation and
authorized at a meeting of stockholders, and not by written consent, by the
affirmative vote of the holders of at least 66-2/3% of the outstanding voting
stock of the corporation not owned by the Interested Stockholder. The Company
has not adopted an amendment to the Restated Certificate or By-Laws electing not
to be governed by Section 203 of the DGCL.
Washington Business Combination Statute. The State of Washington has adopted a
similar business combination statute that applies to corporations such as the
Company which are incorporated elsewhere but have their principal executive
offices in, and have certain other significant contacts with, the State of
Washington. The Washington statute differs from Section 203 in the following
principal respects: it (a) defines an "acquiring person" as the beneficial owner
of 10% or more of a corporation's outstanding voting stock rather than 15%, (b)
imposes a five-year moratorium period on business combinations rather than
three, (c) makes an exception only for approval by the board of directors of
either the significant business transaction or the transaction that resulted in
the shareholder becoming an acquiring person, (d) following the five-year
moratorium period, prohibits any significant business transaction unless the
consideration to be received by the corporation's shareholders meets certain
"fair price" tests, generally related to the highest price per share of the
corporation's stock paid by the acquiring person within specified periods, and
(e) does not permit a corporation subject to the statute to elect not to be
governed by the statute.
25
<PAGE>
If the Charter Amendment to increase the number of authorized shares is
approved, the first paragraph of Article Fourth of the Restated Certificate will
read in its entirety as follows:
The total number of shares of stock of all classes which the Corporation
shall have authority to issue is 1,220,000,000, of which 20,000,000 shares
shall be Preferred Stock of the par value of $1 each (hereinafter called
"Preferred Stock") and 1,200,000,000 shares shall be Common Stock of the
par value of $5 each (hereinafter called "Common Stock").
Approval of the Charter Amendment will require the affirmative vote of a
majority of the outstanding shares of common stock entitled to vote at the
Annual Meeting. If such approval is obtained, the stock split will be effected
by the payment on June 13, 1997, of one share of common stock for each share
outstanding at the close of business on May 16, 1997, the record date for the
stock split. The Company's dividend rate cannot be changed pending the proposed
Merger with McDonnell Douglas, but will be reviewed by the merged Board of
Directors at a later date.
The Board has unanimously determined that the Charter Amendment is advisable and
fair to and in the best interests of the shareholders of Boeing.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR PROPOSAL 2.
PROPOSAL 3:
ADOPTION OF THE BOEING COMPANY
1997 INCENTIVE STOCK PLAN FOR EMPLOYEES
The Board of Directors recommends the adoption of the proposed Boeing Company
1997 Incentive Stock Plan for Employees (the "1997 Plan"). The purpose of the
1997 Plan is to attract, retain and motivate key employees by providing them
with the opportunity to acquire a proprietary interest in the Company and to
link their interests with those of shareholders. The 1997 Plan will replace and
supersede The Boeing Company 1993 Incentive Stock Plan for Employees (the "1993
Plan"), which, as of February 24, 1997, had approximately 2,100,000 shares of
Boeing common stock available for grant. No further grants will be made under
the 1993 Plan after the effective date of the 1997 plan.
The text of the proposed 1997 Plan is published in this proxy statement as
Appendix A. The following is a summary of the 1997 Plan and should be read
together with the full 1997 Plan text.
If approved, the 1997 Plan will be administered by the Compensation Committee of
the Board of Directors (the "Committee"), whose members are all independent,
non-employee directors of the Company. The 1997 Plan allows the Committee to
make awards of stock options, stock appreciation rights in tandem with, or
independent of, stock options, and restricted stock to
26
<PAGE>
employees of the Company and employees of entities directly or indirectly
controlled by the Company or in which the Company has a significant equity
interest. Approximately 14,000 employees are eligible to participate in the
1997 Plan. The types of awards are more fully described below. The Committee may
delegate its authority to a committee of one or more senior executive officers
who are also members of the Board, except that it cannot delegate decisions
regarding grants or awards to employees subject to Section 16 of the Securities
Exchange Act of 1934, as amended.
The aggregate number of shares of Boeing common stock available under the 1997
Plan will be 15 million, except that no more than 3 million shares of common
stock are available for grant as restricted stock awards and no more than 1.5
million shares of restricted stock may be granted subject to restrictions based
on continuous employment for less than three years (except when employment is
terminated because the employee dies, retires, is laid off or becomes disabled).
In any one calendar year, no individual may receive awards under the 1997 Plan
representing more than 600,000 shares of common stock. The Board, in its sole
discretion, may increase the aggregate number of shares of common stock
available under the 1997 Plan by an additional 1.5 million shares if, in the
future, Boeing acquires another company and either (a) assumes its outstanding
stock option or stock grant commitments or (b) makes grants in connection with
the acquisition. The aggregate number of shares available for awards and the
price of stock options and number of shares under outstanding awards will be
adjusted in the event of changes in capitalization, including a stock dividend,
stock split, or recapitalization.
Stock options may be either incentive stock options, which comply with Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
nonqualified stock options. The Committee will set option exercise prices and
terms. Regardless of option type, however, the exercise price of an option may
not be less than 100% of the Fair Market Value (for these purposes, the mean of
the high and low per share trading prices for Boeing common stock as reported in
The Wall Street Journal or such other source as the Committee deems reliable) on
the date of grant. The Fair Market Value on February 24, 1997, was $106.44.
Options do not vest unless the recipient remains employed for at least 12 months
after grant. The term of an incentive stock option may not be more than 10
years.
Stock appreciation rights ("SARs") may be granted by the Committee to employees
as a right in tandem with the number of shares underlying stock options granted
to such employees under the 1997 Plan or on a stand-alone basis with respect to
a number of shares for which a stock option has not been granted. SARs are the
right to receive payment per share of the SAR exercised in stock or in cash
equal to the excess of the share's Fair Market Value on the date of exercise
over its Fair Market Value on the date the SAR was granted. An SAR may not be
exercised unless the recipient remains an employee for at least 12 months from
the date of grant. Exercise of an SAR issued in tandem with stock options will
result in the reduction of the number of shares underlying the related stock
option to the extent of the SAR exercise. The Committee may establish a maximum
appreciation value for any SAR.
Restricted stock awards may be made by the Committee in Boeing common stock or
denominated in units of common stock. An award may be contingent upon continued
service or the attainment of
27
<PAGE>
certain performance goals related to profits, profit growth, profit-related
return ratios, cash flow or shareholder returns with such goals stated in
absolute terms or relative to comparison companies or indices to be achieved
during a period of time. The Committee may decide to include dividends or
dividend equivalents as part of an award and may accrue dividends, with or
without interest, until the award is paid.
Stock options, SARs and restricted stock awards are not transferable or
assignable. Payments under the 1997 Plan may be deferred to a future date or
dates (accruing interest) subject to certain terms and conditions. The Company
may deduct sufficient sums to pay withholding required for federal, state and
local taxes and to pay amounts due to the Company from the recipient of an award
made under the 1997 Plan. The 1997 Plan may be amended by the Board or the
Committee, except that shareholder approval is required for any amendment that
would increase the number of shares available under the 1997 Plan or if such
approval is required by Section 422 or 162(m) of the Code.
If approved by the Company's shareholders, the 1997 Plan will become effective
as of May 1, 1997 and will terminate on April 30, 2007, unless sooner terminated
by the Board of Directors.
Federal Income Tax Consequences of the 1997 Plan: The Company has been advised
by counsel that the material federal income tax consequences to the Company and
its employees of the grant and exercise of options and SARs under existing and
applicable provisions of the Code and regulations will generally be as
follows:
Nonqualified Options and SARs: A recipient will not have any income at the time
a nonqualified option or SAR is granted nor will the Company be entitled to a
deduction at that time. When a nonqualified option is exercised, the optionee
will have ordinary income (whether the option price is paid in cash or by
surrender of already owned Boeing common stock), in an amount equal to the
excess of the Fair Market Value of the shares to which the option exercise
pertains over the option price. When an SAR is exercised, the recipient will
recognize ordinary income equal to the sum of (a) the gross cash proceeds
payable and (b) the Fair Market Value on the exercise date of any shares
received. The Company will be entitled to a tax deduction with respect to a
nonqualified option or SAR at the same time and in the same amount as the
recipient, assuming that the deduction is not disallowed by Section 162(m) of
the Code (which limits the Company's deduction in any one year for certain
remuneration paid to certain executives in excess of $1 million) or otherwise
limited under the Code.
Incentive Stock Options ("ISOs"): An optionee will not have any income at the
time an ISO is granted. Furthermore, an optionee will not have regular taxable
income at the time the ISO is exercised. However, the excess of the Fair Market
Value of the shares at the time of exercise over the exercise price will be a
preference item that could create an alternative minimum tax liability. If an
optionee disposes of the shares acquired on exercise of an ISO after the later
of two years after the grant of the ISO and one year after exercise of the ISO,
the gain (i.e., the excess of the proceeds received over the option price), if
any, will be long-term capital gain eligible for favorable tax rates under the
Code. If the optionee disposes of the shares within two years of the grant of
the ISO or within one year of exercise of the ISO, the disposition is normally a
"disqualifying disposition," and the optionee will recognize ordinary income in
the year of the disqualifying disposition equal to the excess of the amount
received for the shares (or, in the case of a gift, the Fair Market Value of the
shares at the time the ISO is exercised) over the option
28
<PAGE>
price. The balance of the gain or loss, if any, will be long-term or short-term
capital gain depending on whether the shares were sold more than one year after
the ISO was exercised.
The Company is not entitled to a deduction as the result of the grant or
exercise of an ISO. If the optionee has ordinary income taxable as compensation
as a result of a disqualifying disposition, the Company will be entitled to a
deduction at the same time and in the same amount as the optionee, assuming that
the deduction is not disallowed by Section 162(m) of the Code.
New Plan Benefits: Since awards under the 1997 Plan will be discretionary,
awards thereunder for the current fiscal years are not currently determinable.
For purposes of comparison, the following table contains information about
awards made and benefits received during 1997 through February 24, 1997 under
the 1993 Plan to the Named Executive Officers and the groups indicated. No such
stock options have been exercised to date. Approximately 14,000 employees
participated in the 1993 Plan during 1996; a comparable number of employees,
adjusted for the acquisition of Rockwell's aerospace and defense businesses and
for the pending Merger with McDonnell Douglas, are expected to be eligible to
participate in the 1997 Plan. No nonofficer director or nonofficer nominee for
election as a director of the Company received awards under the 1993 Plan in
1997.
BENEFITS UNDER 1993 PLAN IN 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
BOEING AVERAGE
COMMON STOCK EXERCISE
UNDERLYING PRICE OF OPTIONS
NAME OPTIONS GRANTED
- -----------------------------------------------------------------
<S> <C> <C>
Philip M. Condit 60,000 $106.44
Frank Shrontz(1) 0
Boyd E. Givan 20,000 $106.44
C. Gerald King(1) 0
Ronald B. Woodard 21,000 $106.44
All executive officers as a
group 133,400 $106.44
All other employees
(including all officers
who are not executive
officers) as a group 2,888,989 $106.37
</TABLE>
- --------------------------------------------------------------------------------
(1) Mr. Shrontz retired as an executive officer of the Company effective
January 31, 1997, and Mr. King has announced his intention to retire in
1997; therefore, they received no stock option grants in 1997.
- --------------------------------------------------------------------------------
Approval of the 1997 Plan will require the affirmative vote of a majority of the
outstanding shares of common stock present in person or by proxy and entitled to
vote at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR PROPOSAL 3.
29
<PAGE>
PROPOSAL 4:
AMENDMENT OF THE INCENTIVE
COMPENSATION PLAN FOR OFFICERS AND EMPLOYEES
OF THE BOEING COMPANY AND SUBSIDIARIES
The Board of Directors, subject to approval of the Company's shareholders, has
adopted resolutions to amend and restate the Incentive Compensation Plan for
Officers and Employees of The Boeing Company and Subsidiaries (the "Incentive
Plan"). The Incentive Plan was originally approved by the Company's shareholders
in 1947 and was last submitted to shareholders for approval of an amendment and
restatement in 1957. The Incentive Plan has subsequently been amended and
restated by the Board of Directors. The purpose of the Incentive Plan is to
attract, retain and motivate key employees by recognizing, motivating and
rewarding contributions to the Company and the accomplishment of Company
objectives.
The proposed Incentive Plan amendments (the "Incentive Plan Amendments") were
prepared primarily to qualify certain payments to employees under the Incentive
Plan as performance-based compensation under Section 162(m) of the Code. Section
162(m) provides that compensation in excess of $1 million paid in any year to
the chief executive officer and the four other highest paid executive officers
of a public company (for purposes of the Incentive Plan, "Covered Employees")
will not be deductible by the corporation for federal income tax purposes unless
certain conditions are met. One condition is that the compensation qualify as
"performance-based compensation." In addition to other requirements for
qualification as performance-based compensation, shareholders must be advised of
and approve the material terms of the performance goals under which such
compensation is to be paid.
Set forth below is a summary of certain important features of the Incentive Plan
and the Incentive Plan Amendments, which summary is qualified in its entirety by
reference to the full text of the Incentive Plan, as amended and restated, which
is published in this proxy statement as Appendix B. The proposed substantive
amendments are shown in upper case type in Appendix B.
The Incentive Plan will continue to be administered by the Compensation
Committee. Officers and employees of the Company and its 50%-owned subsidiaries
who hold executive, administrative, supervisory, technical or other key
positions are eligible to participate in the Incentive Plan. In certain cases,
employees in other positions within the Company and certain former employees may
receive awards under the Incentive Plan. As of February 24, 1997, approximately
2,000 employees were eligible to participate in the Incentive Plan.
The Incentive Plan provides the Committee with complete discretion to make
awards of cash, Boeing common stock, "Boeing Stock Units" (the right to receive
Boeing common stock and the dividends thereon at the end of a three-year vesting
period) or a combination thereof to employees who are eligible for awards under
the Incentive Plan. The Committee may also establish programs under the
Incentive Plan to provide for long-term incentive awards to selected senior
executives. The long-term incentive program previously in effect under the Plan
is currently being phased out. The Committee has authority to establish a long-
term incentive program in the future, at which time performance criteria and
employee maximums may be specified. The Committee may authorize
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<PAGE>
the chief executive officer of the Company (who may in turn authorize other
executive officers of the Company) to make awards under the Incentive Plan to
certain eligible employees. Awards under the Incentive Plan may be deferred
pursuant to the Company's Deferred Compensation Plan or other deferral
arrangements, and the Company may deduct from the payment of an award
withholdings required by law or amounts owed by the award recipient to the
Company or to a subsidiary of the Company.
The Incentive Plan Amendments provide that payments to participants in the
Incentive Plan are limited each year to an aggregate of 6% of "Plan Earnings"
for the previous year. Plan Earnings are defined as the net earnings of the
Company for the year, as reported by the Company in its consolidated financial
statements, adjusted to exclude income tax, certain non-recurring and
extraordinary items, the Company's ShareValue Trust and the Incentive Plan. The
amount paid to Covered Employees under the Incentive Plan Amendments is limited
to 1% of Plan Earnings, with a maximum of 0.3% of Plan Earnings for the chief
executive officer, 0.2% of Plan Earnings for the second most highly compensated
Covered Employee and 0.167% of Plan Earnings for each of the other three Covered
Employees. The Committee has the discretion to reduce amounts awarded to Covered
Employees below these maximum levels, but does not have the discretion to
increase the amount awarded to a Covered Employee beyond the maximum levels of
compensation established by the Incentive Plan. Prior to the Incentive Plan
Amendments, the Incentive Plan provided that the Company's Board of Directors
could set aside each year for awards under the Incentive Plan a fund in an
amount not in excess of 6% of "profit subject to the plan" for such year, as
such term was defined in the Incentive Plan, and that no person could receive
from the fund for any one year awards in excess of 5% of the fund.
The Incentive Plan Amendments provide that the Incentive Plan may be amended by
a majority vote of the Company's shareholders or Board of Directors, except that
the Company's shareholders must also approve any amendment that would increase
the number of shares available for issuance under the Incentive Plan, change the
performance criterion or goal governing the amount that may be paid to Covered
Employees or the formula used to determine such amount, change the definition of
a Covered Employee, or change the requirements for amending the Incentive Plan.
Prior to the Incentive Plan Amendments, a two-thirds vote by the Company's
shareholders or Board of Directors was required to amend the Incentive Plan,
with shareholder approval required for any amendment that would increase the
amount that could be set aside for any year for the Incentive Plan fund,
increase the percentage of the Incentive Plan fund set aside for any year that
could be awarded to one participant or change the requirements for amending the
Incentive Plan.
The Incentive Plan Amendments identify the total of 5 million shares of Boeing
common stock that continue to be available under the Incentive Plan and may be
used for making awards under the Incentive Plan. The number is slightly less
than the number of shares currently registered with the SEC (adjusted for stock
splits) for issuance under the Incentive Plan, based on previous shareholder
approval of the formula under which the number of shares registered was
initially determined. Prior to the Incentive Plan Amendments, an aggregate share
limit was not required to be stated under the Incentive Plan.
31
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES: The Company has been advised by counsel that
the material federal income tax consequences to the Company and employees of the
grant and vesting of BSUs under existing and applicable provisions of the Code
and regulations will generally be as follows. When a participant receives
payment with respect to BSUs, the amount of cash and the fair market value of
the Boeing common stock received will be ordinary income to the participant and
will be allowed as a deduction for federal income tax purposes to the Company,
assuming that the deduction is not disallowed by Section 162(m) of the Code or
otherwise limited under the Code. As there is not currently an ongoing long-term
incentive program in effect under the Incentive Plan, tax consequences of such a
program are not determinable at this time.
NEW PLAN BENEFITS: The incentive awards payable under the amended and restated
Incentive Plan for services to be rendered in 1997 are not determinable until
completion of the year. However, had the Incentive Plan Amendments been in
effect in 1996, and assuming comparable financial performance by the Company,
the awards that would have been made to the Covered Employees (the Named
Executive Officers in this proxy statement) and the groups indicated in the
following table would be approximately equal to the incentive awards under
the Incentive Plan made or expected to be made in 1997 for services rendered in
1996. Approximately 2,000 employees participated in the Incentive Plan in 1996;
a comparable number, adjusted for the acquisition of Rockwell's aerospace and
defense businesses and for the pending merger with McDonnell Douglas, are
expected to participate in 1997. No nonofficer director or nonofficer nominee
for election as a director of the Company received awards under the Incentive
Plan for services rendered in 1996.
BENEFITS UNDER INCENTIVE PLAN IN 1997 FOR SERVICES RENDERED IN 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON STOCK
CASH UNDERLYING
NAME AWARDS BSUS(1)
- --------------------------------------------------------------------------
<S> <C> <C>
Philip M. Condit $ 639,000 2,452
Frank Shrontz 852,000 3,270
Boyd E. Givan 262,800 1,054
C. Gerald King 249,300 993
Ronald B. Woodard 279,900 1,128
All executive officers as a group 3,021,300 11,826
All other employees (including all officers
who are not executive officers) as a group 2,500,000 20,000
</TABLE>
- --------------------------------------------------------------------------------
(1) BSUs are phantom shares of Boeing common stock that vest three years after
the date of the award and earn dividend equivalents. BSUs are payable in
Boeing common stock or cash at the election of the holder. The BSUs shown
above for the Named Executive Officers were granted on February 24, 1997.
- --------------------------------------------------------------------------------
32
<PAGE>
Approval of this proposal to amend the Incentive Plan will require the
affirmative vote of two-thirds of the outstanding shares of Boeing common
stock present in person or by proxy and entitled to vote at the Annual
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR PROPOSAL 4.
PROPOSAL 5:
SHAREHOLDER PROPOSAL
ON MILITARY CONTRACTS
The General Board of Pension and Health Benefits of the United Methodist Church,
The Domestic and Foreign Missionary Society of The Protestant Episcopal Church
in the United States, The Marianist Society, Inc., and the Missionary Oblates of
Mary Immaculate have advised the Company that they intend to present the
following resolution at the Annual Meeting. Approval of this proposal would
require the affirmative vote of a majority of the outstanding shares of common
stock present in person or by proxy and entitled to vote at the Annual Meeting.
SHAREHOLDER RESOLUTION
WHEREAS, the proponents of this resolution believe that Boeing should
establish criteria to guide management in bidding for and implementing
military contracts. We propose the following for Board and management
study.
RESOLVED: The shareholders request the Board of Directors to commission a
subcommittee to develop criteria for acceptance and implementation of
military contracts and to report these criteria at the 1998 Annual Meeting.
Proprietary information may be omitted, and costs limited to a reasonable
amount.
PROPONENTS' STATEMENT OF SUPPORT
We believe corporate social responsibility in a successful free enterprise
society demands that business conduct be ethically correct, socially supportive,
economically useful, and financially profitable. We recommend the criteria
include:
- The appropriateness of implementing military contracts for countries that
repress their citizens, divert resources from human needs to arms
purchases, or that are engaged in acts of aggression against other
countries.
- Basic canons of ethical business practice.
- Stability of employment, including descriptions of conversion plans and
funding sources; strategies identifying community needs; employees' ideas
and market opportunities; membership in state and/or local government
economic conversion task forces.
- Ethical criteria for lobbying and marketing activities, including the
appropriateness of seeking to expand domestic or foreign markets for arms
sales.
- Sales of weapons, weapon parts and dual-use technology to foreign
governments, other companies and individuals.
33
<PAGE>
Global security is based upon the well-being and human potential of people, and
not limited to the security of territory, particularly when that security is
dependent on an arsenal of weapons. Human security is built up through adequate
jobs/employment, human and cultural development, environmental sustainability,
and the capacity of a community to be life-giving.
A YES vote recommends to the Board the development of criteria for military
contracts.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST
THIS PROPOSAL FOR THE FOLLOWING REASONS:
The Boeing Company sells military products only in strict compliance with U.S.
laws and regulations that control what products may be exported and where such
products may be sold overseas. The U.S. Government identifies those countries to
which sale of particular military equipment would not be in the United States'
interest; the U.S. Government prohibits such military sales to those countries.
In fact, many foreign sales of Boeing military products are made through
contracts with the U.S. Government, which then sells the products directly to a
foreign government that is a U.S. ally or friendly nation. The foreign sale of
all major military products must be in compliance with the requirements of both
the executive and legislative branches of the U.S. Government. Boeing believes
that determination of what products it is appropriate for the U.S. Government or
foreign governments to purchase is more properly handled by our government
officials, who ultimately must answer to the nation's electorate and who are in
the best position to determine the public's interest. Boeing complies with all
such determinations.
As to ethical business practices, The Boeing Company has a strong commitment to
integrity and has an active program for all employees to learn and support our
ethical business standards. The Ethics and Business Conduct Program includes an
experienced staff, ethics advisors functioning throughout the Company, and
active oversight of the ethics program by the Audit Committee of the Board of
Directors. The Company's ethical business conduct policy, procedures, and
program apply to all of our business activities. This includes all of the
Company's lobbying and marketing activities.
As to employment stability, the proposal implies that the Company should convert
from military work to commercial work in order to increase stability of
employment. Boeing already has almost three fourths of its business in
commercial aviation. In fact, the Board of Directors has determined that greater
stability will be accomplished through achieving a better balance between the
Company's commercial work and its defense and space work. This is expected to be
accomplished through the proposed merger with McDonnell Douglas Corporation,
which will be the subject of a shareholders' meeting later this year.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 5.
34
<PAGE>
PROPOSAL 6:
SHAREHOLDER PROPOSAL
ON DOING BUSINESS WITH CHINA
The Province of St. Joseph of the Capuchin Order, the Passionist Community, and
Franklin Research & Development Corporation have advised the Company that they
intend to present the following resolution at the Annual Meeting. Approval of
this proposal would require the affirmative vote of a majority of the
outstanding shares of common stock present in person or by proxy and entitled to
vote at the Annual Meeting.
SHAREHOLDER RESOLUTION
WHEREAS, The Boeing Company successfully lobbied the Clinton Administration to
grant Most Favored Nation status to the Peoples' Republic of China in a way that
"delinks" human rights from MFN status;
- In arguing against such linkage, President Clinton stated (1994) that
"constructive engagement" in China through business contacts would best ensure
human rights;
- In 1997 President Clinton admitted his "constructive engagement" policy had
not produced positive results regarding human rights in China. His
Administration's annual report on human rights noted of China that its "economic
pragmatism and increasingly robust ties of trade and commerce with the United
States" has not prevented or ameliorated "widespread and well-documented human
rights abuses;"
- The New York Times reported (06/09/96) Boeing is "China's most valuable
------------------
lobbyist" and has co-produced "a video that is a remarkably dewy-eyed depiction
of China--no repression of dissidents, no sales of automatic weapons to gangs in
Los Angeles, no nuclear proliferation, but plenty of Chinese enjoying American
goods;"
- U.S. corporations doing business with China and Tibet provide financial
support and legitimization for the Chinese government's rule there;
- Congressional resolutions were introduced into both houses calling for
certain principles to be followed by U.S. nationals engaged in commercial
activities in China and Tibet. Human Rights Watch created parallel principles;
RESOLVED: shareholders request the Board to adopt, by January 1, 1998,
basic human rights criteria for its business operations in and/or with the
Peoples' Republic of China. Requesting shareholders shall be notified of
these principles and how Boeing intends to implement them by July 1, 1998.
PROPONENTS' SUPPORTING STATEMENT
We ask the board to consider the following in creating these principles:
1. Not to use goods or products manufactured by forced labor in the People's
Republic of China and Tibet;
2. To safeguard Chinese and Tibetan employees prone to dismissal based upon
their involvement in non-violent demonstrations, past records of arrests or
internal exile for non-violent protest or membership in unofficial organizations
committed to non-violence;
3. To ensure that production methods do not unnecessarily risk harm to the
surrounding environment;
35
<PAGE>
4. To strive to use independent businesses when looking for potential business
partners in China and Tibet;
5. To prohibit any military presence on industrial cooperation project
premises;
6. To promote freedom of association and assembly among employees;
7. To press Chinese authorities to list those arrested in the last three years,
to end incommunicado detention, and for access to international observers to
places of detention;
8. To discourage or undertake to prevent compulsory political indoctrination
programs from occurring on company premises in China and Tibet;
9. To promote freedom of expression.
In a New York Times piece, A.M. Rosenthal stated: "The Chinese Communists are
--------------
creating a system in which controlled capitalism and tyranny work together. . .
But if American businesses do not care that their country and companies help
finance torture cells, what can an individual do about it? Use the stockholder's
right to demand a rights code for every U.S. business investing in China." If
you agree, please vote "yes."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST
THIS PROPOSAL FOR THE FOLLOWING REASONS:
The Boeing Company is a leading aerospace firm and is committed to being one of
the premier industrial companies in the world. We operate in an extraordinarily
competitive business and have done so successfully and responsibly. Ours is the
history of a company identified with integrity and high business principle.
Where we operate, we bring commitment to the rule of law and respect for
employees and their rights of association and assembly.
The Board of Directors is not insensitive to the issues surrounding the totality
of United States interests in relations with China. These include the interest
of the United States in the promotion of human rights. We believe that the lives
of hundreds of millions of Chinese have improved dramatically under economic
reform and through the engagement in China of international companies, including
Boeing. As former U.S. Ambassador to China Stapleton Roy has stated, the recent
years of modern China's history are "the best in terms of prosperity, individual
choice, access to outside sources of information, freedom of movement within the
country, and stable domestic conditions."
As China moves into the next century, it is important that China has business
relations with countries and companies that foster practices compatible with
those of its trading partners. Boeing is conducting its business to compete
successfully and to maintain and strengthen its role and opportunities in China.
It is our experience that significant good is accomplished by bringing countries
into the mainstream of open-market trading and economic progress. China's
accession into the World Trade Organization and U.S. normalization of trade with
China (through the grant of permanent Most Favored Nation status) will expand
engagement by the United States in China and further improve living standards
for the Chinese people.
Contrary to the implications in the proposal, The Boeing Company is not doing
business in Tibet. It does not use products manufactured in Tibet and does not
sell airplanes there. Boeing has no company premises in Tibet and no suppliers
in Tibet.
36
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 6.
PROPOSAL 7:
SHAREHOLDER PROPOSAL
ON ANNUAL ELECTION OF DIRECTORS
The Ray T. Chevedden and Veronica G. Chevedden Family Trust has advised the
Company that it intends to present the following resolution at the Annual
Meeting. In accordance with applicable proxy regulations, the proposed
resolution and supporting statement, for which the Board of Directors and the
Company accept no responsibility, are set forth below. Approval of this proposal
would require the affirmative vote of a majority of the outstanding shares of
common stock present in person or by proxy and entitled to vote at the Annual
Meeting.
SHAREHOLDER RESOLUTION
Recommend that the Directors and Management take the necessary steps to
start annual election of Board members, instead of waiting 3 years for
election of each Board member. This includes eliminating any by-laws
that may hinder annual elections.
PROPONENT'S SUPPORTING STATEMENT
The rational [sic] begins with highlighting Boeing's tremendous
achievement.
Financial World, March 25, 1996, honored Boeing Chairman Frank Shrontz
---------------
for preeminence in competition and service to country. FW said Boeing is
--
America's most important exporter, the Boeing 777 is the first airplane designed
entirely by computer and Boeing is global in every sense of the word.
Consequently, the entire world is a Boeing stakeholder. Boeing is
important to everyone in the world including all airlines, everyone who flies,
makes business trips, every company that depends on business travel, everyone
that buys a product from a company that relies on business trips.
With this Boeing achievement, comes a great responsibiity. There are
events that could make Boeing complacent. For instance, McDonnell Douglas,
Boeing's chief airliner competitor for most of the years since the early 1930s,
is exiting-out of the airliner business, leaving only Boeing and Airbus.
Shareholders don't want complacency even if there is still one remaining
competitor in the entire world for 100+ seat planes.
A significant step in ensuring management vigilance is the annual
election of Board members. Annual Board elections will heighten the
accountability and performance of Boeing and its Board of Directors.
Additionally, this is a small selection of issues of concern regarding
safety, profitability and management of Boeing's essential high-skill
workforce:
Boeing's first-quarter net fell 34% due to strike.
Wall Street Journal April 30, 1996
- -------------------
50% of Boeing machinist [sic] said their jobs insecure.
Cult of the "tough" executive firing subordinates without sentiment or
hesitation replaces "Human resources management."
Harper's Magazine January 1996
- -----------------
Top Boeing executives now eligible for as much as $5 million stock options
each.
Boeing production nearly halted.
Workers continue 7-week strike.
New York Times November 25, 1995
- --------------
NTSB called for sweeping changes in Boeing 737 equipment and training because of
the unknown cause of he Boeing 737 Pittsburgh USAir crash.
New York Times October 17, 1996
- --------------
NTSB Chairman accuses Boeing of failing to tell the Board everything Boeing knew
about the Boeing 737 Pittsburgh USAir crash, killing all 132 people on board.
plus
The 2,600 Boeing 737s in use by 250 airlines make the investigation urgent.
New York Times January 28, 1995
- --------------
The most intense investigation in aviation history has not yet discovered the
cause of the 747 TWA Flight 800 crash and there is still potential of finding
mechanical fault in the Boeing 747 aircraft, with 800 aircraft in service and
350 seats each.
VOTE FOR ANNUAL ELECTION OF BOARD MEMBERS TO IMPROVE BOARD ACCOUNTABILITY AND
MANAGEMENT PERFORMANCE:
FOR CONTINUED PROFITABILITY, GREATER WORLD AIRLINER SAFETY AND EFFECTIVE
RECRUITING & RETAINING OF HIGH-SKILL EMPLOYEES
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING REASONS:
Under the Company's By-Laws, as approved by Boeing shareholders, the Board of
Directors is divided into three classes with directors elected to staggered
three-year terms. Approximately one-third of the directors stand for election
each year and the entire Board can be replaced in the course of three annual
meetings, all held within approximately two years. At the same time, a majority
of directors will have prior experience as directors of the Company. This is
important for ensuring the Board has solid knowledge of the Company's complex
products, its product strategy, its long-range plans and progress, and its
evolving role in the global aerospace market.
The Board believes the classified board ensures directors' accountability to
shareholders while it also ensures continuity in the composition and long-range
planning of the Board. The Board believes this is particularly important with a
company like Boeing that has high technology products and programs that require
major investments to be made over long periods of time.
The Board also believes that a classified board reduces the ability of a third
party to effect a sudden, unsolicited change in the Company's direction. The
staggered board system would permit the Company time to negotiate with the
proponent of the change, permitting the Board to consider alternative proposals
and seek the best results for all shareholders.
37
<PAGE>
The staggered board is also a part of the Agreement and Plan of Merger between
Boeing and the McDonnell Douglas Corporation. Subject to Boeing shareholder
approval of the issuance of Boeing stock to effect the Merger and subject to
McDonnell Douglas shareholder approval of the Merger itself (both such
shareholder votes to be held later this year) and subject to governmental
approvals, the Merger would result in one third of the Boeing Board being made
up of directors who are currently McDonnell Douglas directors, with those new
directors being spread as evenly as possible throughout the three classes of
directors. The Company expects to honor the terms of the Merger Agreement with
respect to the classified board.
Further, the Board finds the supporting rationale for this proposal to be
misleading and inaccurate. It is based on incomplete information, misstates
published reports, and perpetuates inaccuracies in the press.
The Board of Directors believes that a classified board is appropriate for a
company like Boeing and that it ensures responsible, knowledgeable
representation of the long-term interests of Boeing shareholders.
Approval of this proposal would require the affirmative vote of a majority of
the outstanding shares of common stock present in person or by proxy and
entitled to vote at the Annual Meeting. However, approval of the proposal would
not automatically eliminate the classified board, as this proposal is only a
recommendation. Eliminating the classified board would require the affirmative
vote of at least 75% of the outstanding shares on a proposal to amend Article
II, Section 1 of the Company's By-Laws, which provides for a classified board.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 7.
The Secretary of the Company will provide the addresses of the proponents
named in the shareholder proposals above and the number of shares they hold
upon oral or written request for such information.
38
<PAGE>
ANNUAL REPORT AND FORM 10-K
The 1996 Annual Report of the Company was mailed to shareholders with this proxy
statement. UPON REQUEST, THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1996, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES. The Form 10-K has been
filed with the SEC. It may be obtained by writing to the Data Shipping
Department, The Boeing Company, P.O. Box 3707, Mail Stop 3T-33, Seattle,
Washington 98124-2207, or calling (206) 393-4964. The 1996 Annual Report is
also available at the Company's World Wide Web site, HTTP://WWW.BOEING.COM.
SHAREHOLDER PROPOSALS FOR 1998
The Company's next annual meeting will be held on April 27, 1998. An eligible
shareholder who wants to have a qualified proposal considered for inclusion in
the proxy statement for that meeting must notify the Secretary of the Company.
The proposal must be received at the Company's executive offices no later than
November 18, 1997. A shareholder must have been a registered or beneficial
owner of at least one percent of the Company's outstanding stock or stock with a
market value of $1,000 for at least one year prior to submitting the proposal,
and the shareholder must continue to own such stock through the date on which
the meeting is held.
The Company's By-Laws outline procedures, including minimum notice provisions,
for shareholder nomination of directors and submission of other shareholder
business to be brought before the annual meeting. A copy of the pertinent By-Law
provisions is available on request to Heather Howard, Corporate Secretary, The
Boeing Company, P.O. Box 3707, Mail Stop 10-13, Seattle, Washington 98124-2207.
THE BOEING COMPANY
39
<PAGE>
APPENDIX A
THE BOEING COMPANY 1997 INCENTIVE STOCK PLAN FOR EMPLOYEES
1. PURPOSE.
The purpose of this 1997 Incentive Stock Plan for Employees (the "Plan") is
to attract, retain and motivate key employees by providing them the
opportunity to acquire a proprietary interest in The Boeing Company (the
"Company") and to link their interests and efforts to the long-term
interests of the Company's shareholders.
2. PLAN ADMINISTRATION.
2.1 THE COMPENSATION COMMITTEE. The Plan shall be administered by the
Compensation Committee (the "Committee") of the Company's Board of
Directors (the "Board"). Except for the terms and conditions explicitly
set forth in the Plan, the Committee shall have the authority, in its
discretion, to determine all matters relating to awards under the Plan,
including selection of the individuals to be granted awards, the type of
awards granted, the number of shares of the Company's common stock (the
"Common Stock") subject to an award, all terms, conditions, restrictions
and limitations, if any, of an award, and the terms of any award agreement
or notice.
2.2 OTHER PLANS. The Committee shall also have authority to grant awards as an
alternative to or as the form of payment for grants or rights earned or due
under other compensation plans or arrangements of the Company, including
the plan of any entity acquired by the Company.
2.3 DELEGATION TO STOCK PLAN COMMITTEE. Except for the power to amend the Plan
as provided in Section 12, the Board or the Committee, in its sole
discretion, may delegate the Committee's authority and duties under the
Plan to the Stock Plan Committee of the Board or to such other committee
appointed by the Board consisting of one or more senior executive officers
of the Company who are also members of the Board, under such conditions and
limitations as the Board or the Committee may from time to time establish,
except that only the committee may make any determinations regarding awards
to participants who are subject to Section 16 of the Securities Exchange
Act of 1934, as amended (the "1934 Act").
2.4 FINALITY OF COMMITTEE DETERMINATIONS. All decisions made by the Committee
or its delegate pursuant to the provisions of the Plan and all
determinations and selections made by the Committee or its delegate
pursuant to such provisions and related orders or resolutions of the Board
shall be final and conclusive.
3. ELIGIBILITY.
Any employee of the Company shall be eligible to receive an award under the
Plan. For purposes of this Section 3, the "Company," with respect to all
awards under the Plan other than Incentive Stock Options (as defined in
Section 6.2), includes any entity that is directly or indirectly controlled
by the Company or any entity in which the Company has a significant equity
interest, as determined by the Committee. With respect to Incentive Stock
Options, the "Company" includes any parent or subsidiary of the Company in
accordance with Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
A-1
<PAGE>
4. SHARES SUBJECT TO THE PLAN.
4.1 NUMBER AND SOURCE. The stock offered under the Plan shall be shares of
Common Stock and may be unissued shares or shares now held or subsequently
acquired by the Company as treasury shares, as the Board, or a Board
committee to which the Board may delegate such authority, may from time to
time determine. Subject to adjustment as provided in Sections 4.3 and 5,
the aggregate number of shares that may be issued under the Plan shall not
exceed fifteen million (15,000,000). Subject to adjustment as provided in
Sections 4.3 and 5, the aggregate number of shares that may be issued under
awards granted pursuant to Section 6.4 shall not exceed three million
(3,000,000). The aggregate number of shares that may be covered by awards
granted to any one individual in any one calendar year shall not exceed six
hundred thousand (600,000).
4.2 SHARES AVAILABLE. Any shares subject to an award granted under the Plan
that is forfeited, terminated or canceled or, in the case of awards granted
under Section 6.4, any shares that do not vest, shall again be available
for the granting of awards under the Plan. In instances where a stock
appreciation right is settled in cash, the shares covered by such award
shall remain available for the granting of other awards. Likewise, the
payment of cash dividends and dividend equivalents paid in cash in
conjunction with outstanding awards shall not be counted against the shares
available for issuance.
4.3 ACQUISITIONS. The Board, in its sole discretion, may increase the
aggregate number of shares of Common Stock to be delivered under Section
4.1 by up to one million five hundred thousand (1,500,000) shares in the
event the Company acquires any other corporation or business entity and the
Company agrees to assume the acquired entity's obligations for outstanding
employee stock options or stock grant commitments or otherwise grants
awards to employees in connection with such acquisition.
5. ADJUSTMENT OF SHARES AVAILABLE.
The aggregate numbers and kind of shares available for awards under the
Plan, the maximum number and kind of shares that may be subject to awards
to any individual under the Plan, the number and kind of shares covered by
each outstanding award, and the exercise price per share (but not the total
price) for stock options, stock appreciation rights or similar awards
outstanding under the Plan shall all be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock
resulting from any split-up, combination or exchange of shares,
consolidation, spin-off or recapitalization of shares or any like capital
adjustment or the payment of any stock dividend.
6. AWARDS.
6.1 TYPES OF AWARDS. The Committee shall have the authority, in its sole
discretion, to determine the type or types of awards to be granted to
employees under the Plan. Such awards may include, but are not limited to,
Incentive Stock Options, Nonqualified Stock Options (as defined in Section
6.2), stock appreciation rights or restricted stock awards. Such awards
may be granted either alone, in addition to or in tandem with any other
type of award granted under the Plan.
A-2
<PAGE>
6.2 STOCK OPTIONS. The Committee may grant stock options, designated as
"Incentive Stock Options," which comply with the provisions of Section 422
of the Code or any successor statutory provision, or "Nonqualified Stock
Options." The price at which shares may be purchased upon exercise of a
particular option shall be determined by the Committee but shall not be
less than 100% of the Fair Market Value of such shares at the time such
option is granted. For purposes of the Plan, "Fair Market Value" as to a
particular day equals the mean of the high and low per share trading prices
for the Common Stock as reported for such day in the Wall Street Journal or
in such other source as the Committee deems reliable. The Committee shall
set the term of each stock option, but no Incentive Stock Option shall be
exercisable more than 10 years after the date such option is granted and,
to the extent the aggregate Fair Market Value (determined as of the date
the option is granted) of Common Stock with respect to which Incentive
Stock Options granted to a particular individual become exercisable for the
first time during any calendar year (under the Plan and all other stock
option plans of the Company) exceeds $100,000 (or such corresponding amount
as may be set by the Code) such options shall be treated as Nonqualified
Stock Options.
6.3 STOCK APPRECIATION RIGHTS. The Committee may grant stock appreciation
rights to employees, either in tandem with stock options that have been or
are granted under the plan or with respect to a number of shares on which
an option is not granted. A stock appreciation right shall entitle the
holder to receive, with respect to each share of stock as to which the
right is exercised, payment in an amount equal to the excess of the share's
Fair Market Value on the date the right is exercised over its Fair Market
Value on the date the right was granted. Such payment may be made in cash
or in shares of Common Stock valued at the Fair Market Value as of the date
of the surrender, or partly in cash and partly in shares of Common Stock,
as determined by the committee in its sole discretion. The Committee may
establish a maximum appreciation value payable for stock appreciation
rights.
6.4 RESTRICTED STOCK AWARDS.
(a) The Committee may grant restricted stock awards under the Plan in
Common Stock or denominated in units of Common Stock. The Committee,
in its discretion, will make such awards subject to conditions and
restrictions, as set forth in the instrument evidencing the award,
which may be based on continuous service with the Company or the
attainment of certain performance goals related to profits, profit
growth, profit-related return ratios, cash flow or shareholder
returns, where such goals may be stated in absolute terms or relative
to comparison companies or indices to be achieved during a period of
time. No more than one million five hundred thousand (1,500,000)
shares may be issued subject to restrictions based on continuous
employment for less than three years (except where employment is
terminated because the employee dies, retires, is laid off or becomes
disabled).
(b) The Committee may choose, at the time of granting an award or at any
time thereafter up to the time of payment of the award, to include as
part of such award an entitlement to receive dividends or dividend
equivalents, subject to such terms as the
A-3
<PAGE>
Committee may establish. All dividends or dividend equivalents that
are not paid currently may, in the Committee's sole discretion, accrue
interest and be paid to the participant if, when and to the extent
such award is paid.
6.5 PAYMENT; DEFERRAL. Awards granted under the Plan may be settled through
cash payments, the delivery of Common Stock or the granting of awards or
combinations thereof as the committee shall determine. Any award
settlement, including payment deferrals, may be subject to such conditions,
restrictions and contingencies as the Committee shall determine. The
Committee may permit or require the deferral of any award payment, subject
to such rules and procedures as it may establish, which may include
provisions for the payment or crediting of interest, or dividend
equivalents, including converting such credits to deferred stock unit
equivalents.
7. OPTION EXERCISE.
7.1 EMPLOYMENT REQUIREMENT. Each award agreement or notice for a stock option
or stock appreciation right shall contain a provision that the option or
right shall not be exercisable unless the optionee remains in the Company's
employ at least 12 months after the granting of the option or right.
7.2 PRECONDITION TO STOCK ISSUANCE. No shares shall be delivered pursuant to
the exercise of any stock option or stock appreciation right, in whole or
in part, until qualified for delivery under such securities laws and
regulations as may be deemed by the Committee to be applicable thereto and
until, in the case of the exercise of an option, payment in full of the
option price thereof (in cash or stock as provided in Section 7.4) is
received by the Company. No holder of an option or stock appreciation
right, or any legal representative, legatee or distributee shall be or be
deemed to be a holder of any shares subject to such option or right unless
and until such shares are issued.
7.3 NO FRACTIONAL SHARES. No stock option may at any time be exercised with
respect to a fractional share. No fractional share shall be issued in the
event shares are issued pursuant to the exercise of a stock appreciation
right; however, a fractional stock appreciation right may be exercised for
cash.
7.4 FORM OF PAYMENT. An optionee may exercise a stock option using as the form
of payment (i) cash or cash equivalent, (ii) stock-for-stock payment (as
described in Section 7.5), (iii) any combination of the above or (iv) such
other means as the Committee may approve.
7.5 STOCK FOR STOCK. An optionee who owns Common Stock may use such shares,
the value of which shall be determined as the Fair Market Value of such
shares on the date the stock option is exercised, as a form of payment to
exercise stock options under the Plan. The Committee, in its discretion,
may restrict or rescind this right by notice to optionees. A stock option
may be exercised in such manner only by tendering (actually or by
attestation) to the Company whole shares of Common Stock having a Fair
Market Value equal to or less than the exercise price. If an option is
exercised by surrender of stock having a Fair Market Value less than the
exercise price, the employee must pay the difference in cash.
A-4
<PAGE>
8. TRANSFERABILITY.
The right of any award recipient to exercise an award granted under the
Plan shall, during such recipient's lifetime, be exercisable only by such
recipient, and shall not be assignable or transferable by such recipient
other than by will or the laws of descent and distribution.
9. WITHHOLDING TAXES; OTHER DEDUCTIONS.
The Company shall have the right to deduct from any settlement of an award
made under the Plan, including the delivery or vesting of shares, (a) an
amount sufficient to cover withholding as required by law for any federal,
state or local taxes and (b) any amounts due from the recipient of such
award to the Company or to any subsidiary of the Company or to take such
other action as may be necessary to satisfy any such withholding or other
obligations, including withholding from any other cash amounts due or to
become due from the Company to such recipient an amount equal to such taxes
or obligations.
10. TERMINATION OF EMPLOYMENT.
The terms and conditions under which an award may be exercised following
termination of a participant's employment with the Company shall be
determined by the Committee; provided, that if a participant's employment
with the Company terminates for any reason within 12 months of the grant
date of a stock option or stock appreciation right, such option or right
shall expire as of the date of such termination of employment and the
participant and the participant's legal representative shall forfeit any
and all rights pertaining to such award.
11. TERM OF THE PLAN.
The Plan shall become effective as of May 1, 1997 and shall remain in full
force and effect through April 30, 2007, unless sooner terminated by the
Board. After the Plan is terminated, no future awards may be granted but
awards previously granted shall remain outstanding in accordance with their
applicable terms and conditions and the Plan's terms and conditions.
12. PLAN AMENDMENT.
The Committee or the Board may amend, suspend or terminate the Plan at any
time; provided that no such amendment shall be made without the approval of
the Company's stockholders (a) that would increase the number of shares
available for issuance in accordance with Section 4 or (b) if such approval
is required (i) to comply with Section 422 of the Code with respect to
Incentive Stock Options or (ii) for purposes of Section 162(m) of the Code.
13. BIFURCATION OF THE PLAN.
Notwithstanding anything in the Plan to the contrary, the Board, in its
sole discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan to participants who are
officers subject to Section 16 of the 1934 Act without so restricting,
limiting or conditioning the Plan with respect to other participants.
A-5
<PAGE>
Appendix B
Incentive Compensation Plan for Officers and Employees
of the Boeing Company and Subsidiaries
(as amended and restated)
1. Definitions.
AS USED IN THIS PLAN (THE "PLAN"), THE FOLLOWING TERMS HAVE THE MEANINGS
SET FORTH BELOW:
"Board of Directors" means the Board of Directors of the Boeing Company;
"BSU" means Boeing Stock Unit, as described in Section 5.2;
"Common Stock" means the Common Stock of the Boeing Company;
"Company" means the Boeing Company;
"Committee" means the Compensation Committee of the Board of Directors;
"COVERED EMPLOYEE" MEANS EACH OF (i) AN EMPLOYEE OF THE COMPANY WHO ON THE
LAST DAY OF THE YEAR WITH RESPECT TO WHICH AN AWARD IS MADE IS (OR
SERVES IN THE CAPACITY OF) THE COMPANY'S CHIEF EXECUTIVE AND (ii) THE
FOUR MOST HIGHLY COMPENSATED EXECUTIVE OFFICERS OF THE COMPANY, OTHER
THAN THE COMPANY'S CHIEF EXECUTIVE OFFICER, WHOSE TOTAL COMPENSATION FOR
THAT YEAR IS REPORTED TO COMPANY SHAREHOLDERS IN ACCORDANCE WITH THE
PROVISIONS OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
"Earnings Credit BSUs" has the meaning given in Section 5.2;
"Exchange" means the New York Stock Exchange;
"Fair Market Value" means, as to a particular day, the mean of the high and
low per share trading prices for the common stock as reported for such
day in The Wall Street Journal or in such other source as the Committee
-----------------------
deems reliable.
"PLAN EARNINGS" FOR A PARTICULAR YEAR MEANS THE NET EARNINGS OF THE COMPANY
FOR SUCH YEAR, AS REPORTED ON THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENT INCLUDED IN ITS ANNUAL REPORT ON FORM 10-K FOR SUCH YEAR,
ADJUSTED TO ELIMINATE THE FOLLOWING:
(i) FEDERAL AND STATE TAXES ON INCOME,
(ii) AWARDS UNDER THE PLAN,
(iii) RESTRUCTURING OR SIMILAR CHARGES TO THE EXTENT THEY ARE
SEPARATELY DISCLOSED IN SUCH ANNUAL REPORT,
(iv) THE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES,
(v) THE EFFECT ON NET EARNINGS FOR THE ACCRUED DISTRIBUTABLE
APPRECIATION OF THE COMPANY'S SHAREVALUE PROGRAM, AND
(vi) "EXTRAORDINARY ITEMS" DETERMINED UNDER GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES;
"Subsidiary" means any corporation or association more than 50% of the
voting securities of which are owned directly or indirectly by the
Company or by one or more of its other subsidiaries and the accounts of
which are customarily consolidated with those of the Company for the
purpose of reporting to stockholders.
2. Committee.
The Committee shall have full power and authority to administer the Plan,
and to construe and interpret its terms and provisions. Decisions of the
Committee shall be final and binding upon all parties.
B-1
<PAGE>
3. Eligibility.
3.1 Key Employees. Officers and employees of the Company and its Subsidiaries
who hold executive, administrative, supervisory, technical or other key
positions shall be eligible for participation under the Plan, and
participants shall for the most part be selected from among members of this
group. None of the members of the Committee and no director of the Company
or of a Subsidiary who is not also an officer or employee of the Company or
of a Subsidiary shall be eligible for participation under the Plan.
3.2 Special Contributors; Former Employees. Awards may also be made under the
plan to employees not holding executive, administrative, supervisory,
technical or other key positions who have, nevertheless, made a substantial
contribution to the success of the Company and its Subsidiaries. In
addition, a former employee who has either
(a) retired under the employee retirement plan of the Company or of a
Subsidiary or
(b) left the service of the Company or of a Subsidiary to enter the armed
services
and who would have been eligible for an award but for such retirement or
termination of service, may be eligible for an award for the year in which
such employee retires or so leaves the service of the Company or of a
Subsidiary. In the case of a former employee who would have been eligible
for an award but for death, an award may be granted to the surviving spouse
or children or to the estate of such former employee, as the Committee may
determine in its sole discretion.
4. Making Awards.
4.1 Committee Authority. The Committee shall make awards, subject to the
limitations herein, to such individuals within the eligible group and in
such amounts and at such times as, in the Committee's judgment, shall best
serve the interest of the Company and its Subsidiaries at that time, taking
into account each individual's job performance and contributions to the
success of the Company and its Subsidiaries.
Except as provided in Section 4.2, the Committee shall have complete
discretion in determining to whom awards under the Plan shall be made and
when awards shall be paid, including whether all or any portion of any
award shall be paid in installments over two or more years; provided,
however, in making awards the Committee shall request and consider the
recommendations of the Chief Executive Officer of the Company and others
whom it may designate.
4.2 Delegation of Award-making Authority and Award Recommendations. The
Committee may, at such time or times as it may elect, authorize the Chief
Executive Officer of the Company who in turn may authorize other executives
of the Company to make additional awards subject to the limitations herein
provided, in amounts not exceeding an aggregate amount and under conditions
determined by the Committee. In making recommendations to the Committee
and in making awards authorized by the Committee, the Chief Executive
Officer of the Company shall request and consider the recommendations of
other officers and supervisory employees of the Company and its
Subsidiaries.
B-2
<PAGE>
4.3 Forms of Awards. Awards may be made entirely in cash, in Common Stock, in
stock units, or in any combination thereof as determined by the Committee;
provided, however, awards made by the Chief Executive Officer or other
authorized executives of the Company shall be made only in cash or Common
Stock or a combination thereof.
4.4 LIMITS ON AWARDS.
4.4.1 LIMIT ON THE NUMBER OF SHARES AWARDED. NOT MORE THAN FIVE
MILLION (5,000,000) SHARES OF COMMON STOCK MAY BE USED FOR THE PURPOSE OF
MAKING AWARDS UNDER THE PLAN. THE NUMBER OF SHARES AWARDED UNDER THE PLAN
IN ANY ONE YEAR SHALL BE CONSISTENT WITH THE TOTAL NUMBER OF SHARES
IDENTIFIED IN THIS SECTION 4.4 BEING AVAILABLE OVER THE PROJECTED TWENTY
YEAR MINIMUM LIFE OF THE PLAN.
4.4.2 ANNUAL LIMIT ON VALUE OF AWARDS. THE AGGREGATE VALUE OF ALL
AWARDS GRANTED UNDER THE PLAN (INCLUDING AWARDS GRANTED UNDER SECTION 4.5
TO COVERED EMPLOYEES) IN ANY ONE CALENDAR YEAR SHALL NOT EXCEED 6% OF PLAN
EARNINGS FOR THE PREVIOUS YEAR.
4.5 AWARDS TO COVERED EMPLOYEES. NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS
SECTION 4, ANY AWARD UNDER THE PLAN TO A COVERED EMPLOYEE MUST SATISFY THE
REQUIREMENTS OF THIS SECTION 4.5. THE PURPOSE OF THIS SECTION 4.5 IS TO
ENSURE COMPLIANCE BY THE PLAN WITH THE REQUIREMENTS OF SECTION 162(m) OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, RELATED TO PERFORMANCE-BASED
COMPENSATION. COVERED EMPLOYEE STATUS IS DETERMINED FOR THE YEAR WITH
RESPECT TO WHICH THE AWARD IS MADE, RATHER THAN THE YEAR OF PAYMENT.
AWARDS TO COVERED EMPLOYEES ARE SUBJECT TO:
(a) APPROVAL OF THIS PLAN AND OF THE CRITERION STATED IN SECTION
4.5.1 BY THE SHAREHOLDERS OF THE COMPANY;
(b) THE MAXIMUM AMOUNT THAT MAY BE AWARDED TO ANY COVERED EMPLOYEE
UNDER THE PLAN FOR ANY YEAR AS STATED IN SECTION 4.5.1; AND
(c) APPROVAL BY THE COMMITTEE.
4.5.1 CRITERION; MAXIMUM AWARDS. THE MAXIMUM POTENTIAL AWARDS UNDER
THE PLAN TO COVERED EMPLOYEES FOR ANY YEAR SHALL BE THE RESPECTIVE
PERCENTAGES OF PLAN EARNINGS FOR SUCH YEAR AS FOLLOWS:
<TABLE>
<CAPTION>
MAXIMUM POTENTIAL AWARD AS
COVERED EMPLOYEE PERCENTAGE OF PLAN EARNINGS
- --------------------------------- -----------------------------------
<S> <C>
CHIEF EXECUTIVE OFFICER THREE-TENTHS OF ONE PERCENT (0.3%)
THE MOST HIGHLY COMPENSATED
COVERED EMPLOYEE OTHER THAN TWO-TENTHS OF ONE PERCENT (0.2%)
THE CHIEF EXECUTIVE OFFICER
EACH OTHER COVERED EMPLOYEE ONE-SIXTH OF ONE PERCENT (0.16%)
- ---------------------------------- -----------------------------------
TOTAL ONE PERCENT (1.0%)
</TABLE>
B-3
<PAGE>
4.5.2 SHAREHOLDER APPROVAL OF PERFORMANCE GOAL. THE CRITERION ESTABLISHED
IN SECTION 4.5.1 ON WHICH AWARDS UNDER THE PLAN ARE BASED SHALL FIRST APPLY
IN THE YEAR 1997, BUT SUCH CRITERION AND ANY AWARDS BASED THEREON SHALL BE
CONDITIONAL UPON A VOTE OF THE SHAREHOLDERS OF THE COMPANY APPROVING THE
PLAN AND THE CRITERION AND PERFORMANCE GOAL STATED HEREIN.
4.5.3 APPROVAL; COMMITTEE DISCRETION. THE COMMITTEE SHALL MAKE A
DETERMINATION IN WRITING AS TO WHETHER THE COVERED EMPLOYEES HAVE MET THE
PERFORMANCE GOAL FOR EACH YEAR. THE COMMITTEE MAY, IN ITS SOLE DISCRETION,
REDUCE AMOUNTS OF AWARDS TO ALL OR ANY OF THE COVERED EMPLOYEES FROM THE
MAXIMUM POTENTIAL AWARDS ALLOCATED BY APPLICATION OF SECTION 4.5.1. NO SUCH
REDUCTION SHALL INCREASE THE AMOUNT OF THE AWARD PAYABLE TO ANY OTHER
COVERED EMPLOYEE. THE COMMITTEE SHALL DETERMINE THE AMOUNT OF ANY REDUCTION
IN A COVERED EMPLOYEE'S AWARD ON THE BASIS OF SUCH FACTORS AS IT DEEMS
RELEVANT, AND IT SHALL NOT BE REQUIRED TO ESTABLISH ANY ALLOCATION OR
WEIGHTING COMPONENT WITH RESPECT TO THE FACTORS IT CONSIDERS. THE COMMITTEE
SHALL HAVE NO DISCRETION TO INCREASE AN AWARD ABOVE THE AMOUNT DETERMINED
BY APPLICATION OF SECTION 4.5.1.
5. Certain Types of Awards.
5.1 Long-term Incentive Program. Subject to the other terms and conditions of
this Plan, the Committee may make awards, in capital stock of the Company
or otherwise, to selected senior executives within the eligible group
pursuant to a program adopted by the Committee providing for long-term
incentive awards; and the committee may in connection therewith reduce
other awards under the Plan to such executives.
5.2 BSUs. Subject to the other terms and conditions of the Plan, the Committee
may direct that all or part of an award shall be made in the form of BSUs.
BSU awards shall be subject to the following terms and conditions:
5.2.1 Calculation of Award Amount. A participant shall be credited with
BSUs equal in number to either
(i) the number of shares specified in the grant of the award or
(ii) the number of shares of Common Stock that could be purchased with the
BSU portion of an award otherwise denominated in cash, based on the
Fair Market Value of such stock on the day of the award (or on the
next business day on which the Exchange is open, if the Exchange is
closed on the day of the award) excluding commissions, taxes and other
charges. Such number shall be carried to two decimal places.
For purposes of the Plan, a "participant" includes an employee or former
employee having a BSU account under the Plan; and the number of BSUs in a
participant's account shall be appropriately adjusted to reflect stock
splits, stock dividends and other like adjustments in the Common Stock.
B-4
<PAGE>
5.2.2 Participant Accounts. The Company shall maintain accounts for each
participant to whom BSUs have been credited, and shall annually report to
each participant his or her BSU account balance.
5.2.3 Vesting of BSU Awards. BSUs shall vest three years after the date the
award is made or (if earlier) on the date the participant dies, retires, is
laid off, or becomes disabled and entitled to Disability Retirement Income
under the Company's employee retirement plan or under comparable provisions
of a Subsidiary's retirement plan.
5.2.4 Earnings Credit on BSU Awards. Each participant's BSU account shall
be credited with Earnings Credit BSUs equal in number to the number of
shares of Common Stock that could be purchased with the cash dividends that
would be payable on the number of shares of Common Stock that equals the
number of BSUs in such participant's account. Determination of the number
of shares so to be credited shall be made in the manner described in
Section 5.2.1 as to cash-denominated awards, as of each dividend payment
date for the Common Stock. Participants shall be notified annually of the
number of Earnings Credit BSUs in their accounts. Earnings Credit BSUs
shall vest at the same time as the BSUs with which they are associated.
5.2.5 Forfeiture of Non-vested BSU Awards. If a participant's employment
with the Company or a Subsidiary terminates prior to the expiration of
three years from the date an award is made, for any reason other than
death, retirement, layoff, or disability, the participant's BSUs from such
award shall be forfeited and canceled. Earnings Credit BSUs shall be
forfeited and canceled along with the BSUs with which they are associated.
5.2.6 BSU Awards Payable in Cash or Stock. Distributions from a
participant's BSU account shall be made as soon as reasonably possible
after the vesting date of the BSUs. In the absence of an election to the
contrary by the participant, distributions shall be in cash. A cash
distribution shall equal the cash value, on the date as of which the
distribution is calculated (which shall be the vesting date, unless some
other date is prescribed by the Committee), of that number of whole shares
of Common Stock equal to the whole number of vested BSUs in the
participant's account on such date, based on the Fair Market Value of such
stock on that date (or on the next day on which the Exchange is open, if
the Exchange is closed on the date as of which the distribution is
calculated). Any distribution in stock shall be in whole shares of Common
Stock equal in number to the whole number of vested BSUs in the
participant's account, adjusted in accordance with Section 5.2.7. No
fractional shares shall be distributed, and any account balance remaining
after a stock distribution shall be added to the required withholdings
provided for in Section 5.2.7.
5.2.7 Deferral of BSU Awards. Participants may elect to defer distribution
of vested BSUs through the Company's Deferred Compensation Plan. Such
deferral elections must be made in the manner and at the times prescribed
in that plan.
B-5
<PAGE>
6. Distribution of Awards.
6.1 Terms; Deferred Payment. Distribution of awards shall be governed by the
terms and conditions applicable to such awards, as determined by the
Committee or its delegate. An award, the payment of which is to be deferred
pursuant to the terms of an employment agreement, shall be paid as provided
by the terms of such agreement. Awards or portions thereof deferred
pursuant to the Company's Deferred Compensation Plan or other deferral
arrangement shall be paid as provided in such plan or arrangement. Any
other awards the payment of which has been deferred, in whole or in part,
shall be paid as determined by the Committee.
6.2 Deductions. The Company shall deduct from the payment of each award any
withholdings required by law or required by Section 5.2.6; and the Company
may deduct any amounts due from the recipient to the Company or a
Subsidiary.
6.3 Notice; Distribution Date. The Committee or its delegates shall advise
participants of their awards under the Plan, and shall fix the distribution
date or dates for such awards. Awards shall be paid on the distribution
date or as soon thereafter as reasonably possible. The number of shares of
stock to be issued in payment of awards otherwise denominated in cash shall
be determined based on the closing trading price per share of the Common
Stock as reported for the business day immediately preceding the applicable
distribution date in The Wall Street Journal or in such other source as the
Committee deems reliable.
7. REPEAL; AMENDMENTS.
THE PLAN AND ANY AND ALL PROVISIONS HEREOF MAY BE REPEALED OR AMENDED
EITHER:
(a) BY THE AFFIRMATIVE VOTE OF THE HOLDERS OF RECORD OF A MAJORITY OF THE
SHARES OF STOCK PRESENT IN PERSON OR BY PROXY AND ENTITLED TO VOTE AT
ANY MEETING OF THE SHAREHOLDERS OF THE COMPANY AT WHICH A QUORUM IS
PRESENT IF THE NOTICE OF SUCH MEETING SETS FORTH THE FORM OF THE
PROPOSAL FOR SUCH REPEAL OR AMENDMENT OR A SUMMARY THEREOF, OR
(b) BY THE AFFIRMATIVE VOTE OF A MAJORITY OF THE BOARD OF DIRECTORS AT ANY
MEETING IF THE NOTICE OF SUCH MEETING SETS FORTH THE FORM OF THE
PROPOSAL FOR SUCH REPEAL OR AMENDMENT OR A SUMMARY THEREOF; PROVIDED,
HOWEVER, THAT THE COMPANY'S SHAREHOLDERS MUST ALSO APPROVE, BY A VOTE
MEETING THE REQUIREMENTS OF CLAUSE (a) ABOVE, ANY AMENDMENT WHICH
WOULD:
(i) AMEND SECTION 4.4.1 SO AS TO INCREASE THE NUMBER OF SHARES
AVAILABLE FOR ISSUANCE UNDER THE PLAN, OR
(ii) AMEND SECTION 4.5.1 SO AS TO CHANGE THE CRITERION OR GOAL
GOVERNING THE AMOUNT WHICH MAY BE AWARDED TO ANY COVERED
EMPLOYEE OR THE FORMULA USED TO DETERMINE SUCH AMOUNT, OR
(iii) CHANGE THE DEFINITION OF COVERED EMPLOYEE, OR
(iv) AMEND THIS SECTION 7.
NO REPEAL OR AMENDMENT OF THE PLAN SHALL OPERATE TO ANNUL OR MODIFY ANY
AWARD PREVIOUSLY MADE UNDER THE PLAN.
B-6
<PAGE>
8. Nonassignability.
No awards authorized or made pursuant to the Plan shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, execution, attachment, garnishment or any other legal
process, and any attempt to subject an award to any of the foregoing shall
be void.
B-7
<PAGE>
1997 Annual Meeting of Shareholders
7755 East Marginal Way South
Second Floor Auditorium, 2-22 Building
Seattle, Washington
April 28, 1997 11:00 a.m.
[Map of area surrounding corporate headquarters, with directional arrows, and
inset map of intersection of East Marginal Way South and 16th Avenue South,
Seattle.]
General Directions
From I-5 Northbound
- - Exit 158 - Airport Way, East Marginal Way South.
- - Proceed west on access road to East Marginal Way South.
- - Right on East Marginal Way South.
- - Right at Gate C-16.
From I-5 Southbound
- - Exit 161 - Swift-Albro.
- - Proceed west on Albro and Ellis Ave. South.
- - Turn left on East Marginal Way South.
- - Left at Gate C-16. (If Exit 161 is missed, use northbound directions.)
From I-90 Westbound
- - Proceed on I-5 southbound.
- - Exit 161 - Swift-Albro.
- - Proceed west on Albro and Ellis Ave. South.
- - Turn left on East Marginal Way South.
- - Left at Gate C-16. (If Exit 161 is missed, use northbound directions.)
The doors will be opened at 9:30 a.m. The meeting will begin at 11:00 a.m. and
is expected to last no more than 1-1/2 hours.
This facility is accessible. If you are an individual with a disability who
requires a reasonable accommodation, please contact Boeing Disability Services
at (206) 965-4140 (voice) or (206) 965-4166 (TDD) at least 2 weeks in advance of
the meeting.
Parking places in the Company parking lot have been reserved for Boeing
shareholders on a first-come, first-served basis. Handicapped parking will be
located across the street from the meeting location. Wheelchair-accessible vans
will transport attendees to the meeting site. This area is indicated on the map
above.
<PAGE>
Information concerning public transportation to the meeting may be obtained from
METRO by calling (206) 553-3000. Please be prepared to give them the full street
address shown at the top of this page.
<PAGE>
SOLICITED BY THE BOARD OF DIRECTORS
THE BOEING COMPANY
ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1997
The undersigned hereby appoints Philip M. Condit, Donald E. Petersen and
Charles M. Pigott (the "Proxy Committee"), and each or any of them, with power
of substitution, proxies for the undersigned and authorizes them to represent
and vote all of the shares of stock of the Company which the undersigned may be
entitled to vote at the Annual Meeting of Shareholders to be held on April 28,
1997 (the "Meeting"), and at any adjournment thereof, as indicated on the
reverse side of this card with respect to Proposals 1 through 7, and with
discretionary authority as to any other matters that may properly come before
the Meeting, in accordance with and as described in the Notice and Proxy
Statement for the Meeting.
If there are shares of stock allocated to the undersigned in Fund E of The
Boeing Company Voluntary Investment Plan, the undersigned hereby instructs the
Trustee to vote all of such shares at the Meeting and any adjournment thereof as
indicated on the reverse side of this card with respect to Proposals 1 through
7 and authorizes the Trustee to vote in its judgment or to empower the Proxy
Committee to vote in the Proxy Committee's judgment on such other business as
may properly come before the Meeting and any adjournment thereof.
If no direction is given, this proxy will be voted FOR proposals 1 through
4 and AGAINST proposals 5 through 7.
IMPORTANT: TO BE SIGNED AND DATED ON THE REVERSE SIDE.
...............................................................................
[X] Please mark votes as in this example.
BOEING
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
RECOMMENDS A VOTE FOR AGAINST PROPOSALS
PROPOSALS 1,2,3 AND 4 5,6, AND 7
- ---------------------------------------------------------------------------------------------------------------------------------
<S>
1. Election of Directors:
Paul E. Gray, Harold J.
Haynes, Frank Shrontz,
and George H.
Weyerhaeuser.
<C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[_] [_] 2. Amend the [_] [_] [_] 5. Board to [_] [_] [_]
Restated commission
Certificate subcommittee
to increase on criteria
the number for military
of authorized contracts and
shares. report to 1998
Annual Meeting.
3. Adopt The Boeing 6. Adopt human rights
Company 1997 [_] [_] [_] criteria for [_] [_] [_]
[_]__________________ Incentive Stock operations in and
FOR all nominees, except as Plan for Employees. with China and
noted above. report to
shareholders.
4. Amend the 7. Recommend
Incentive [_] [_] [_] annual [_] [_] [_]
Compensation election of
Plan for all directors.
Officers and
Employees.
- ----------------------------------------------------------------------------------------------------------------------------------
Mark here for address [_] Mark here for comments [_]
change and note at left. and note at left.
Please sign exactly as your name appears on your account. If the shares
are registered in the names of two or more persons, each should sign. If
acting as attorney, executor, trustee or in another representative
capacity, sign name and title.
-------------------------------- -------------- ---------------------------------- --------------
Signature Date Signature Date
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
