<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
THE BOEING COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
NOTICE OF 1998 ANNUAL MEETING
OF SHAREHOLDERS
AND PROXY STATEMENT
[CIRCULAR PHOTO COLLAGE]
THE BOEING COMPANY
[BOEING LOGO]
<PAGE> 3
THE BOEING COMPANY
March 20, 1998
Dear Shareholder:
You are invited to attend the Company's 1998 Annual Meeting of
Shareholders.
It will be held on Monday, April 27, 1998, in the auditorium of Building 33
of the McDonnell Aircraft and Missile Systems Engineering Campus, located at the
corner of Lindbergh and J.S. McDonnell Boulevards, Hazelwood, Missouri. The
meeting will begin at 10:00 a.m., local time. A map and directions to the
meeting site 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.
Very truly yours,
/s/ PHILIP M. CONDIT
PHILIP M. CONDIT
Chairman of the Board
and Chief Executive Officer
<PAGE> 4
THE BOEING COMPANY
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 1998
------------------------
The 1998 Annual Meeting of Shareholders of The Boeing Company will be held on
April 27, 1998, at 10:00 a.m., local time, in the auditorium of Building 33 of
the McDonnell Aircraft and Missile Systems Engineering Campus, located at the
corner of Lindbergh and J.S. McDonnell Boulevards, Hazelwood, Missouri.
Shareholders at the close of business on February 26, 1998 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 for three-year terms expiring
in 2001;
2. To consider and vote on a proposal to amend The Boeing Company 1997
Incentive Stock Plan for Employees;
3. To consider and vote on a shareholder proposal concerning military
contracts;
4. To consider and vote on a shareholder proposal on doing business with China;
5. To consider and vote on a shareholder proposal concerning the annual
election of the entire board of directors;
6. To consider and vote on a shareholder proposal concerning cumulative voting
in the election of directors;
7. To consider and vote on a shareholder proposal concerning the creation of
the position of independent lead director;
8. To consider and vote on a shareholder proposal concerning political
contributions;
9. To consider and vote on a shareholder proposal concerning the sale of the
Douglas Products Division; and
10. 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/ THEODORE J. COLLINS
THEODORE J. COLLINS
Senior Vice President, General
Counsel and Secretary
March 20, 1998
IF YOU CANNOT ATTEND THE MEETING, PLEASE SIGN, DATE, AND RETURN THE ENCLOSED
PROXY CARD APPOINTING PHILIP M. CONDIT, HARRY C. STONECIPHER, AND GEORGE H.
WEYERHAEUSER AS YOUR PROXIES.
<PAGE> 5
TABLE OF CONTENTS
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PAGE
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General Information for Shareholders........................ 1
Outstanding Securities.................................... 1
Attendance at the Annual Meeting.......................... 1
Voting at the Annual Meeting or by Proxy.................. 2
Voting via Telephone or the Internet...................... 2
Voting by Participants in Employee Plans.................. 2
Vote Required and Method of Counting Votes................ 3
Confidential Voting Policy................................ 4
Expenses of Solicitation.................................. 4
Independent Auditors...................................... 5
Proposal 1: Election of Directors........................... 6
Nominees.................................................. 7
Continuing Directors...................................... 8
Compensation of Directors................................. 10
Retirement Policy......................................... 10
Committees of the Board of Directors...................... 11
Board and Committee Meetings.............................. 12
Related Party Transactions................................ 12
Section 16(a) Beneficial Ownership Reporting Compliance... 13
Security Ownership........................................ 13
Executive Compensation.................................... 16
Summary Compensation Table............................. 16
Option Grants in 1997 Table............................ 19
Aggregated Option/SAR Exercises in 1997 and Year-End
Option/SAR Values Table.............................. 20
Pension Plan Tables.................................... 20
Employment Contracts and Termination of Employment
Arrangements......................................... 22
Compensation Committee Report on Executive
Compensation......................................... 24
Shareholder Return on Performance Graphs............... 29
Proposal 2: Approval of Amendment of The Boeing Company 1997
Incentive Stock Plan for Employees........................ 30
Proposal 3: Shareholder Proposal on Military Contracts...... 34
Proposal 4: Shareholder Proposal on Doing Business with
China..................................................... 36
Proposal 5: Shareholder Proposal on Annual Election of the
Entire Board of Directors................................. 38
Proposal 6: Shareholder Proposal on Cumulative Voting for
the Election of Directors................................. 41
Proposal 7: Shareholder Proposal on Creation of the Position
of Independent Lead Director.............................. 43
Proposal 8: Shareholder Proposal on Political
Contributions............................................. 45
Proposal 9: Shareholder Proposal on the Sale of Douglas
Products Division......................................... 47
Annual Report and Form 10-K................................. 49
Shareholder Proposals for 1999.............................. 49
Appendix A: 1997 Incentive Stock Plan for Employees, as
Amended and Restated...................................... A-1
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i
<PAGE> 6
THE BOEING COMPANY
P.O. BOX 3707
SEATTLE, WASHINGTON
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
------------------------
APRIL 27, 1998
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 1998 Annual Meeting of Shareholders (the
"Annual Meeting"). The approximate date on which this proxy material is first to
be sent to shareholders is March 20, 1998.
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 26, 1998, as the record date for identifying shareholders of the
Company entitled to vote at the Annual Meeting. On February 26, 1998, there were
971,191,102 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 $53.9375 per share.
ATTENDANCE AT THE ANNUAL 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 26, 1998.
The doors to Building 33 will be opened at 8:30 a.m. and the Annual Meeting will
begin at 10:00 a.m. It is expected to be finished no later than 12:00 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 13, 1998, at The Boeing
Company, P.O. Box 3707, Mail Stop 13-08, Seattle, Washington 98124-2207.
1
<PAGE> 7
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 a proxy card is executed and returned but
no instructions are given, the shares will be voted according to the
recommendations of the Board of Directors. The Board of Directors recommends a
vote FOR each of the nominees, FOR Proposal 2 and AGAINST Proposals 3 through 9.
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 registered 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 registered 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. Those
who hold their stock in street name cannot revoke their proxies in person at the
Annual Meeting, because the agents who have the right to cast the votes will not
be present. If they wish to change their votes after returning voting
instruction cards, they should contact their brokers or other agents before the
Annual Meeting to determine whether they can do so.
VOTING VIA TELEPHONE OR THE INTERNET
Registered shareholders can save the Company expense by voting their shares over
the telephone (toll-free from the United States or Canada) or by voting through
the Internet. The voting procedures are designed to authenticate each
shareholder by use of a Control Number, to allow shareholders to vote their
shares, and to confirm that their instructions have been properly recorded.
Specific instructions to be followed by any registered shareholder interested in
voting by telephone or the Internet are set forth on the enclosed proxy card.
Beneficial owners receive proxy cards or voting instruction forms from their
banks, brokers or other agents; some agents use the Company's proxy card and
some prepare their own forms. Beneficial owners may be able to vote by
telephone. They should follow the instructions on the form they receive from
their bank, broker, or other agent.
The method of voting will not limit a shareholder's right to attend the Annual
Meeting.
VOTING BY PARTICIPANTS IN EMPLOYEE PLANS
The proxy card that is being sent with this proxy statement to registered
shareholders is also being sent to those who have interests in shares of Boeing
stock through participation in the following plans (the "Plans"):
1. The Boeing Company Voluntary Investment Plan
2. Employee Savings Plan of McDonnell Douglas Corporation -- Salaried Plan
3. Employee Thrift Plan of McDonnell Douglas Corporation -- Subsidiary Plan
4. Employee Savings Plan of McDonnell Douglas Corporation -- Component Plan
5. Employee Thrift Plan of McDonnell Douglas Corporation -- Hourly Plan
2
<PAGE> 8
6. Employee Investment Plan of McDonnell Douglas Corporation -- Hourly East
Plan
7. Employee Investment Plan of McDonnell Douglas Corporation -- Hourly West
Plan
8. Employee Payroll Stock Ownership Plan ("PAYSOP") of McDonnell Douglas
Corporation
9. Boeing North American Salaried Voluntary Savings Plan
10. Boeing North American Savings Plan for Certain Employees
11. Boeing North American Voluntary Savings Plan for Certain Represented Hourly
Employees
12. Allen-Bradley Savings and Investment Plan for Non-Represented Hourly
Employees
13. Allen-Bradley Savings and Investment Plan for Salaried Employees
14. Rockwell Savings Plan for Certain Employees
15. Rockwell International Corporation Savings Plan
16. Reliance Electric Company Savings and Investment Plan
These are retirement, savings and employee stock ownership plans that hold
Boeing stock. The shares of Boeing stock held in the Plans (which are referred
to in this proxy statement as "Plan Shares") are registered in the names of the
trustees. The participants do not have actual ownership of the Plan Shares and
therefore are not eligible to vote the Plan Shares directly at the Annual
Meeting. However, participants are allocated interests in the funds and may
instruct the trustees how to vote the Plan Shares represented by their units.
The number of shares of Boeing common stock shown on the back of the proxy card,
above the boxes to be marked, represents all registered shares and Plan Shares.
Plan 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.
Plan Shares will be voted by the trustees according to each participant's
instructions. If the trustee does not receive voting instructions from a
participant in time for the Annual Meeting, the trustee will vote the
participant's shares in accordance with the terms of the Plans, which are as
follows:
- Plans 1-7, 10 and 11: shares will be voted in the same manner and
proportion as the shares with respect to which voting instructions have
been received.
- Plan 8 (PAYSOP): shares for which no instructions are received will not
be voted.
- Plans 9 and 12-16: the trustee will vote in its own discretion.
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
3
<PAGE> 9
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 through 9. 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 3
through 9 on the agenda for the Annual Meeting are non-discretionary proposals.
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 the Boeing stock fund of one of the Company's
retirement, savings or employee stock ownership plans, the information will not
be disclosed to management unless clause (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 & Co., Inc. 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.
4
<PAGE> 10
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, 1998. 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.
5
<PAGE> 11
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors currently consists of 13 members. Eleven of them are
independent directors and two are members 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 for terms of three years, expiring on the date of
the annual meeting of shareholders in 2001. Each director elected will continue
in office until a successor has been elected or until resignation or removal in
the manner provided by 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, in its
discretion, may reduce the size of the Board of Directors rather than nominate a
substitute.
On August 1, 1997, a subsidiary of Boeing was merged into McDonnell Douglas
Corporation ("McDonnell Douglas") and McDonnell Douglas became a subsidiary of
Boeing (the "Merger"), as provided by the Agreement and Plan of Merger dated as
of December 14, 1996 (the "Merger Agreement"). The Merger Agreement provided
that immediately following the effective time of the Merger, the Boeing Board of
Directors would fix the number of directors constituting the Board at between 12
and 15 members. The McDonnell Douglas Board of Directors would select from among
its members such number of individuals acceptable to Boeing for nomination as
directors of Boeing as would constitute one-third of such total number. In
accordance with the Merger Agreement, the Boeing Board set the total number of
members at 12 and four members of the McDonnell Douglas Board (Messrs. John H.
Biggs, Kenneth M. Duberstein, John F. McDonnell, and Harry C. Stonecipher) were
elected members of the Boeing Board, effective August 1, 1997.
The Merger Agreement also provided that those former McDonnell Douglas directors
joining the Boeing Board would be allocated as equally as practicable among the
different classes of directors. Mr. Biggs was placed in the class of directors
whose terms expire in 1998, Mr. Duberstein in the class whose terms expire in
1999, and Mr. McDonnell and Mr. Stonecipher in the class whose terms expire in
2000.
On October 27, 1997, the Board of Directors increased the number of its members
to 13 and elected Dr. William J. Perry as a member.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR EACH OF THE NOMINEES.
6
<PAGE> 12
NOMINEES
JOHN H. BIGGS Director since August 1997
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE, TEACHERS INSURANCE AND ANNUITY
ASSOCIATION-COLLEGE RETIREMENT EQUITIES FUND ("TIAA-CREF"), age 61. Mr. Biggs
has served as Chairman and Chief Executive of TIAA-CREF (national teachers'
pension fund) since January 1993 and as President since November 1997. He is
also a Trustee of TIAA-CREF and a director of Ralston Purina Company.
Shares, options exercisable within 60 days and share interests............25,099
JOHN E. BRYSON Director since 1995
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, EDISON INTERNATIONAL, age 54.
Mr. Bryson has served as Chairman of the Board and Chief Executive Officer of
Edison International and its principal subsidiary, Southern California Edison
Company (electric utility), since 1990. He is a director of The Times Mirror
Company, H.F. Ahmanson & Company, and the Council on Foreign Relations, and a
trustee of Stanford University.
Shares, options exercisable within 60 days and share interests.............8,103
CHARLES M. PIGOTT Director since 1972
CHAIRMAN EMERITUS, PACCAR INC, age 68. Mr. Pigott served as Chief Executive
Officer of PACCAR Inc (manufacturer of transportation equipment) from 1967
through 1996. He was President of that company from 1965 to 1987, and Chairman
from 1986 though 1996. Mr. Pigott is a director of Chevron Corporation, PACCAR
Inc and The Seattle Times Company.
Shares, options exercisable within 60 days and share interests............51,044
ROZANNE L. RIDGWAY Director since 1992
FORMER ASSISTANT SECRETARY OF STATE FOR EUROPE AND CANADA, age 62. 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 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.
Shares, options exercisable within 60 days and share interests............14,777
7
<PAGE> 13
CONTINUING DIRECTORS
PHILIP M. CONDIT Director since 1992
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, THE BOEING COMPANY, age 56.
Mr. Condit was elected Chairman of the Board effective February 1, 1997. He has
served as Chief Executive Officer since April 29, 1996, and was President from
August 1992 until becoming Chairman. Mr. Condit is also a director of
Hewlett-Packard Company. His current term as a Boeing director expires in 1999.
Shares, options exercisable within 60 days and share interests...........456,648
KENNETH M. DUBERSTEIN Director since August 1997
CHAIRMAN AND CHIEF EXECUTIVE, THE DUBERSTEIN GROUP, age 53. Mr. Duberstein has
served as Chairman and Chief Executive of The Duberstein Group (consulting firm)
since 1989. He was White House Chief of Staff in 1988 and 1989. Mr. Duberstein
is also a director of Cinergy Corp. and USF&G Corporation. His current term as a
Boeing director expires in 1999.
Shares, options exercisable within 60 days and share interests.............5,951
JOHN B. FERY Director since 1989
RETIRED CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, BOISE CASCADE
CORPORATION, age 68. 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 director of Albertson's, Inc.,
Hewlett-Packard Company, and U.S. Bancorp. Mr. Fery's current term as a Boeing
director expires in 1999.
Shares, options exercisable within 60 days and share interests............13,025
PAUL E. GRAY Director since 1990
PRESIDENT EMERITUS AND PROFESSOR OF ELECTRICAL ENGINEERING, MASSACHUSETTS
INSTITUTE OF TECHNOLOGY ("MIT"), age 66. Dr. Gray served as Chairman of the
Corporation of MIT (education) from 1990 to 1997 and as President from 1980
until he retired in 1990. He is also a director of Eastman Kodak Company. Dr.
Gray's current term as a Boeing director expires in 2000.
Shares, options exercisable within 60 days and share interests.............8,120
JOHN F. MCDONNELL Director since August 1997
RETIRED CHAIRMAN, MCDONNELL DOUGLAS CORPORATION, age 60. Mr. McDonnell served as
Chairman of McDonnell Douglas Corporation (aerospace) from 1988 until its merger
with Boeing in 1997 and as its Chief Executive Officer from 1988 to 1994. He is
also a director of Ralston Purina Company and Chairman of the Board of The
Federal Reserve Bank of St. Louis. Mr. McDonnell's current term as a Boeing
director expires in 2000.
Shares, options exercisable within 60 days and share interests........17,580,722
8
<PAGE> 14
WILLIAM J. PERRY Director since November 1997
PROFESSOR IN THE SCHOOL OF ENGINEERING AND SENIOR FELLOW AT THE INSTITUTE FOR
INTERNATIONAL STUDIES, STANFORD UNIVERSITY, age 70. Dr. Perry served as U.S.
Secretary of Defense from February 1994 through January 1997 and as Deputy
Secretary of Defense from 1993 to 1994. Dr. Perry is also a director of United
Technologies Corp. and Hambrecht & Quist. He is a trustee of the Carnegie
Endowment for International Peace, a member of the National Academy of
Engineering, and a fellow of the American Academy of Arts and Sciences. Dr.
Perry's current term as a Boeing director expires in 2000.
Shares, options exercisable within 60 days and share interests...............167
DONALD E. PETERSEN Director since 1990
RETIRED CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, FORD MOTOR COMPANY,
age 71. Mr. Petersen served as Chairman of the Board and Chief Executive Officer
of Ford Motor Company (automobile manufacturer) from 1985 to 1990. He was
President of Ford Motor Company from 1980 to 1985. Mr. Petersen's current term
as a Boeing director expires in 1999.
Shares, options exercisable within 60 days and share interests............20,668
HARRY C. STONECIPHER Director since August 1997
PRESIDENT AND CHIEF OPERATING OFFICER, THE BOEING COMPANY, age 61. Mr.
Stonecipher served as President and Chief Executive Officer of McDonnell Douglas
Corporation (aerospace) from 1994 until its merger with Boeing in 1997. He was
Chairman and Chief Executive Officer of Sundstrand Corporation from 1991 to
1994. Mr. Stonecipher is also a director of Cincinnati Milacron Inc., Computer
Management Sciences, Inc., and Sentry Insurance. Mr. Stonecipher's current term
as a Boeing director expires in 2000.
Shares, options exercisable within 60 days and share interests.........1,150,361
GEORGE H. WEYERHAEUSER Director since 1962
CHAIRMAN OF THE BOARD, WEYERHAEUSER COMPANY, age 71. Mr. Weyerhaeuser has been
Chairman of the Board of Weyerhaeuser Company (forest products) 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. Mr. Weyerhaeuser's current term as a Boeing director expires in
1999.
Shares, options exercisable within 60 days and share interests............26,789
9
<PAGE> 15
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 deferred stock
units issued under the Deferred Compensation Plan for Directors (the "Deferred
Compensation Plan").
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 of
Directors 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 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 of Directors 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
10
<PAGE> 16
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.
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
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John E. Bryson Donald E. Petersen John B. Fery Charles M. Pigott
Kenneth M. Duberstein John H. Biggs John E. Bryson John H. Biggs
John B. Fery William J. Perry Kenneth M. Duberstein William J. Perry
Paul E. Gray Charles M. Pigott Paul E. Gray Donald E. Petersen
John F. McDonnell George H. Weyerhaeuser John F. McDonnell 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 five meetings in
1997.
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 performance shares and stock options awarded to certain officers
of the Company and the terms and conditions on which they are granted. It
administers the Incentive Compensation Plan, stock option plans, and deferred
compensation plans. The Compensation Committee held seven meetings in 1997.
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
11
<PAGE> 17
Company's credit agreements and short-term investment policy. The committee also
reviews the investment policies, administration, and performance of the trust
investments of the Company's employee benefit plans. The Finance Committee held
five meetings in 1997.
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 50 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. At least once each year, the committee reviews the
performance of the Chief Executive Officer and the Company's plans for senior
management succession. The Organization and Nominating Committee held six
meetings in 1997.
BOARD AND COMMITTEE MEETINGS
During 1997, the Board of Directors held seven meetings and the committees
described above held 23 meetings. Average attendance by incumbent directors at
all such meetings was 99%. Each incumbent director attended at least 95% 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.
The Company has entered into a consulting agreement with Harold J. Haynes, who
served as a member of the Company's Board of Directors from 1974 to 1982 and
from 1984 until his retirement from the Board as of August 1, 1997. The
agreement commenced August 1, 1997 and will end April 30, 1998. Under the terms
of the agreement, Mr. Haynes provides consulting services to the Company. For
these services, Mr. Haynes is paid $27,000 for each three-month period during
the term of the agreement.
The Company has also entered into a consulting agreement with Frank A. Shrontz,
who served as Chairman of the Company's Board of Directors from 1988 until his
retirement on January 31, 1997 and was the Company's Chief Executive Officer
from 1986 until 1996 and President from 1985 until 1988. Mr. Shrontz retired as
a member of the Board as of August 1, 1997. The agreement commenced February 1,
1997 and, as amended on August 25, 1997, will end April 30, 1998. Under the
terms of the agreement, Mr. Shrontz provides consulting and other services to
the Company. For these services, Mr. Shrontz will be paid a total of $264,334
and will receive administrative support for his services performed under the
consulting agreement.
12
<PAGE> 18
McDonnell Douglas made a loan of $1,252,792 in 1997 to Michael M. Sears, now
ISDS Executive Vice President and President of McDonnell Aircraft and Missile
Systems, to facilitate the purchase of a residence in California. The loan
accrued interest at 5% per annum. The loan has been repaid in full.
In 1997, the Company made deposits with taxing authorities on behalf of Harry C.
Stonecipher, President and Chief Operating Officer and a member of the Board of
Directors, and James F. Palmer, Senior Vice President and President of Shared
Services Group, to cover excise and other tax liabilities on their income
arising from the change of control of McDonnell Douglas. The deposits exceeded
their tax liabilities in the respective amounts of $551,520 and $459,408. It is
anticipated that these amounts will be fully repaid to the Company, without
interest, in 1998.
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. Based
solely on the Company's review of the copies of such reports it has received,
the Company believes that all of its directors and officers complied with all
reporting requirements applicable to them with respect to transactions during
1997.
SECURITY OWNERSHIP
The table below shows ownership of Boeing common stock as of February 23, 1998,
by (a) each director, (b) the Chief Executive Officer and each of the other four
most highly compensated executive officers (collectively, the "Named Executive
Officers"), (c) all directors and executive officers as a group, and (d) all
persons believed by the Company to be a beneficial owner of more than 5% of the
outstanding shares of common stock.
The first column, Number of Shares Beneficially Owned, shows for each person the
number of shares of Boeing common stock directly and indirectly owned as of
February 23, 1998, including shares owned by, or jointly with, his or her
spouse. The second column shows the number of shares that such person may
acquire on or before April 24, 1998 by exercising stock options awarded by the
Company. The third column shows the total number of stock units and interests in
shares held pursuant to the Company's compensation and benefit plans or pursuant
to a contract, as of February 23, 1998. The final column shows for each person
the percentage of all shares outstanding and entitled to vote represented by the
total of the shares, options and share interests shown for that person. An
asterisk in that column indicates the person's total interests are less than 1%
of the outstanding shares of Boeing common stock.
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.
13
<PAGE> 19
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SHARES NUMBER OF TOTAL NUMBER OF
SHARES THAT MAY BE SHARES SHARES AS PERCENT
BENEFICIALLY ACQUIRED BY INTERESTS OF SHARES
NAME OF BENEFICIAL OWNER OWNED EXERCISING OPTIONS HELD OUTSTANDING
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DIRECTORS
John H. Biggs................... 24,610 0 489(1) *
John E. Bryson.................. 2,000 2,160 3,943(1) *
Kenneth M. Duberstein........... 5,460 0 491(1) *
John B. Fery.................... 4,500 8,280 245(1) *
Paul E. Gray.................... 4,275 3,600 245(1) *
John F. McDonnell............... 17,424,327(2) 0 156,395(1) 1.81
William J. Perry................ 0 0 167(1) *
Donald E. Petersen.............. 6,000 5,280 9,388(1) *
Charles M. Pigott............... 40,186 8,280 2,578(1) *
Rozanne L. Ridgway.............. 1,160 7,320 6,297(1) *
George H. Weyerhaeuser.......... 18,224(3) 8,280 245(1) *
NAMED EXECUTIVE OFFICERS
(**also serve as directors)
Philip M. Condit**.............. 18,678 385,391 52,579(4) *
Boyd E. Givan................... 32,583(5) 255,663 21,703(4) *
John A. McLuckey................ 1,460 73,320 4,161(4) *
Harry C. Stonecipher**.......... 185,378(6) 468,000 496,983(4) *
Ronald B. Woodard............... 7,082 138,428 23,777(4) *
All directors and executive
officers as a group (35
persons)...................... 18,039,297(5) 2,140,697 945,933 2.18
BENEFICIAL OWNER OF MORE
THAN 5% OF STOCK
The Chase Manhattan Bank(7)..... 50,267,631 0 0 5.18
</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 10.
(2) Of these shares, 12,226,011 are held in trusts for the benefit of members of
the McDonnell family. Either Mr. McDonnell or his wife is a trustee of each
of those trusts. In addition, the James S. McDonnell Foundation, of which
Mr. McDonnell is a trustee, holds 6,948,424 shares of Boeing common stock,
which are not included in the total shown above.
(3) This number does not include 700 shares held in a family trust. Mr.
Weyerhaeuser is one of three trustees who share voting and investment power
over the trust, and he disclaims beneficial ownership of such shares.
(4) Beginning in 1994, executives have received a portion of their annual
incentive compensation in the form of units based on Boeing common stock
("Boeing Stock Units" or "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. Beginning in
1998, executives have received awards of Career Shares, issued pursuant to
the Company's 1997 Incentive Stock Plan for Employees. Career Shares are
stock units that are payable in shares of Boeing common stock if the
executive remains employed by the Company until retirement. For the years
1990 through 1995, executives received long-term incentive program
performance shares ("LTIP Shares"), issued pursuant to the Company's
Incentive Compensation Plan. LTIP
14
<PAGE> 20
Shares are converted into shares of Boeing common stock four years after
they are awarded. The officers cannot vote any of these types of share
interests or transfer them unless and until they are converted into Boeing
common stock, and they may be forfeited on termination of employment prior
to vesting. For further description of BSUs and Career Shares, see the
Compensation Committee Report on Executive Compensation, which begins on
page 24.
Stock equivalent units ("SEUs") granted to Mr. Stonecipher by McDonnell
Douglas prior to the Merger were converted into 477,415 SEUs upon the
consummation of the Merger. Dividend equivalents were converted into an
additional 2,488 SEUs after the Merger. These units, which do not have
voting rights but earn dividend equivalents that are reinvested in
additional SEUs, are payable in cash. See Employment Contracts and
Termination of Employment Arrangements on page 22.
Mr. McLuckey, Mr. Stonecipher, and Mr. Woodard have units equivalent to 499,
1,788 and 6,460 shares in the Boeing stock funds of 401(k) retirement plans
and may instruct the trustees of those plans how to vote their units.
Under the Company's Deferred Compensation Plan for Employees and agreements
with the Company, 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 for Employees, 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.
The BSUs, Career Shares, LTIP Shares, SEUs, deferred stock units, and 401(k)
plan stock units held by each Named Executive Officer as of February 23,
1998, are as follows:
<TABLE>
<CAPTION>
CAREER LTIP DEFERRED 401(k) PLAN
BSUs SHARES SHARES SEUs STOCK UNITS UNITS
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Philip M. Condit.......................... 15,985 3,791 24,680 0 8,123 0
Boyd E. Givan............................. 7,579 1,744 12,380 0 0 0
John A. McLuckey.......................... 1,957 1,706 0 0 0 499
Harry C. Stonecipher...................... 3,176 3,412 0 479,903 8,704 1,788
Ronald B. Woodard......................... 7,582 1,895 7,840 0 0 6,460
</TABLE>
(5) This number does not include shares for which Mr. Givan has shared
investment power as a member of certain committees appointed by the Board of
Directors to administer certain savings and retirement plans. Mr. Givan does
not have beneficial ownership of these shares.
(6) Includes 78,000 shares of restricted stock. See Employment Contracts and
Termination of Employment Arrangements on page 22.
(7) The following information is based on a Schedule 13G filed by the parties on
February 14, 1998.The Chase Manhattan Bank ("Chase"), Chase Manhattan
Center, Brooklyn, New York 11245, is Trustee for the McDonnell Douglas
Corporation Master Savings Plans. Chase reports that the plans and the Trust
created pursuant to the plans beneficially own 50,228,273 shares of common
stock. The plans and the Trust share the power to vote or direct the vote of
those shares and the power to dispose or direct the disposition of those
shares. Chase and its parent, The Chase Manhattan Corporation, have voting
and dispositive power over an additional 39,358 shares.
15
<PAGE> 21
The Trustee has dispositive power for the shares in the Trust to the extent
necessary to follow valid instructions from participants regarding
withdrawals, transfers or loans from such plans. Participants in each of
these plans may direct the Trustee how to vote his or her proportionate
interest in these shares. Unallocated shares and allocated shares for which
no instructions are given (except for certain shares held in the Employee
Payroll Stock Ownership Plan (the "PAYSOP") are voted by the Trustee in the
same proportion as the allocated shares for which voting instructions are
received. PAYSOP shares for which no instructions are received are not voted
by the Trustee.
EXECUTIVE COMPENSATION
The following table summarizes the annual and long-term compensation of the
Named Executive Officers for fiscal years 1997, 1996, and 1995. Annual
compensation includes amounts deferred at the officer's election. All numbers
are rounded to the nearest dollar or whole share. The Compensation Committee
Report on Executive Compensation begins on page 24.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
ANNUAL
COMPENSATION AWARDS PAYOUTS
OTHER SECURITIES ALL
ANNUAL UNDER- OTHER
NAME AND COMPEN- RESTRICTED LYING LTIP COMPEN-
PRINCIPAL SALARY BONUS SATION STOCK OPTIONS PAYOUTS SATION
POSITION IN 1997 YEAR ($) ($)(3) ($)(4) $(5) (#)(6) ($)(7) ($)(8)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Philip M. Condit 1997 $884,675 $446,000 0 $ 204,378 120,000 0 $ 69,520
Chairman 1996 694,829 639,000 0 258,701 150,000 0 57,958
and CEO 1995 558,622 373,800 0 150,739 115,766 $ 197,921 47,249
Boyd E. Givan 1997 452,376 129,600 0 70,530 40,000 0 38,568
Senior Vice President 1996 422,606 262,800 0 111,212 54,000 0 38,407
and CFO 1995 393,870 213,600 0 86,137 66,152 186,173 35,315
John A. McLuckey 1997 430,193 451,000 0 99,183 73,320 0 849,139
Executive Vice President, ISDS
and President of Space
Systems(1)
Harry C. Stonecipher 1997 895,345(2) 489,300(2) 2,333,896(2)(4) 4,105,998(2) 0 8,051,518(2) 268,624(2)
President and Chief Operating
Officer
Ronald B. Woodard 1997 490,269 123,500 0 76,642 42,000 0 36,420
Senior Vice President 1996 446,744 279,900 0 119,042 80,000 0 34,224
and President of BCAG 1995 383,755 203,600 0 86,137 70,000 101,220 29,728
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------
- ----------------------------------
(1) Mr. McLuckey, who became an executive officer of the Company on March 1,
1997, has announced his intention to retire as of April 1, 1998.
(2) Mr. Stonecipher became an executive officer of the Company on August 1,
1997, the effective date of the Merger. The table includes the following
amounts paid to Mr. Stonecipher in 1997 by McDonnell Douglas prior to the
Merger:
<TABLE>
<S> <C>
Salary $585,000, out of the total amount of $895,345;
Other Annual Compensation $2,328,975;
Restricted Stock $3,945,000;
LTIP Payout $8,051,518, the value of performance-based restricted stock
whose vesting was accelerated upon the Merger;
All Other Compensation $35,318 in McDonnell Douglas contributions to retirement and
401(k) plans, and $13,632 for premiums on term life
insurance.
</TABLE>
16
<PAGE> 22
(3) Annual incentive compensation (cash payments reported in the Bonus column
and BSUs reported in the Restricted Stock column) is based on performance in
the year shown, but is determined and paid the following year.
(4) Other Annual Compensation includes the following amounts paid to Mr.
Stonecipher in 1997 by McDonnell Douglas prior to the Merger: $2,204,929 for
excise tax on the LTIP payout accelerated upon the Merger; $57,600 for
earnings paid on LTIP awards; and $45,165 in perquisites, including $17,531
for personal use of corporate aircraft. The total also includes perquisites
of $4,921 paid by Boeing, including $2,701 for personal use of Company
aircraft.
(5) The amount reported in the Restricted Stock column for each officer is the
value of the BSUs awarded in February of the following year. For Mr.
Stonecipher, the amount also includes the value of 60,000 shares of
restricted stock granted by McDonnell Douglas prior to the Merger, based on
the closing market price of McDonnell Douglas common stock of $65.75 on the
date of grant, January 30, 1997. The number of BSUs awarded is the number of
shares that could be purchased with 30% of the officer's target incentive
award, adjusted for Company, operating group, and individual performance,
using as the purchase price the FAIR MARKET VALUE (as defined on page 10) 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. 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. For a discussion of
target annual incentive awards, see the Compensation Committee Report on
Executive Compensation, at page 25.
The following table shows all BSUs, LTIP Shares, and restricted stock and
SEUs 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 held as of February 23, 1998, (b) the value of
those BSUs, based on the closing market price of Boeing common stock on
February 23, 1998, which was $50.6875 per share, (c) the number of LTIP
Shares held as of December 31, 1997 (for discussion of LTIP Shares, see
footnote (7) below), (d) the value of those LTIP Shares, based on the
closing market price of Boeing common stock on December 31, 1997, which was
$48.9375 per share, (e) the number of shares of restricted stock and SEUs
held as of December 31, 1997 (for discussion of SEUs, see footnote (4) to
the Security Ownership Table, at page 15), and (f) the value of those shares
of restricted stock and SEUs, based on the closing market price of Boeing
common stock on December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF 12/31/97
12/31/97 SHARES OF VALUE OF
NUMBER 2/23/98 NUMBER OF VALUE OF RESTRICTED RESTRICTED
OF VALUE LTIP LTIP STOCK STOCK
BSUs OF BSUs SHARES SHARES AND SEUs AND SEUs
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
P.M. Condit................. 15,985 $810,217 24,680 $1,207,778 0 0
B.E. Givan.................. 7,579 384,165 12,380 605,846 0 0
J.A. McLuckey............... 1,957 70,530 0 0 0 0
H.C. Stonecipher............ 3,176 160,998 0 0 557,903 $27,302,378
R.B. Woodard................ 7,582 384,320 7,840 383,670 0 0
</TABLE>
17
<PAGE> 23
(6) The numbers reported in the Securities Underlying Options column for each
officer are the numbers of shares for which options were granted in 1995,
1996 and 1997, as adjusted for the 2-for-1 stock split that occurred on June
6, 1997.
(7) The amount reported for each officer in the LTIP Payouts column on the line
for 1995 reflects the award of LTIP Shares by the Compensation Committee
(the "Committee") in 1996, based on performance in the three-year period
ended December 31, 1995, under a long-term incentive program that has been
phased out. The amount shown is equal to the number of LTIP Shares awarded
multiplied by the closing market price of Boeing common stock on the date of
the award. New cycles under the program were discontinued in 1994, and the
awards made in 1996 were the last to be made under the 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 LTIP 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 LTIP Share is
converted into one share of Boeing common stock four years after it was
awarded and earns dividend equivalents and interest on dividend equivalents,
which are payable when the LTIP Share is converted into stock. As to the
amount shown for Mr. Stonecipher on the line for 1997, see footnote (2),
above.
(8) Amounts reported in the All Other Compensation column are the sums of the
value of (a) dividend equivalents and interest on dividend equivalents on
LTIP Shares, (b) Company contributions to retirement and 401(k) plans of the
Company and its subsidiaries, and (c) premiums paid by the Company for term
life insurance for the benefit of the insured. The amounts described in
clauses (a), (b), and (c) above for each of the Named Executive Officers on
the line for 1997 are as set forth below. In addition, Mr. Stonecipher
received $160,507 in connection with his relocation to Seattle, and Mr.
McLuckey received $830,000 as a retention bonus pursuant to his Retention
Agreement with the Company. See Employment Contracts and Termination of
Employment Arrangements on page 22.
<TABLE>
<CAPTION>
(a) (b) (c)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Philip M. Condit.................................... $16,590 $51,671 $1,260
Boyd E. Givan....................................... 10,401 26,907 1,260
John A. McLuckey.................................... 0 17,879 1,260
Harry C. Stonecipher................................ 0 92,905 15,212
Ronald B. Woodard................................... 5,971 29,189 1,260
</TABLE>
18
<PAGE> 24
OPTION GRANTS IN 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT
UNDER- OF TOTAL POTENTIAL REALIZABLE VALUE AT
LYING OPTIONS ASSUMED ANNUAL RATES OF STOCK PRICE
OPTIONS GRANTED TO EXERCISE APPRECIATION FOR OPTION TERMS(2)
GRANTED EMPLOYEES IN PRICE EXPIRATION ---------------------------------------
NAME (#)(1) FISCAL YEAR ($/SH) DATE 0%($) 5%($) 10%($)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
P.M. Condit.................... 120,000 1.91 53.2188 2/24/07 $0 $4,016,282 $10,178,047
B.E. Givan..................... 40,000 0.64 53.2188 2/24/07 $0 1,338,761 3,392,682
J.A. McLuckey.................. 40,120 0.64 53.0313 1/13/07 $0 1,338,046 3,390,872
33,200 0.53 53.2188 2/24/07 $0 1,111,171 2,815,926
H. Stonecipher(3).............. 0 -- -- -- -- -- --
R.B. Woodard................... 42,000 0.67 53.2188 2/24/07 $0 1,405,699 3,562,317
Share price...................................................................... 86.6878 138.0359
All optionees (14,121 employees and retirees).................................... 0 209 million 529 million
All shareholders(4).............................................................. 0 24,137 million 61,167 million
Gain of all optionees as % of gain of all shareholders........................... 0 0.87% 0.87%
</TABLE>
- ---------------
(1) All options shown for the Named Executive Officers were granted on February
24, 1997 (except for Mr. McLuckey's grant for 40,120 shares, which was
granted on January 13, 1997), pursuant to the 1997 Incentive Stock Plan for
Employees. The numbers and exercise prices of options granted have been
adjusted for the 2-for-1 stock split that occurred on June 6, 1997. The per
share exercise price is the Fair Market Value of Boeing common stock (as
defined on page 10) 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, except that as to Mr. McLuckey's grant for 40,120 shares,
33% becomes exercisable after one year from the date of grant, and the
remaining 67% after two 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.
Mr. McLuckey's 40,120-share grant was awarded to replace a long-term cash
incentive award opportunity that Mr. McLuckey would have been eligible to
receive had he continued employment with Rockwell International Corporation
("Rockwell") after the Company acquired Rockwell's aerospace and defense
businesses on December 6, 1996. Similar options were granted to certain
other Rockwell executives who became employees of the Company.
(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) As a result of the Merger, each outstanding McDonnell Douglas stock option,
including outstanding options then held by Mr. Stonecipher, was converted
into a Company option at the same exercise price and term as the McDonnell
Douglas option. The options issued in substitution for previously issued
McDonnell Douglas options are not included in the above table.
19
<PAGE> 25
(4) 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 the last of these options were granted, February
24, 1997, there were 721,164,184 shares of common stock outstanding (as
adjusted for the 2-for-1 stock split that occurred on June 6, 1997).
AGGREGATED OPTION/SAR EXERCISES IN 1997
AND YEAR-END OPTION/SAR VALUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
ACQUIRED OPTIONS/SARS AT FISCAL YEAR- MONEY OPTIONS/SARS AT FISCAL
ON VALUE END (#)(2) YEAR-END ($)(2)
EXERCISE REALIZED ----------------------------- ----------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Philip M. Condit 65,000 $2,142,811 309,011 305,860 $ 7,290,356 $ 3,242,281
Boyd E. Givan 1,898,430 212,167 127,392 5,578,813 1,707,351
John A. McLuckey 0 0 0 73,320 0 0
H.C. Stonecipher 0 0 468,000 702,000 16,221,020 24,331,531
Ronald B. Woodard 32,798 860,097 102,226 143,476 2,041,255 1,768,410
- -------------------------------------------------------------------------------------------------------
</TABLE>
(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, 1997, which was $48.875. There is
no guarantee that if and when these options are exercised they will have
this value.
PENSION PLAN TABLES
The following tables show the estimated annual benefits payable to an employee,
assuming retirement on January 1, 1998, at age 65 after selected periods of
service, in each case including amounts to be paid pursuant to applicable
defined benefit supplementary and excess pension award plans, 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 tables
are not subject to any deduction for Social Security or other offset amounts.
BOEING EMPLOYEE RETIREMENT PLAN (THE "BOEING PLAN")
YEARS OF CREDITED SERVICE
<TABLE>
<CAPTION>
REMUNERATION 10 15 20 25 30 35 40
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 500,000 $ 73,535 $110,300 $147,100 $ 183,800 $ 220,600 $ 257,400 $ 294,100
1,000,000 148,535 222,800 297,100 371,300 445,600 519,900 594,100
1,500,000 223,535 335,300 447,100 558,800 670,600 782,400 894,100
2,000,000 298,535 447,800 597,100 746,300 895,600 1,044,900 1,194,100
2,500,000 373,535 560,300 747,100 933,800 1,120,600 1,307,400 1,494,100
3,000,000 448,535 672,800 897,100 1,121,300 1,345,600 1,569,900 1,794,100
- ------------------------------------------------------------------------------------------------
</TABLE>
MCDONNELL DOUGLAS EMPLOYEE RETIREMENT INCOME PLAN (THE "MDC PLAN")
YEARS OF CREDITED SERVICE
<TABLE>
<CAPTION>
REMUNERATION 10 15 20 25 30 35 40
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 500,000 $ 80,400 $120,000 $159,600 $ 200,400 $ 240,000 $ 280,800 $ 320,400
1,000,000 162,000 243,600 325,200 406,800 487,200 588,800 650,400
1,500,000 244,800 367,200 489,600 613,200 735,600 858,000 980,400
2,000,000 327,600 490,800 655,200 818,400 982,800 1,146,000 1,310,400
2,500,000 410,400 615,600 819,600 1,024,800 1,230,000 1,435,200 1,640,400
3,000,000 492,000 739,200 985,200 1,231,200 1,477,200 1,724,400 1,970,400
- ------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 26
BOEING NORTH AMERICAN RETIREMENT PLAN
FOR CERTAIN SALARIED EMPLOYEES SUB-PLAN (THE "BNA PLAN")
YEARS OF CREDITED SERVICE
<TABLE>
<CAPTION>
REMUNERATION 10 15 20 25 30 35 40
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 500,000 $132,017 $ 197,999 $ 210,132 $ 222,266 $ 234,400 $ 246,533 $ 246,533
1,000,000 265,367 397,999 422,632 447,266 471,900 496,533 496,533
1,500,000 398,717 597,999 635,132 672,266 709,400 746,533 746,533
2,000,000 532,067 797,999 847,632 897,266 946,900 996,533 996,533
2,500,000 665,417 997,999 1,060,132 1,122,266 1,184,400 1,246,533 1,246,533
3,000,000 798,767 1,197,999 1,272,632 1,347,266 1,421,900 1,496,533 1,496,533
- -----------------------------------------------------------------------------------------------------
</TABLE>
Under the Boeing Plan, "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. Under both the MDC Plan and the BNA Plan, credited
service begins at commencement of employment. The Named Executive Officers have
the following years of credited service:
<TABLE>
<CAPTION>
BOEING PLAN MDC PLAN BNA PLAN
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Philip M. Condit............................. 32.5 -- --
Boyd E. Givan................................ 31.9 -- --
John A. McLuckey............................. 1.0 -- 36.5
Harry C. Stonecipher......................... .9 5.8 --
Ronald B. Woodard............................ 31.4 -- --
</TABLE>
Pursuant to Mr. Stonecipher's Employment Agreement with the Company (see
Employment Contracts and Termination of Employment Arrangements on page 22), Mr.
Stonecipher will receive credit for twice as many years of service as he
actually works for the Company and McDonnell Douglas. The years of credited
service shown above are twice his actual periods of employment to January 1,
1998. In addition, the Company will provide a supplemental pension payment equal
to the difference between (a) what Mr. Stonecipher would have received from a
prior employer had he stayed with that employer through the expiration of the
Employment Agreement and (b) the pension payments he is actually entitled to
receive from the prior employer, McDonnell Douglas, and the Company.
Pension benefits are based on earnings in the last ten years of employment.
Under the Boeing Plan, the amount used is (a) the average annual salary for the
highest consecutive 60 months plus (b) the average annual incentive compensation
for the five highest years. Under the MDC Plan, the amount used is (a) the
average annual salary for the highest five consecutive years plus (b) the
average annual incentive compensation for the last five years prior to
retirement. Under the BNA Plan, the amount used is the average of the highest
five consecutive calendar years of compensation that include non-deferred
incentive compensation. The total annual averages for the Named Executive
Officers are currently as follows:
<TABLE>
<CAPTION>
BOEING PLAN MDC PLAN BNA PLAN
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Philip M. Condit............................. $1,163,420 -- --
Boyd E. Givan................................ 664,723 -- --
John A. McLuckey............................. 761,821 -- $803,714
Harry C. Stonecipher......................... 1,364,842 $1,437,449 --
Ronald B. Woodard............................ 619,553 -- --
</TABLE>
In the Bonus column of the Summary Compensation Table on page 16, amounts shown
are net of approximately 30% of the incentive award, which was converted into
BSUs. The values of BSUs (at
21
<PAGE> 27
the closing market price of Boeing common stock on the day the BSUs were
granted) are included in the Restricted Stock column. Compensation covered under
the plans referred to above includes the full incentive award.
EMPLOYMENT CONTRACTS AND TERMINATION
OF EMPLOYMENT ARRANGEMENTS
Employment Agreement With Mr. Stonecipher. Effective August 1, 1997, the
Company entered into an employment agreement (the "Employment Agreement") with
Mr. Stonecipher to secure his services as President and Chief Operating Officer
of the Company. The Employment Agreement amends and restates Mr. Stonecipher's
prior employment agreement with McDonnell Douglas and supersedes all prior
agreements between McDonnell Douglas and Mr. Stonecipher.
The current "Employment Period" under the Employment Agreement expires on
September 24, 1999. Unless written notice is otherwise given by either party at
least one year prior to the expiration date, however, the Employment Period will
be extended annually for an additional year, but in no event will it extend
beyond May 16, 2001.
During the Employment Period, Mr. Stonecipher is to receive both annual and
long-term equity incentive compensation. Annual compensation includes a base
salary of $900,000 per year, reviewed annually by the Compensation Committee of
the Board of Directors, and target annual incentive compensation of $635,000,
payable by March 31, 1998 under the terms of the McDonnell Douglas annual
incentive compensation plan. Thereafter Mr. Stonecipher will receive amounts
determined under the Company's Incentive Compensation Plan. Pursuant to the
Employment Agreement, the following long-term equity incentive compensation
previously awarded to Mr. Stonecipher by McDonnell Douglas was converted into
similar awards with respect to Boeing common stock in accordance with the terms
of the Merger Agreement: 477,415 stock equivalent units ("SEUs"), 140,400 of
which, together with related dividend equivalents, remain subject to vesting by
no later than March 31, 2002; 78,000 shares of restricted stock, which will vest
31,200 shares at the end of 1999 and 15,600 shares at the end of each of 2000,
2001, and 2002; and options to purchase 1,170,000 shares of common stock, which
vested and became exercisable or vest and become exercisable in increments of
234,000 shares on September 24 in each of 1996, 1997, 1998, 1999, and 2000. Mr.
Stonecipher receives dividends and voting rights on his shares of restricted
stock; the SEUs do not have voting rights, and dividend equivalent payments on
the SEUs are reinvested into additional SEUs. All converted restricted stock and
stock options will be granted and issued under the terms and conditions of the
McDonnell Douglas Corporation 1994 Performance and Equity Incentive Plan.
Additional long-term incentive awards will be granted to Mr. Stonecipher at the
sole discretion of the Compensation Committee.
For the purposes of calculating Mr. Stonecipher's benefits under the retirement
plans of the Company and McDonnell Douglas, he will receive credit for twice as
many years of service as he actually worked for the Company and McDonnell
Douglas. In addition, the Company will provide a supplemental pension payment
equal to the difference between (a) what Mr. Stonecipher would have received
from a prior employer had he stayed with that employer through the end of the
Employment Period and (b) the pension payments he is actually entitled to
receive from the prior employer, McDonnell Douglas, and the Company.
Pursuant to the Employment Agreement, Mr. Stonecipher is also entitled to at
least four weeks paid vacation each year, fringe benefits and perquisites in
accordance with the policies of McDonnell Douglas as in effect immediately prior
to the Merger, moving and relocation expenses incurred in
22
<PAGE> 28
moving to Seattle, and participation in the Company's other employee benefit
plans available to senior Boeing executives. Under the Employment Agreement, the
Company will also make "gross-up payments" to Mr. Stonecipher to fully offset
the effect of any excise tax imposed on change-in-control payments under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"), on any such
payment made to him under the Employment Agreement.
The Employment Agreement terminates upon either party's timely notification to
the other of an intent not to extend the Employment Period, termination by the
Company of Mr. Stonecipher's services for cause, termination of his employment
by Mr. Stonecipher for good reason, or Mr. Stonecipher's death or inability to
render services for 180 days during any 12-month period. Under the Employment
Agreement, "good reason" means a breach of the Employment Agreement by the
Company, removal from the Company's Board of Directors for reasons other than
voluntary resignation, removal from his position as President and Chief
Operating Officer for reasons other than for cause, diminution in
responsibilities or assignment of duties reasonably deemed by Mr. Stonecipher to
be inappropriate for someone in his position, or the Company's timely election
not to extend the Employment Period.
In the event Mr. Stonecipher terminates his employment for good reason, he will
be entitled to receive the present value of the salary and target annual
incentive compensation he would have received if his employment had continued
for the remainder of the Employment Period. In the event of such a termination,
all of Mr. Stonecipher's SEUs would be paid upon termination of employment,
stock options would continue to vest for the remainder of the Employment Period
and for one year following termination of the Employment Period and must be
exercised within three years of that time, and grants of performance-based
restricted shares would be ratably adjusted based on the ratio of the number of
years Mr. Stonecipher would have been employed had he remained employed for the
remainder of the Employment Period plus one, over the six-year performance
period. Payments of amounts due upon termination of the Employment Agreement
shall be deferred to the extent necessary to permit the Company a full deduction
for all such payments under Section 162(m) of the Code.
The Employment Agreement prohibits Mr. Stonecipher from disclosing at any time
confidential information or trade secrets concerning the Company without the
Company's express written consent. Mr. Stonecipher also may not be employed or
affiliated with a competitor of the Company as long as any restricted stock,
SEUs or stock options under the Employment Agreement remain unvested or
unexercised. The vesting of restricted stock and SEUs and the exercise of stock
options is subject to Mr. Stonecipher's full compliance with the Company's
nondisclosure and non-compete provisions of the Employment Agreement.
Retention Agreement With Mr. McLuckey. In connection with the Company's
acquisition of the aerospace and defense business of Rockwell on December 6,
1996 (the "Closing Date"), the Company assumed a Retention Agreement (the
"Retention Agreement") between Rockwell and Mr. McLuckey, who at the time was
Senior Vice President of Rockwell and President and Chief Operating Officer of
Rockwell Aerospace and Defense. Pursuant to the Retention Agreement, Mr.
McLuckey received a retention payment of $300,000 on the Closing Date and has
deferred receipt of a further retention payment of $830,000, which was
conditioned on Mr. McLuckey's remaining at the Company for 12 months after the
Closing Date. Mr. McLuckey remains eligible to receive a severance payment of
$415,000 under the Retention Agreement if he is involuntarily terminated (other
than for cause) within two years of the Closing Date or voluntarily terminates
employment after his responsibilities are substantially diminished during the
period two years after the Closing Date. However, Mr. McLuckey has announced his
intention to retire as of April 1, 1998.
23
<PAGE> 29
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors
establishes and administers the Company's executive compensation programs. The
Committee is comprised of five non-employee members of the Board, Messrs.
Petersen, Biggs, Perry, Pigott and Weyerhaeuser. Messrs. Biggs and Perry became
members of the Committee on August 1 and November 1, 1997, respectively.
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 Company, operating group and individual performance; and
4. Achieve a balance between incentives for short-term and long-term
performance.
The full Board of Directors reviews the Committee's recommendations and approves
the salaries of all elected officers, including those named in the Summary
Compensation Table on page 16. The Committee reviews the recommendations of the
Company's Chief Executive Officer for the salaries of all nonelected officers
and is responsible for all other elements of executive compensation, including
annual and long-term incentive awards.
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 long-term incentive awards 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.
SALARIES
The Committee annually reviews the salary levels of executive officers using
data provided by an outside consulting firm, and compares Boeing salaries with
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 ("S&P") Aerospace Index used in the
performance comparison graphs on page 29. Boeing executive officer salary levels
for 1997 were 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, by comparisons to peers inside and outside the
Company and, with respect to one of the Named Executive Officers, by the terms
of an employment agreement. Survey data indicate that the 1997 base salaries of
the Named Executive Officers, including Mr. Condit, are on average at or
slightly below the median of the benchmark companies.
ANNUAL INCENTIVE AWARDS
Annual incentive awards are designed to focus management attention on Company
performance. Each executive 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.
24
<PAGE> 30
Annual incentive awards for 1997 were paid out approximately 70% in cash and 30%
in Boeing Stock Units ("BSUs"), which are discussed below, except that the
awards granted to certain former McDonnell Douglas executives were paid entirely
in cash.
CASH AWARDS. The cash portion of the incentive awards approved by the Committee
was determined based on the officer's target incentive award, adjusted 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 1997, Company performance was evaluated based on the Company's overall
profitability and growth, measured by shareholder value over the long term,
together with quality as measured by customer, employee, and community
satisfaction.
Shareholder value is indicated by performance comparisons with S&P Aerospace
Index companies, the S&P 500 Stock Index, and a select group of premier
companies. In addition to comparison of the relative shareholder return
performances on this basis, the Committee's final evaluation of Company
performance included subjective and internal analysis of the reasons for changes
in the Company's shareholder value.
With regard to the Company's long-term shareholder value measurements, for the
five-year period 12/31/92 through 12/31/97, the Company outperformed the S&P 500
but lagged the S&P Aerospace Index and failed to rank among the top 50% of the
selected premier companies. For the ten-year period 12/31/87 through 12/31/97,
which included both an upcycle and a downcycle in the commercial aircraft
market, 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.
For 1997, the Committee's assessment was that quality performance by the
Company, as a whole, was below expected levels due to difficulties in meeting
commitments to customers in the commercial airplane business.
Operating group performance was evaluated 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 1997, the Committee assessment was that, while the operating groups
performed well in obtaining new business in both commercial airplane and defense
and space markets, cost performance and profit contribution goals were not met
in the commercial airplane business, as a result of production problems
associated with a rapid increase in production rates. Process improvement
objectives in the commercial airplane business were also hampered by production
problems.
Total 1997 annual incentive awards for the named executive officers other than
Mr. Condit, based on the foregoing assessments and an employment agreement with
one of the Named Executive Officers, averaged 96% of their assigned percentages.
Mr. Condit's award was 81% of his assigned percentage. The cash portion of Mr.
Condit's annual incentive award was based on the Committee's assessment of his
leadership and overall contributions to the Company's operating performance,
integration of both the Company's Merger with McDonnell Douglas and acquisition
of the aerospace and defense units of Rockwell, product quality, and customer
satisfaction. The cash portion of each incentive award is shown in the Bonus
column of the Summary Compensation Table on page 16.
25
<PAGE> 31
BOEING STOCK UNITS. Boeing Stock Units are restricted Boeing common stock units
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
common stock 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
common 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 16.
FEATURES OF THE 1998 EXECUTIVE COMPENSATION PROGRAM
Following the Merger with McDonnell Douglas, the Committee undertook a
comprehensive study, with the assistance of a compensation and benefits
consulting firm, to review the Company's executive compensation program. The
purpose of the study was to ensure that the compensation programs for the
expanded executive group reflect the Company's compensation policies and
objectives, integrate all executives into a common compensation structure for
1998, and strengthen the alignment of executive interests with those of
shareholders.
As a result of its study, the Committee determined that the general structure of
the Company's current base salary and annual incentive compensation programs
continues to be appropriate, but it approved a new performance-based long-term
incentive compensation program that ties executive rewards more directly to the
increase of shareholder value through stock price growth. This new program
awards Performance Shares of Boeing common stock to executives contingent on
attaining shareholder return goals within a specific time period. The new
program also awards Career Shares of Boeing common stock that are contingent on
the executive's staying with the Company for the remainder of his or her career.
The Committee also issued guidelines and incentives for executive ownership of
Company common stock.
The new Performance Share program provides a greater incentive for executives to
create and maintain shareholder value through stock price growth than the
Company's prior executive stock option program and other executive incentive
programs in most comparable companies. Like the option program, the Performance
Share program focuses executives on stock price appreciation. However, the
Performance Share program requires a minimum compound average annual increase in
share price of 10% within a five-year period before any gains can be realized.
The 1998 awards are contingent on the Company's achieving a minimum, target, and
superior stock price appreciation during a five-year performance cycle.
Specifically, the vesting of 1998 Performance Share awards is contingent on the
Company's stock price appreciating to a minimum, target, and superior average
price of $81.63, $97.59, and $101.95, respectively, within five years from the
date of grant. The minimum performance hurdle equates to a 60% increase in stock
price and would add approximately $30 billion to the Company's market value. The
Performance Shares will be paid in Boeing common stock on the date the specified
performance hurdles are met. The Performance Shares will earn dividend
equivalents, which will be accrued in the form of additional Performance Shares
and paid in Boeing common stock when and to the extent that the related
Performance Shares are paid.
The total number of shares delivered by the end of the five-year cycle will
range from zero to 125% of the contingent grant. If the minimum price is
achieved, 25% of the Performance Shares will vest. If stock price milestones
between minimum and target are met, the Performance Shares will vest in
increments of 40%, 55%, and 75%, up to 100% if the target price is achieved and
125% if the
26
<PAGE> 32
maximum price is achieved. In the event the Company's stock price does not
achieve the specified performance hurdles, the Committee may, in its discretion,
allow vesting of up to 100% of the target Performance Shares if the Company's
total shareholder return ("TSR" -- stock price appreciation plus dividends)
during the five-year performance period exceeds the average TSR of the S&P 500
over the same period.
To implement the new long-term incentive program, the Board of Directors has
approved and is submitting for shareholder approval an amendment to the
Company's 1997 Incentive Stock Plan for Employees that will remove the
limitation on the number of shares available for performance-based restricted
stock awards. See Proposal 2: Approval of Amendment of The Boeing Company 1997
Incentive Stock Plan for Employees on page 30.
The long-term incentive program also includes grants of Career Shares to certain
executives who make substantial contributions to the management, growth, and
success of major components of the Company's business. Career Shares are stock
units whose payout in Boeing common stock is contingent on the participant's
staying with the Company until retirement. Career Shares will earn dividend
equivalents, which will be accrued in the form of additional Career Shares and
paid in Boeing common stock when and to the extent the related Career Shares are
paid. To recognize the different levels of responsibilities within the Company,
the number of Career Shares an executive is granted will be based on the
executive's pay grade and salary and the price of Boeing common stock. The
number of Career Shares granted will be subject to discretionary adjustments
based on individual performance or for purposes of retention.
The Committee has also established new stock ownership guidelines for executives
that range from one to six times annual base salary, and from three to six times
for the named executive officers. As an incentive to encourage and facilitate
stock ownership, the Company will match any deferral of Performance Shares,
salary (up to 50%), annual cash incentive awards, or BSUs into an unfunded stock
unit account within the Company's Deferred Compensation Plan with a matching
contribution of an additional 25% of stock units.
The Committee believes that the new Performance Shares, Career Shares, stock
ownership guidelines, and deferral match will more effectively promote the
Company's overall philosophy of aligning executive and shareholder interests.
Beneficial stock ownership is a fundamental principle underlying the philosophy
and structure of Boeing's compensation programs for all employees. Ownership
ensures alignment with the interests of shareholders and reinforces the
Company's mission of people working together as one global company for aerospace
leadership. The Company's approach to compensation design through such programs
as the executive Performance Share program and employee ShareValue Program
focuses all employees on continuously growing shareholder value.
27
<PAGE> 33
Boeing executive compensation programs are designed to provide awards based on
Company, operating group and individual performance. To the extent consistent
with this performance-based approach and the Company's ability to provide
competitive compensation, the Committee's policy is generally to provide
executive compensation that is fully deductible by the Company for income tax
purposes. In 1997, all the compensation paid to the Named Executive Officers
(other than certain amounts paid by McDonnell Douglas prior to the Merger) was
fully deductible by the Company. The Performance Shares described above are not
designed to qualify as performance-based compensation that is fully deductible
by the Company for income tax purposes.
COMPENSATION COMMITTEE
Donald E. Petersen, Chairman
John H. Biggs
William J. Perry
Charles M. Pigott
George H. Weyerhaeuser
28
<PAGE> 34
SHAREHOLDER RETURN ON PERFORMANCE GRAPHS
The following graphs show changes in the value of $100 invested at year-end 1992
and 1987, respectively, in (a) Boeing common stock, (b) the S & P 500 Stock
Index, and (c) the S & P 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.
FIVE-YEAR CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) BOEING S&P 500 S&P AEROSPACE
<S> <C> <C> <C>
1992 100 100 100
1993 111 110 130
1994 123 111 140
1995 207 153 230
1996 285 187 297
1997 264 250 308
</TABLE>
TEN-YEAR CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) BOEING S&P 500 S&P AEROSPACE
<S> <C> <C> <C>
1987 100 100 100
1988 168 116 126
1989 252 153 161
1990 294 148 169
1991 317 193 201
1992 273 207 211
1993 302 227 273
1994 335 230 295
1995 564 315 486
1996 776 389 627
1997 721 517 651
</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 and space priorities. The stock price
performance shown in the graphs is not necessarily indicative of future price
performance.
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<PAGE> 35
PROPOSAL 2
APPROVAL OF AMENDMENT OF THE BOEING COMPANY
1997 INCENTIVE STOCK PLAN FOR EMPLOYEES
The Board of Directors, subject to approval of the Company's shareholders, has
adopted resolutions approving an amendment to The Boeing Company 1997 Incentive
Stock Plan for Employees (the "1997 Plan") to better meet the ongoing needs of
the Company by modifying the limitation on the number of shares that may be
issued as restricted stock (including restricted stock units).
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. Currently, the
1997 Plan authorizes 30 million shares for issuance as stock options, stock
appreciation rights and restricted stock, with no more than 6 million shares
being authorized for issuance as restricted stock. The proposed amendment would
make this 6 million share limitation inapplicable to restricted stock that vests
based on the achievement of specified performance goals.
The Company is not seeking shareholder approval of any increase in the total
number of shares authorized for issuance under the 1997 Plan. The amendment is
necessary to permit the continued funding under the 1997 Plan of the Company's
new Performance Share program. The Company believes it is appropriate to make a
distinction between performance-based restricted stock and time-vested
restricted stock because of their differing impacts on shareholder value. In the
case of performance-based restricted stock such as the Performance Shares, no
value is transferred to the holder unless performance goals that enhance the
value of the Company for all shareholders are achieved. For a description of the
Performance Share program, see Features of the 1998 Executive Compensation
Program on page 26. Shareholder approval of the proposed amendment is required
under the terms of the 1997 Plan.
Set forth below is a summary of certain important features of the 1997 Plan as
proposed to be amended, which summary is qualified in its entirety by reference
to the full text of the 1997 Plan, as amended and restated, which is published
in this proxy statement as Appendix A. The proposed amendment is shown in
italics in Appendix A.
DESCRIPTION OF THE 1997 PLAN
The 1997 Plan is administered by the Compensation Committee (the "Committee") of
the Board of Directors, 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 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 21,000 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.
An aggregate of 30 million shares of Boeing common stock is authorized for
issuance under the 1997 Plan. No more than 6 million shares are authorized for
grant as restricted stock awards that are not subject to restrictions based on
the achievement of specified performance goals, and no more than 3 million
shares may be granted as restricted stock that is subject to restrictions based
on continuous employment for less than three years (except when employment is
terminated because the employee
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<PAGE> 36
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 1.2
million 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 3 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 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 23, 1998, was $50.5938. 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 ten 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 on continued
service or the attainment of 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 of Directors
or the Committee, except that shareholder approval is required for any amendment
that would increase the number of shares authorized for issuance under the 1997
Plan or if such approval is required by Section 422 or 162(m) of the Code. The
1997 Plan became effective as of May 1, 1997 and will terminate on April 30,
2007, unless sooner terminated by the Board.
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
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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 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 held for the short-or long-term capital gains holding
periods.
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 are discretionary, total awards that may be
granted for the current fiscal year are not determinable until completion of the
year. During 1997, options to purchase an aggregate of 545,170 shares of Boeing
common stock were granted under the 1997 Plan to all executive officers of the
Company as a group (24 persons) at an average exercise price of $53.2186, and
options to purchase an aggregate of 5,752,912 shares were granted to all other
employees of the Company as a group (including officers who are not executive
officers) at an average exercise price of $53.1692. Options granted during 1997
to the Named Executive Officers are set forth under Executive
Compensation -- Option Grants in 1997 on page 19. No options were granted under
the 1997 Plan during 1997 to directors or nominees who are not also executive
officers of the Company. The Company in 1998 generally will grant only
Performance Shares and Career Shares to executives (including the 24 executive
officers). The Company will continue to grant stock options to key employees who
are not executives.
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<PAGE> 38
Approval of the amendment to 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 2.
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<PAGE> 39
PROPOSAL 3
SHAREHOLDER PROPOSAL
ON MILITARY CONTRACTS
Seventeen shareholders have advised the Company that they intend 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
WHEREAS, the proponents of this resolution believe that the Board of
Boeing should establish criteria to guide management in their defense
contract bidding and implementation activities;
WHEREAS, we believe that economic decision making has both an ethical
and a financial component;
WHEREAS, we believe our company's ethical responsibilities include
analyzing the effects of its decisions with respect to employees,
communities, and nations;
WHEREAS, we believe decisions to develop and to produce weapons can
have grave consequences to the lives and/or freedoms of people
worldwide if the company has not considered its ethical
responsibilities ahead of time; therefore be it
RESOLVED, that the shareholders request the Board of Directors to
establish a committee to research this issue and to develop criteria
for the bidding, acceptance, and implementation of military contracts
and to report the results of its study to shareholders at its 1999
annual meeting. Proprietary information may be omitted and the cost
limited to a reasonable amount.
PROPONENTS' SUPPORTING STATEMENT
The proponents of this resolution believe that all human beings are called to
seek justice and peace. An ethic of stewardship of the earth must include
respect for humanity and for creation. Because we believe that corporate social
responsibility in a successful free enterprise system demands ethical reflection
and action upon activities that are socially useful as well as economically
profitable, we recommend that the Board study include the following subjects:
- -- Arms sales to governments that repress their citizens
- -- The connection between arms sales and geographical or political instability
- -- Lobbying and marketing activities, both in the United States and abroad
including costs
- -- Sales of weapons, parts, technology, and components convertible to military
use ("dual-use") to foreign governments
- -- Transfers of technology, including co-production agreements
A YES vote recommends that the Board consider the above-listed criteria in a
study of our company's military sales and production activities.
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The criteria proposed by the committee should include guidance for company
management regarding these subjects.
A YES vote recommends that the Board consider the above-listed criteria in a
study of our company's military sales and production activities.
BOARD OF DIRECTORS' RESPONSE
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. The Boeing Company believes that determination of what products it
is appropriate for the U.S. Government or foreign governments to purchase is
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.
The 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 Company has a strong commitment to integrity and has an active program for
employees to learn and support ethical business standards. The Ethics and
Business Conduct Office has an experienced staff, ethics advisors are located
throughout the Company, and the Audit Committee of the Board of Directors
oversees the program. The Company's ethical business policy, procedures, and
program apply to employees engaged in every business activity, including
lobbying and marketing activities.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 3.
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PROPOSAL 4
SHAREHOLDER PROPOSAL
ON DOING BUSINESS WITH CHINA
Four shareholders have advised the Company that they intend 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
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, 1999,
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, 1999.
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;
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<PAGE> 42
3. To ensure that production methods do not unnecessarily risk harm to the
surrounding environment;
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 ensure 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 ensure 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."
BOARD OF DIRECTORS' RESPONSE
The Boeing Company is a leading aerospace firm and is committed to being one of
the premier industrial companies in the world. We will continue our history of
operating with integrity with high business principles, bringing commitment to
the rule of law and respect for employees and their rights of association and
assembly wherever we operate in the world.
While the Board of Directors is not insensitive to individual rights in China,
the United States should continue to recognize the interrelationships among
economic growth, social progress and political stability in determining the
welfare of the Chinese people. We believe that the lives of hundreds of millions
of Chinese have improved dramatically under economic reform and the engagement
of governments and international companies. Indeed, it is our experience that
significant good is accomplished by bringing countries into the mainstream of
open-market trading and economic progress. We support granting China permanent
"Most Favored Nation" status, which is not something special, but normal trading
rights. China's accession into the World Trade Organization and normalized trade
with China will also expand engagement by the worldwide community and the United
States in China, thereby enhancing the opportunities to further the rule of law
and an open society for the Chinese people.
Secretary of State Madeleine Albright articulated the Administration's policy in
clear terms during her confirmation hearing before the Foreign Relations
Committee in 1997: "Our goal is to expand areas of cooperation, reduce the
potential for misunderstandings and encourage China's full emergence as a
responsible member of the international community." The Board of Directors
supports this policy and believes that working for enhanced individual freedom
in a transforming China is a basic goal best served by broader political and
economic engagement with China.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 4.
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PROPOSAL 5
SHAREHOLDER PROPOSAL
ON ANNUAL ELECTION OF THE
ENTIRE BOARD OF DIRECTORS
A shareholder 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
RESOLVED: The Boeing shareholders request the Board of Directors take
the necessary steps to change all company governing instruments to
require election of the entire Board each year. This includes the
requirement that any future change in director frequency-of-election
be submitted to shareholder vote as a separate issue.
PROPONENT'S SUPPORTING STATEMENT
Annual election of the entire Board is widely accepted by corporate governance
experts to improve corporate performance and avoid surprise reversals. Major
corporations went to the brink of disaster due to lame board oversight.
This is an update of the 1997 Boeing shareholder resolution that achieved more
than 48% shareholder approval. Institutional Shareholder Services, a proxy
advisory firm, recommended this resolution in 1997.
The Business Week Nov. 25, 1996 Cover Story said for the best board: "PLACE THE
ENTIRE BOARD UP FOR ELECTION EVERY YEAR." Business Week said annual election was
one of a number of factors for the best board.
This resolution is designed to prevent surprise reversals like Boeing's $2.6
Billion write-off plus the $1.4 Billion MD-80/MD-90 cancellation charge. The
$2.6 Billion write-off sent Boeing stock tumbling and resulted in a deluge of
costly lawsuits. (A portion of these $-Billions reflect a loss rather than a
write-off or potential write-off).
This is a short list of the kinds of issues the entire board should answer for
each year:
- - Justice department accused Boeing of knowingly allowing defective parts in
hundreds of Boeing helicopters -- 2 crashes.
New York Times May 3, 1997
- - The most intense investigation in aviation history has not yet discovered the
cause of the Boeing 747 TWA Flight 800 crash.
- - Top journalism prize awarded for reports on 2 unsolved Boeing 737 crashes.
Seattle Times April 24, 1997
- - With the Boeing MD-80/MD-90 airliners canceled, the Airbus A320 will be the
only option if 737 safety and production problems increase.
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- - Independent Boeing directors are short on experience in Boeing's primary
business of jetliners, defense and space.
- - Boeing directors sit on the Board for 35-year and 25-year stretches.
- - Air Canada and Virgin place $4-Billion Airbus order. The Douglas acquisition
could encourage airlines to buy planes from Boeing's only
competitor -- Airbus.
Los Angeles Times August 2, 1997
- - A federal court lawsuit charges Boeing hid production problems to keep its
stock price high.
Wall Street Journal November 3, 1997
- - Boeing laid off 35% of its employees from 1990-1995, meanwhile productivity
fell 6%.
Business Week February 24, 1997
- - Skilled former Boeing employees are prohibited from working at any Boeing site
in 26 states.
Mr. Condit, Boeing CEO, said the customer was "a key part of the process" on the
new 777. Likewise, shareholders need to be "a key part of the process" at
Boeing.
VOTE FOR ANNUAL ELECTION OF ENTIRE BOARD OF DIRECTORS
YES ON 5
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<PAGE> 45
BOARD OF DIRECTORS' RESPONSE
This proposal is substantially the same as presented last year. The Board of
Directors has not changed its position. In the opinion of the Board, the claims
made in the supporting statement are largely irrelevant to the issue.
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 for 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 of Directors 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.
The Board believes that a classified board is appropriate for 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 5.
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PROPOSAL 6
SHAREHOLDER PROPOSAL
ON CUMULATIVE VOTING FOR THE
ELECTION OF DIRECTORS
Two shareholders have advised the Company that they intend 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
RESOLVED: That the stockholders of The Boeing Company, assembled in
annual meeting in person and by proxy, hereby request the Board of
Directors to take the steps necessary to provide for cumulative voting
in the election of directors, which means each stockholder shall be
entitled to as many votes as shall equal the number of shares he or
she owns multiplied by the number of directors to be elected, and he
or she may cast all of such votes for a single candidate, or any two
or more of them as he or she may see fit.
PROPONENTS' SUPPORTING STATEMENT
California law still requires that unless stockholders have voted not to have
cumulative voting they will have it. Ohio also has the same provision.
The National Bank Act provides for cumulative voting. In many cases companies
get around it by forming holding companies without cumulative voting. Banking
authorities have the right to question the capability of directors to be on
banking boards. In many cases authorities come in after and say the director or
directors were not qualified. We were delighted to see the SEC has finally taken
action to prevent bad directors from being on boards of public companies. The
SEC should have hearings to prevent such persons becoming directors before they
harm investors.
Many successful corporations have cumulative voting. Example, Pennzoil defeated
Texaco in that famous case. Texaco's recent problems might have also been
prevented with cumulative voting, getting directors on the board to prevent such
things. Ingersoll-Rand, also having cumulative voting won two awards. Further,
Union Pacific is a good example having troubles with their freight shipments,
which are backed up for a month. The merger with Southern Pacific is part of the
excuse. Just last year, Union Pacific took away cumulative voting.
Lockheed-Martin, as well as VWR Corporation, now have a provision that if anyone
has 40% or more of the shares cumulative voting applies: it does apply at the
latter company.
In 1995 American Premier adopted cumulative voting. Allegheny Power System tried
to take away cumulative voting, as well as put in a stagger system, and
stockholders defeated it, showing stockholders are interested in their rights.
Also, Hewlett-Packard, a very successful company, has cumulative voting.
If you agree, please mark your proxy for this resolution; otherwise it is
automatically cast against it, unless you have marked to abstain.
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BOARD OF DIRECTORS' RESPONSE
The Company believes that cumulative voting would threaten to undermine
effective Board of Directors functioning. Cumulative voting introduces the
possibility of partisanship among directors that could impair their ability to
work together, an essential element in the effective functioning of the Board.
Also, it is the Board's duty to represent all shareholders. Each director must
therefore bear responsibility toward all Company shareholders, without any
special loyalty to any one group. From this perspective, cumulative voting is
undesirable since directors so elected might be principally concerned about
representing and acting in the interest of special groups of shareholders
responsible for their election, rather than in the interests of all
shareholders. The Board does not believe that a narrow constituency of
shareholders who have pooled their votes should have an advantage over the
interests of the Company's shareholders as a whole.
In 1986, 80% of the shareholders who voted at the Company's annual meeting voted
in favor of amending the Company's Certificate of Incorporation to eliminate
cumulative voting, as permitted under Delaware law. The Company's action was
consistent with a general trend away from cumulative voting for public
companies. For example, the State of California, considered among the most
protective of shareholder interests, amended its state laws to permit the repeal
of cumulative voting in 1989. In supporting the change, the Committee on
Corporations of the Business Law Section of the State Bar of California argued:
While a healthy diversity of opinion and experience, as represented by
independent directors, is desirable, factionalism is not appropriate
in the board's essential executive function. The principal objective
of a business enterprise should be profit and gain for its
shareholders, not political accommodation of competing interests . . .
. Practical experience has shown that effective management of a
corporation requires candor and consensus in the Boardroom, [not]
rancor and contention.
The Company believes that the present method of voting has served the Company
well and should continue to work as successfully in the future as it has in the
past. Eleven of the Company's 13 directors are independent non-employee
directors and are all nominated for the Board of Directors by the Company's
Organization and Nominating Committee, which consists entirely of independent
directors. This guarantees the continued independence of the Board in
representing all 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 establish cumulative voting, as this proposal is only a
recommendation. Establishing cumulative voting would require the affirmative
vote of at least 75% of the outstanding shares on a proposal to amend the
Company's By-Laws, which specifically do not provide for cumulative voting for
directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 6.
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PROPOSAL 7
SHAREHOLDER PROPOSAL
ON CREATION OF THE POSITION OF
INDEPENDENT LEAD DIRECTOR
A shareholder has advised the Company that he 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
RESOLVED: The shareholders request that Boeing take the necessary
steps to amend the Boeing governing instruments for an outside
independent Lead Director. This will create independent oversight of
management to improve Boeing performance and prevent surprise
$2.6-Billion ($2,600,000,000) business reversals.
PROPONENT'S SUPPORTING STATEMENT
This is a short list of many concerns to shareholders, employees and customers
that call for heightened Management & Board of Directors' accountability,
vigilance and performance:
Boeing is stuck with trying to accomplish 4 tasks simultaneously: train more
than 30,000 new employees, double production rates in a very short time,
fundamentally change the way it builds aircraft, and deal with the McDonnell
Douglas and Rockwell acquisitions.
Long Beach Press Telegram October 24, 1997
A lawsuit (filed in federal court in Seattle on behalf of Boeing shareholders)
charges Boeing executives allegedly concealed production problems to maintain
Boeing's stock price, before completing the McDonnell Douglas merger.
Wall Street Journal November 3, 1997
NASA chief Daniel Goldin said Boeing has a $196-Million ($196,000,000) overrun
on work completed on the international space station. Goldin said Boeing's
performance is "less than stellar."
Los Angeles Times March 5, 1997
The California Public Employees' Retirement System (CalPERS) recommends an
outside independent lead director in its draft of U.S. Corporate Governance
Principles. CalPERS is a leader in advocating effective corporate governance
principles.
According to CalPERS -- INDEPENDENCE IS THE FOUNDATION OF ACCOUNTABILITY.
To instill independent leadership CalPERS recommends that:
When the Chairman of the Board is also the Chief Executive Officer (like
Boeing), the board designates an independent outside director to coordinate with
other independent directors to:
1) Define the timeliness, quality, and quantity of the flow of information
between management and the board. Timely data could alert the Boeing
board to impending problems before they become unmanageable.
2) Approve the hiring of independent consultants who report directly to the
board.
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3) Act as liaison between the independent directors and the CEO on
sensitive issues.
4) Prepare agendas for the Board and Board Committee meetings.
5) Evaluate the CEO's performance and meet with the CEO to discuss the
Board's evaluation.
Shareholders can express concern on Boeing's surprise $2.6-Billion
($2,600,000,000) reversal during a tremendous industry boom, by not voting for
the Directors. Withholding as little as 10% of the vote will convey a powerful
message that the shareholders expect improved corporate performance,
profitability and timely notification of the state of Boeing's business.
ADOPT A PERMANENT POSITION OF INDEPENDENT LEAD DIRECTOR to ensure that
Boeing will profit from its surge in airliner orders.
YES ON 7
BOARD OF DIRECTORS' RESPONSE
The Board of Directors does not believe that establishment of the position of
"Independent Lead Director" would enhance either its independence or its
effectiveness. The Company has a long history of independent leadership by its
Board of Directors. Independent directors who are not present or former
employees of the Company have constituted the majority of the Company's
directors for 25 years. During the last 20 years, when the size of the Board has
ranged from 11 to 14 directors, there have never been more than four directors
serving on the Board at the same time who were current or former employees of
the Company. Currently, 11 of the Company's 13 directors are independent of the
Company. No directors who are employees serve on any of the Board's committees.
Each of the Company's independent directors brings to bear substantial
experience in areas relevant to the Company's business, including service on
other boards of directors.
The Board of Directors believes that it has the necessary power and authority to
request and obtain information from management and to retain outside
consultants, where appropriate, in order to address "sensitive" issues. Each
committee of the Board has its own charter. As more specifically discussed in
the Compensation Committee Report on Executive Compensation, the independent
Compensation Committee of the Board, with input from the entire Board, plays an
active role in evaluating the performance not only of the Company's Chief
Executive Officer but of all the Company's executive officers. The Board has the
flexibility to elect the most appropriate director to the position of Chairman
of the Board and believes that the Chairman, with input from the Board, should
set the agenda for meetings of the Board.
The Board of Directors believes that its current composition and structure
provide for appropriate oversight of management and that each non-employee
director provides valuable insight and advice. The Board does not believe that
any significant purpose is served by the imposition of a strict rule creating
the role of an Independent Lead Director, potentially at odds with the role of
the Chairman of the Board. The Board therefore believes that the creation of the
position of Independent Lead Director would not be in the interest of the
Company's shareholders and that the structure of the Board, given its continuing
independence from the Company's management, is best determined by the Board.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 7.
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PROPOSAL 8
SHAREHOLDER PROPOSAL
ON POLITICAL CONTRIBUTIONS
Two shareholders have advised the Company that they intend 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
RESOLVED: That the shareholders recommend to The Boeing Company
(hereafter referred to as the corporation) that it obtain shareholder
approval for political contributions in excess of $10,000 annually to
a political party, and that it publish in its annual report to
shareholders a list of political contributions for the previous
12-month period.
PROPONENTS' SUPPORTING STATEMENT
The corporation, through its Board of Directors, contributes many thousands of
dollars to the political process in an effort to influence political decisions
dealing with a variety of items ranging from socio-economic issues to
environmental factors.
Oftentimes, an individual shareholder may differ with the corporate view toward
the above issues. But, by virtue of ownership of shares, the shareholder is
giving tacit approval to the Directors to contribute to a political party which
is in opposition to the shareholder's individual views.
At the very least, a shareholder of a public-traded corporation is entitled to
know where and when his/her views differ from the corporate view regarding the
political process and its bearing on socio-economic and environmental factors.
This proposal would reveal any differences between the shareholder's individual
views and corporate activity in the political process. Consequently, the
shareholder would have an opportunity to defend his/her views by taking
appropriate action.
Without this proposal, a corporate decision to support a political party could
be tantamount to coercive cooptation of shareholders in accepting or supporting
a political party contrary to a shareholder's individual view.
The publication of political contributions should be in tandem with a limit on
political contributions of $10,000.00. The $10,000.00 limit will help abate
"influence peddling." Huge corporate contributions to a political party
(referred to as "soft money") are ultimately and indirectly used to buy
influence on a particular issue from a candidate (referred to as "hard money").
Until such a time that effective campaign finance laws are enacted (which
appears remote at this junction) shareholders must initiate action at the grass
roots level in order to curb the abuse of corporate contributions to the
political process.
A past statesman cautioned us on this subject: All that remains to insure
corrupt government is for all good (wo)men to do nothing. The words may not be
the exact quotation, but the message is clear: sit on your rights too long and
you may lose the privilege to exercise them.
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If shareholders fail to act on this proposal, its failure could seriously
undermine the principle of "One (wo)man -- one vote!"
If shareholders wish to contribute or participate in the political process, most
of us are mature enough to do so on an individual basis. We should not be
subjected to coercive cooptation in supporting a political party which stands in
opposition to our individual beliefs.
BOARD OF DIRECTORS' RESPONSE
The Company's political contributions, which are a legitimate business expense,
are made under the direction of the Board of Directors in compliance with
applicable laws and regulations, are made only with advance approval by senior
management of the Company, and are reported to the Board annually.
Under the Federal Election Campaign Act, the Company is permitted to make
contributions to the nonfederal accounts of national party committees from the
Company's general treasury funds (sometimes referred to as "soft money"
contributions) and to establish and administer a separate segregated fund
(commonly known as a political action committee or PAC). The Company, however,
is prohibited from making contributions to candidates for federal elective
office.
The Boeing Company Political Action Committee ("BPAC") was established by the
Company in accordance with federal law. BPAC is governed by a board of directors
who are Company employees and makes political contributions solely from the
contributions it receives from its members, who are eligible Boeing employees.
Certain states and local jurisdictions permit the Company to make contributions
to candidates and political parties. The Company makes political contributions
in such states and localities when the Company believes it to be in the best
interest of the Company. From time to time, the Company also makes contributions
in support of, or in opposition to, specific ballot issues in which the Company
has a substantial interest.
The Company believes that all its political contributions are publicly reported,
either by the Company or by the recipient of the contribution, or by both the
Company and the recipient.
Imposing a shareholder approval requirement for political contributions greater
than $10,000 would simply be impractical. The cost of preparing proxy materials
to solicit shareholder approval would be prohibitive in relation to any possible
benefit to shareholders. The information that would be required by this proposal
to be disclosed in the Company's Annual Report to shareholders would also
require additional preparation time and unnecessary expense to the Company. Most
importantly, due to the time required to prepare and clear proxy materials and
submit matters to a shareholder vote, such approval could not be obtained within
a reasonable time. The effect of the proposal would be to limit the Company's
ability to support those government activities that are an important element of
its business. These activities, and the Company's support of them, are for the
benefit of all shareholders and undertaken in their best interest.
For these reasons, the Board of Directors believes that no useful purpose would
be served by taking the actions advocated by this proposal and that such actions
would result in a waste of the Company's resources.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 8.
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PROPOSAL 9
SHAREHOLDER PROPOSAL
ON THE SALE OF DOUGLAS PRODUCTS DIVISION
A shareholder has advised the Company that he 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
RESOLVED: Boeing shareholders request the Board of Directors take the
steps necessary to immediately hire a nationally recognized investment
banker to explore the sale of Douglas Products Division to another
company to enhance the value of Boeing. The sale of Douglas could save
Boeing an expected write-off of nearly $1.4-Billion ($1,400,000,000).
PROPONENT'S SUPPORTING STATEMENT
These news reports highlight that Boeing may be overwhelmed in dealing with
Douglas:
- - Boeing is too occupied with the problems of $2.6-Billion write-off in Seattle
to act as more than an undertaker for Douglas:
Boeing took a $1.6 Billion ($1,600,000,000) write-off due to production
problems in 1997's 3rd quarter and announced it would spend an
additional $1 Billion ($1,000,000,000) to fix production problems.
Wall Street Journal November 4, 1997
Boeing is stuck with trying to accomplish 4 tasks simultaneously:
1) Train more than 30,000 new employees
2) Double production rates in a short time
3) Fundamentally change the way it builds aircraft
4) Deal with its acquisition of Rockwell and McDonnell Douglas
Long Beach Press Telegram Oct. 24, 1997
- - The purchase of Douglas has benefited Boeing's major rival, Airbus:
Air Canada and Virgin place $4-Billion order with Airbus on the very day
Boeing acquired McDonnell Douglas. The $4-Billion deal bolsters the
argument that Airbus could benefit from Boeing's acquisition of Douglas.
Los Angeles Times August 2, 1997
The Airbus orders support the theory that the Douglas acquisition could
benefit Airbus, by encouraging airlines to buy planes from Boeing's only
competitor.
Los Angeles Times August 2, 1997
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- - After Boeing bought another airliner manufacturer, de Havilland Aircraft, de
Havilland nearly went broke:
Boeing loses nearly $1-Billion ($1,000,000,000) on de Havilland
Aircraft.
New York Times January 23, 1992
- - Boeing cancels the Douglas MD-80/MD-90 airliners, a viable alternative to the
log-jammed Boeing 737 production. At the same time the entire 737 program
could be in jeopardy with a 3rd unsolved 737 crash:
Baffled by 2 unsolved 737 accidents, NTSB chairman James Hall said a 3rd
unexplained 737 crash "would further erode public confidence in the
airplane."
Aviation Week July 24, 1995
Seattle Times aerospace reporter Byron Acohido awarded top journalism
prize for reports on the Boeing 737 rudder suspected of causing 2
unsolved crashes.
Seattle Times April 24, 1997
- Meanwhile:
Boeing will take $1.4-Billion ($1,400,000,000) charge to stop Boeing
MD-80/MD-90 production.
Los Angeles Times Jan. 22, 1998
REQUEST: HIRE AN INVESTMENT BANKER TO INVESTIGATE ENHANCING
THE VALUE OF BOEING, THROUGH THE SALE OF DOUGLAS
YES ON 9
BOARD OF DIRECTORS' RESPONSE
The Board of Directors does not believe that retention of an investment banker
to explore the sale of the Douglas Products Division would result in any
meaningful enhancement of shareholder value. On August 1, 1997, the Company
completed the merger of McDonnell Douglas Corporation ("McDonnell Douglas") with
a subsidiary of the Company (the "Merger"). As disclosed in the Company's proxy
statement related to the Merger, the Company and McDonnell Douglas retained
Credit Suisse First Boston and J.P. Morgan Securities Inc., respectively, both
nationally recognized investment banking firms, to advise them in connection
with the Merger. McDonnell Douglas had already employed financial advisors to
explore a number of alternatives concerning Douglas Aircraft Company (currently
the Douglas Products Division), including a sale, a joint venture, and other
financial arrangements. The Company and McDonnell Douglas both concluded that
the sale of the Douglas Products Division was not economically feasible. Federal
and European regulatory authorities, in independently reviewing the Merger,
reached the same conclusion. The Board believes that the payment of investment
banker fees to reexamine this conclusion would be a waste of Company funds.
The Board of Directors continually reviews alternatives for creating value for
the Company's shareholders in the context of the Company's long-term objectives.
As part of this ongoing review, it approved both the Merger and the acquisition
of Rockwell International Corporation's aerospace and defense business. Both
acquisitions served the strategic objective of creating a stronger Company with
a broader base of defense and space product programs and international business
opportunities.
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The Board of Directors will continue to exercise its business judgment to make
strategic decisions that it believes will enhance shareholder value. The Board
does not believe that retention of an investment banker to explore the sale of
the Douglas Products Division will accomplish this objective.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 9.
The Company will provide the names and addresses of the proponents of the
shareholder proposals above and the number of shares they hold upon oral or
written request for such information. Requests may be sent to the Corporate
Secretary, The Boeing Company, P.O. Box 3707, Mail Stop 13-08, Seattle,
Washington 98124-2207, or submitted by calling (206) 544-1056.
ANNUAL REPORT AND FORM 10-K
The 1997 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,
1997, 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. This proxy statement and the 1997 Annual Report are
also available at the Company's World Wide Web site, http://www.boeing.com.
SHAREHOLDER PROPOSALS FOR 1999
The Company's next annual meeting will be held on April 26, 1999. 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 19, 1998. A shareholder must have been a registered or beneficial owner
of at least 1% 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 Corporate Secretary, The Boeing Company,
P.O. Box 3707, Mail Stop 13-08, Seattle, Washington 98124-2207.
THE BOEING COMPANY
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APPENDIX A
THE BOEING COMPANY 1997 INCENTIVE STOCK PLAN FOR EMPLOYEES
(AS AMENDED AND RESTATED EFFECTIVE APRIL 27, 1998)
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 sole 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
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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").
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 thirty million (30,000,000). 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 that are not
subject to restrictions based on the achievement of specified performance goals
shall not exceed six million (6,000,000). The aggregate number of shares that
may be covered by awards granted to any one individual in any one calendar year
shall not exceed one million two hundred thousand (1,200,000).
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 three million
(3,000,000) 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.
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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.
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 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 sole
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 three million (3,000,000) shares may be issued subject to
restrictions based on continuous employment for less than three years
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(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 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 (a) cash or
cash equivalent (b) stock-for-stock payment (as described in Section 7.5), (c)
any combination of the above or (d) such other means as the Committee may
approve.
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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 sole 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.
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 shareholders (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.
A-5
<PAGE> 60
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-6
<PAGE> 61
[MAP AND INSTRUCTIONS TO ANNUAL MEETING]
1998 ANNUAL MEETING OF SHAREHOLDERS
Engineering Campus Auditorium, Bldg. 33
Corner of J. S. McDonnell and Lindbergh Blvds.
Hazelwood, Missouri 63042
April 27, 1998 - 10:00 a.m.
GENERAL DIRECTIONS
FROM I-270 EASTBOUND
- - Take Exit 23 to McDonnell Boulevard.
- - Proceed right on McDonnell Boulevard
to Lindbergh Boulevard.
- - Go through intersection at Lindbergh
Boulevard.
- - Turn right into first Boeing entrance,
Gate 32 and park in Parking Lot 33.
FROM I-270 WESTBOUND
- - Take Exit 25A to Lindbergh Boulevard
South.
- - Continue on Lindbergh Boulevard South
to McDonnell Boulevard. Turn left
on McDonnell Boulevard.
- - Turn right into first Boeing entrance,
Gate 32 and park in Parking Lot 33.
FROM I-70 EASTBOUND
- - Take Exit 235B to Lindbergh Boulevard
North.
- - Continue on Lindbergh Boulevard North
to McDonnell Boulevard.
- - Turn right on McDonnell Boulevard.
- - Turn right into first Boeing entrance,
Gate 32 and park in Parking Lot 33.
FROM I-70 WESTBOUND
- - Take exit 235B to Lindbergh Boulevard
North.
- - Continue on Lindbergh Boulevard North
to McDonnell Boulevard.
- - Turn right on McDonnell Boulevard.
- - Turn right into first Boeing entrance,
Gate 32 and park in Parking Lot 33.
FROM I-170 NORTHBOUND
- - Take exit 9A to Airport Road.
- - Turn left onto Airport Road.
- - Continue on Airport Road past
Boeing Building 100. Turn right onto
McDonnell Boulevard.
- - Turn left into Boeing Gate 32, and park
in Parking Lot 33 (last left turn before
Lindbergh Boulevard).
- - The doors will open at 8:30 a.m. The meeting will begin at 10:00 a.m. and is
expected to last no more than 2 hours.
- - The facility is accessible to shareholders with disabilities. If you have a
disability and require a special accommodation, please contact Boeing Equal
Opportunity Programs at (314) 232-4018 (voice) or (314) 233-2225 (TDD) at
least two weeks in advance of the meeting.
- - Parking places in the Engineering Campus lot have been reserved for Boeing
shareholders on a first-come, first-served basis. Parking for those with
disabilities will be located across from the entrance to the building. This
area is indicated on the map above.
- - Information about public transportation to the meeting may be obtained from
Bi-State Development Agency. Call (314) 231-2345 or (314) 434-5055 (TDD).
Please be prepared to provide the address shown at the top of this page.
MAP CALLOUTS
HWY 270
HWY 370
HWY 70
MISSOURI BOTTOM
J.S. McDONNELL
LINDBURGH
BLDG. 33
HWY 170
AIRPORT
LINDBERGH BLVD.
BLDG. 33 ENTRANCE
J.S. McDONNELL BLVD.
GATE 32 ENTRANCE
LOT 33 PARKING
<PAGE> 62
DETACH HERE
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
THE BOEING COMPANY
ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 1998
The undersigned hereby appoints Philip M. Condit, Harry C. Stonecipher,
and George H. Weyerhaeuser (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 27, 1998 (the "Meeting"), and at any adjournment thereof, as
indicated on the reverse side of this card with respect to Proposals 1 through
9, 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 any of the
retirement, savings and employee stock ownership plans listed in the Proxy
Statement under the heading "Voting by Participants in Employee Plans," 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 9, 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 AND
2 AND AGAINST PROPOSALS 3 THROUGH 9.
------------
IMPORTANT: TO BE SIGNED AND DATED ON THE REVERSE SIDE SEE REVERSE
SIDE
------------
<PAGE> 63
[LOGO] BOEING
c/o BOSTON EQUISERVE
P.O. BOX 9398
BOSTON, MA 02205-9398
VOTE VIA TELEPHONE OR THE INTERNET - IT'S QUICK, EASY AND IMMEDIATE
Your telephone or Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy
card. Please note all votes cast via the telephone or the Internet must be cast
prior to 5 p.m., April 26, 1998. If you wish to change your address, please
mark the box below, vote and return your proxy by mail.
TELEPHONE VOTING:
. There is NO CHARGE for this call.
. On a Touch Tone Telephone call TOLL FREE 1-888-807-7699 24 hours per day -
7 days a week.
. You will be asked to enter the Control Number which is located above your
name and address below.
- --------------------------------------------------------------------------------
OPTION #1: To vote AS THE BOARD OF DIRECTORS RECOMMENDS, press 1.
- --------------------------------------------------------------------------------
YOUR VOTE WILL BE CONFIRMED AND CAST AS YOU DIRECTED. END OF CALL.
- --------------------------------------------------------------------------------
OPTION #2: If you choose to vote ON EACH PROPOSAL SEPARATELY, press 2.
You will hear these instructions.
- --------------------------------------------------------------------------------
PROPOSAL 1: To vote FOR ALL nominees, press 1; to WITHHOLD YOUR VOTE
FROM ALL nominees, press 2;
To vote FOR EACH NOMINEE SEPARATELY, press 3. Please
listen to the instructions to cast your votes.
PROPOSAL 2 THROUGH 9: To vote FOR, press 1; to vote AGAINST, press 2; to
ABSTAIN, press 3.
YOUR VOTE WILL BE CONFIRMED AND CAST AS YOU DIRECTED. END OF CALL
INTERNET VOTING:
* As with all Internet access, usage or server fees must be paid by the user.
Visit our Internet voting site at http://www.equiserve.com/proxy/ and follow
the instructions on your screen. These instructions are similar to those above
for telephone voting.
- --------------------------------------------------------------------------------
If you vote via telephone or the Internet, it is not necessary to return your
proxy by mail. THANK YOU FOR VOTING.
- --------------------------------------------------------------------------------
DETACH HERE
<PAGE> 64
<TABLE>
<CAPTION>
[X] Please mark
votes as in
this example.
- -----------------------------------------
<S> <C> <C> <C> <C>
The Board of Directors recommends a vote FOR AGAINST ABSTAIN
FOR proposals 1 and 2 and 2. Amend The Boeing Company [ ] [ ] [ ]
AGAINST proposals 3 through 9. 1997 Incentive Stock Plan
- ----------------------------------------- for Employees.
1. Election of directors John H. Biggs,
John E. Bryson, Charles M. Pigott, 3. Request Board to establish [ ] [ ] [ ]
and Rozanne L. Ridgway committee on criteria for
military contracts and
FOR [ ] WITHHELD [ ] report to 1999 Annual Meeting.
ALL FROM ALL
NOMINEES NOMINEES
4. Request Board to adopt human [ ] [ ] [ ]
[ ] _______________________________________ rights criteria for operations
For all nominees except as noted above in and with China and report to
shareholders by July 1, 1999.
FOR AGAINST ABSTAIN
5. Request Board to provide for [ ] [ ] [ ]
annual election of the entire
Board of Directors.
6. Request Board to provide for [ ] [ ] [ ]
cumulative voting in the
election of directors.
7. Request Board to create position [ ] [ ] [ ]
of independent lead director.
8. Request Company to obtain [ ] [ ] [ ]
shareholder approval for
political contributions in
excess of $10,000 annually to
a political party, and list
political contributions in its
annual report.
9. Request Board to hire [ ] [ ] [ ]
investment banker to explore
sale of Douglas Products
Division.
Mark here [ ] [BOEING LOGO]
for
comments Please sign exactly as your name appears on your account. If the
and note at shares are registered in the names of two or more persons, each
left should sign. If acting as attorney, executor, trustee or in another
representative capacity, sign name and title.
Mark here [ ]
for address
change and
note at left
Signature _______________________________ Date: _____________ Signature _______________________________ Date: _____________
</TABLE>
