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THE BOEING COMPANY
March 19, 1999
Dear Shareholder:
I am pleased to invite you to attend the Company's 1999 Annual Meeting of
Shareholders.
It will be held on Monday, April 26, 1999, at The Westin Los Angeles Airport
Hotel, 5400 West Century Boulevard, Los Angeles, California. 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 to the
hearing impaired 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.
Your vote is important. Whether or not you plan to attend the Annual Meeting
in person, I urge you to vote your proxy as soon as possible. This year you can
vote over the Internet, as well as by telephone or by mailing back a traditional
proxy card. Voting over the Internet, by telephone or by written proxy will
ensure your representation at the Annual Meeting if you do not attend in person.
Please review the instructions on the proxy card regarding each of these
options.
Very truly yours,
/s/ Philip M. Condit
--------------------------------------
PHILIP M. CONDIT
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
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THE BOEING COMPANY
P.O. BOX 3707
SEATTLE, WASHINGTON 98124
-----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-----------------
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TIME 10:00 a.m. on Monday, April 26, 1999
PLACE The Westin Los Angeles Airport Hotel
5400 West Century Boulevard, Los Angeles, California
ITEMS OF 1. To elect four people to the Board of Directors for three-year terms expiring
BUSINESS in 2002;
2. To vote on a shareholder proposal on criteria for military contracts;
3. To vote on a shareholder proposal on doing business in and with China;
4. To vote on a shareholder proposal on cumulative voting;
5. To vote on a shareholder proposal on an independent lead director;
6. To vote on a shareholder proposal on annual election of the entire Board of
Directors; and
7. To transact such other business as may properly come before the Annual Meeting
or any adjournment thereof.
RECORD DATE You are entitled to vote if you were a shareholder at the close of business on Thursday,
February 25, 1999.
MEETING If your Boeing stock is held in a brokerage account or by a bank or other nominee, you
ADMISSION are considered the beneficial owner of shares held in street name and these proxy
materials are being forwarded to you by your broker or nominee. Your name does not appear
on the list of shareholders, and in order to be admitted to the meeting, you must bring a
letter or account statement showing that you were the beneficial owner of the stock on
the record date.
VOTING BY Please submit a proxy as soon as possible so that your shares can be voted at the
PROXY meeting. Submitting the enclosed form of proxy will appoint John H. Biggs, Charles M.
Pigott, and Harry C. Stonecipher as your proxies.
You may submit your proxy (1) over the Internet, (2) by telephone, or (3) by mail. For
instructions, please refer to page 2 of this proxy statement or the proxy card.
</TABLE>
/s/ James C. Johnson
--------------------------------------
JAMES C. JOHNSON
VICE PRESIDENT, CORPORATE SECRETARY
AND ASSISTANT GENERAL COUNSEL
March 19, 1999
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TABLE OF CONTENTS
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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....................................................................... 1
Voting by Telephone or the Internet............................................................................ 2
Voting by Participants in Employee Plans....................................................................... 3
Receiving Proxy Materials on the Internet...................................................................... 4
Vote Required and Method of Counting Votes..................................................................... 4
Confidential Voting Policy..................................................................................... 5
Expenses of Solicitation....................................................................................... 5
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........................................................ 12
Stock Ownership................................................................................................ 13
Executive Compensation......................................................................................... 16
Summary Compensation Table................................................................................... 16
Option Grants in 1998........................................................................................ 19
Aggregated Option/SAR Exercises in 1998 and Year-End Option/SAR Values....................................... 20
Long-Term Incentive Plans -- Awards in 1998.................................................................. 20
Pension Plans................................................................................................ 21
Employment Contracts and Termination of Employment Arrangements.............................................. 23
Compensation Committee Report on Executive Compensation...................................................... 26
Performance Graph............................................................................................ 29
Proposal 2: Shareholder Proposal on Criteria for Military Contracts.............................................. 30
Proposal 3: Shareholder Proposal on Doing Business in and With China............................................. 32
Proposal 4: Shareholder Proposal on Cumulative Voting............................................................ 34
Proposal 5: Shareholder Proposal on Independent Lead Director.................................................... 36
Proposal 6: Shareholder Proposal on Annual Election of the Entire Board.......................................... 39
Annual Report and Form 10-K...................................................................................... 41
Shareholder Proposals for 2000................................................................................... 41
</TABLE>
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THE BOEING COMPANY
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
------------------------
APRIL 26, 1999
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 1999 Annual Meeting of Shareholders (the
"Annual Meeting"). The approximate date on which this proxy material is first to
be sent to shareholders is March 19, 1999.
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 25, 1999, as the record date for identifying shareholders of the
Company entitled to vote at the Annual Meeting. On February 25, 1999, there were
976,340,036 shares of common stock outstanding and 936,301,888 of those shares
were entitled to vote. There were 165,502 registered shareholders on the record
date and approximately 835,000 beneficial owners whose shares were held in
street name. The last sale price of the Company's common stock for that date, as
reported in THE WALL STREET JOURNAL, was $35.00 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; IN ORDER TO BE ADMITTED, BENEFICIAL OWNERS MUST BRING ACCOUNT
STATEMENTS OR LETTERS FROM THEIR BANKS OR BROKERS SHOWING THAT THEY OWNED BOEING
STOCK AS OF FEBRUARY 25, 1999. IN ORDER TO VOTE AT THE MEETING, BENEFICIAL
OWNERS MUST BRING LEGAL PROXIES; THEIR BROKERS OR BANKS CAN EXPLAIN HOW TO
OBTAIN LEGAL PROXIES.
Registration will begin 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.
For the hearing impaired, 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 Secretary of the Company no later than April 12, 1999, at
The Boeing Company, P.O. Box 3707, Mail Code 13-08, Seattle, Washington
98124-2207.
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
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the recommendations of the Board of Directors. The Board of Directors recommends
a vote FOR each of the nominees and AGAINST Proposals 2 through 6.
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. The Company has received notice that certain individuals may seek to
bring matters before the Annual Meeting regarding the format of the Meeting and
the conduct of specific aspects of the Company's business. The persons named on
the proxy card intend to exercise the discretionary authority given to them by
the proxy card to vote against such items if they are properly brought before
the Annual Meeting for a vote.
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 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.
Beneficial owners who hold their stock in street name cannot revoke their
proxies in person at the Annual Meeting because the shareholders of record who
have the right to cast the votes will not be present. If they wish to change
their votes after returning voting instructions, beneficial owners should
contact their brokers or other agents before the Annual Meeting to determine
whether they can do so.
VOTING BY TELEPHONE OR THE INTERNET
Registered shareholders and participants in the plans listed on the next page
can save the Company expense by voting their shares over the telephone or by
voting on the Internet. The law of Delaware, under which the Company is
incorporated, specifically permits electronically transmitted proxies, provided
that each such proxy contains or is submitted with information from which the
inspectors of election can determine that such proxy was authorized by the
shareholder. (General Corporation Law of the State of Delaware, Section 212(c).)
The voting procedures available to registered shareholders for the Annual
Meeting 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.
Registered shareholders and plan participants may go to
HTTP://WWW.EPROXYVOTE.COM/BA to vote on the Internet. They will be required to
provide the Control Numbers contained on their proxy cards (or in the e-mail
messages sent to those who signed up to receive proxy materials on the
Internet). After providing the correct Control Number, the voter will be asked
to complete an electronic proxy card. The votes will be generated on the
computer screen and the voter will be prompted to submit or revise them as
desired. Any registered shareholder or plan participant using a touch-tone
telephone may also vote by calling 1-877-779-8683 (toll-free) or 1-201-536-8073
(collect) and following the recorded instructions.
Most beneficial owners whose stock is held in street name receive voting
instruction forms from their banks, brokers or other agents, rather than the
Company's proxy card. Beneficial owners may also be able to vote by telephone or
the Internet. They should follow the instructions on the form they receive from
their bank, broker, or other agent.
The method of voting used will not limit a shareholder's right to attend the
Annual Meeting.
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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 Boeing stock
through participation in the stock funds of 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
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 in the stock funds are allocated interests in the
shares and may instruct the trustees how to vote the Plan Shares represented by
their interests.
The number of shares of Boeing stock shown on the back of the Company's proxy
card, above the boxes to be marked, represents all registered shares and Plan
Shares. Plan Shares can be voted only by submitting proxy instructions, whether
by telephone, the Internet or mailing in the printed proxy card; they cannot be
voted at the Annual Meeting and prior voting instructions cannot be revoked at
the Annual Meeting.
The trustees will cast Plan Share votes according to each participant's
instructions. If the trustee does not receive instructions from a participant in
time for the Annual Meeting, the trustee will vote the participant's Plan Shares
in accordance with the terms of the Plans, which are as follows:
- Plans 1-7, 10 and 11: for each Plan, 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.
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RECEIVING PROXY MATERIALS ON THE INTERNET
Registered shareholders and participants in the Plans listed above may sign up
on the Internet to receive future proxy materials and other shareholder
communications on the Internet instead of receiving printed materials by mail.
This will reduce the Company's printing and postage costs. In order to receive
the communications electronically, you must have an e-mail account, access to
the Internet through an Internet service provider, and a web browser that
supports secure connections. You can access the Internet site at
HTTP://WWW.ECONSENT.COM/BA for additional information and to sign up. If you are
a registered shareholder, you will be asked to enter the number of your account
with the Company's transfer agent, BankBoston. That number is shown on dividend
checks, statements for participants in the Dividend Reinvestment and Stock
Purchase Plan, and on stock certificates. Participants in the Plans will be
asked to provide their Social Security numbers or employee identification
numbers. After you have provided identification and transmitted your e-mail
address, BankBoston's affiliate, EquiServe, will send you an e-mail message
confirming your acceptance of electronic shareholder communications.
When proxy materials for the Annual Meeting to be held in the year 2000 are
ready for distribution, those who have accepted electronic receipt will receive
e-mail notice of their Control Numbers and the Internet site for viewing proxy
materials and for voting. Acceptance of electronic receipt will remain in effect
until it is withdrawn; it can be withdrawn at any time by contacting the
transfer agent.
Many brokerage firms and banks are also offering electronic proxy materials to
their clients. If you are a beneficial owner of Boeing stock that is held for
you by a broker or bank, you may contact that broker or bank to find out whether
this service is available to you.
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 stock
entitles the holder to one vote on each matter presented for shareholder action.
With respect to the election of directors, shareholders may vote in favor of all
nominees, or withhold their votes as to all nominees, or withhold their votes as
to specific nominees. Checking the box that withholds authority to vote for a
nominee is the equivalent of abstaining. The four nominees who receive the
greatest number of votes cast for the election of directors by shares entitled
to vote and present in person or by proxy at the Annual Meeting will be elected
directors. In an uncontested plurality election, such as this, abstentions have
no effect, since approval by a percentage of the 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 those proposals. 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
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directors are "non-discretionary" and brokers who have received no instructions
from their clients do not have discretion to vote on those items. When a broker
votes a client's shares on some but not all of the proposals at a meeting, the
missing votes are referred to as "broker non-votes." Those shares will be
included in determining the presence of a quorum at the Annual Meeting, but are
not considered "present" for purposes of voting on the non-discretionary
proposals. They have no impact on the outcome of such proposals. The New York
Stock Exchange has advised the Company that Proposals 2 through 6 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, tabulated and inspected by the Company's
transfer agent, an independent entity that is not affiliated with 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 $25,000, 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 they hold in street name and, if that is the case, will supply
additional copies of the proxy materials for distribution to such beneficial
owners. The Company will reimburse such parties for their reasonable expenses in
sending proxy materials to the beneficial owners of the shares.
INDEPENDENT AUDITORS
As recommended by the Audit Committee of the Board of Directors, the Board has
appointed Deloitte & Touche LLP as independent auditors to audit the financial
statements of the Company for the fiscal year ending December 31, 1999. 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.
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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 2002. 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.
Board policy requires a nonmanagement director to resign at the annual meeting
of shareholders following that director's 72nd birthday. Accordingly, Donald E.
Petersen and George H. Weyerhaeuser have announced their intentions to retire
from the Board at the Annual Meeting.
The Organization and Nominating Committee of the Board has recommended four
nominees, three of whom are currently serving as directors. The Board has, in
accordance with the By-Laws, reduced the size of the Board to 12, to be
effective at the time of the Annual Meeting. The nominees 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 persons named on the proxy card may vote all
proxies given in response to this solicitation for the election of a substitute
nominee chosen by the Board or the Board, in its discretion, may reduce the size
of the Board rather than nominate a substitute.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR EACH OF THE NOMINEES.
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NOMINEES
PHILIP M. CONDIT Director since 1992
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, THE BOEING COMPANY, age 57.
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.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
453,099
KENNETH M. DUBERSTEIN Director since 1997
CHAIRMAN AND CHIEF EXECUTIVE, THE DUBERSTEIN GROUP, age 54. 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., Federal National Mortgage Association, St.
Paul Companies and Global Vacation Group.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
9,179
JOHN B. FERY Director since 1989
RETIRED CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, BOISE CASCADE
CORPORATION, age 69. 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. and
Hewlett-Packard Company.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
18,102
LEWIS E. PLATT
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER, HEWLETT-PACKARD
COMPANY, age 57. Mr. Platt has served as a director, President and Chief
Executive Officer of Hewlett-Packard Company (measurement, computing and
communications equipment) since November 1992 and has served as Chairman since
September 1993. In 1995, he was appointed to the Advisory Committee on Trade
Policy Negotiations by President Clinton. Mr. Platt also serves on the Wharton
School Board of Overseers and the Cornell University Council and is a Trustee of
the David and Lucille Packard Foundation.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
1,000
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CONTINUING DIRECTORS
JOHN H. BIGGS Director since 1997
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE, TEACHERS INSURANCE AND ANNUITY
ASSOCIATION-COLLEGE RETIREMENT EQUITIES FUND ("TIAA-CREF"), age 62. 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, a Trustee of Washington University, St. Louis, an
At-Large Trustee of the Financial Accounting Foundation and a director of
Ralston Purina Company. Mr. Biggs' current term as a Boeing director expires in
2001.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
27,378
JOHN E. BRYSON Director since 1995
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, EDISON INTERNATIONAL, age 55.
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, the W.M. Keck Foundation, and the Council on Foreign Relations, and a
trustee of Stanford University. Mr. Bryson's current term as a Boeing director
expires in 2001.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
11,975
PAUL E. GRAY Director since 1990
PRESIDENT EMERITUS AND PROFESSOR OF ELECTRICAL ENGINEERING AT MASSACHUSETTS
INSTITUTE OF TECHNOLOGY ("MIT"), age 67. Dr. Gray served as Chairman of the
Corporation of MIT (education) from 1990 to 1997 and as President from 1980
until 1990. He is also a director of Eastman Kodak Company and Nvest L.P. Dr.
Gray's current term as a Boeing director expires in 2000.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
8,202
JOHN F. MCDONNELL Director since 1997
RETIRED CHAIRMAN, MCDONNELL DOUGLAS CORPORATION, age 61. 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 Vice Chairman of the Board of
Trustees of Washington University, St. Louis. Mr. McDonnell's current term as a
Boeing director expires in 2000.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
17,287,632
WILLIAM J. PERRY Director since 1997
PROFESSOR IN THE SCHOOL OF ENGINEERING AND SENIOR FELLOW AT THE INSTITUTE FOR
INTERNATIONAL STUDIES, STANFORD UNIVERSITY, age 71. 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., Hambrecht & Quist, and Cylink Corporation. 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..................
3,480
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CHARLES M. PIGOTT Director since 1972
CHAIRMAN EMERITUS, PACCAR INC, age 69. 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 through 1996. Mr. Pigott is also a director of PACCAR Inc and Chevron
Corporation. His current term as a Boeing director expires in 2001.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
55,895
ROZANNE L. RIDGWAY Director since 1992
FORMER ASSISTANT SECRETARY OF STATE FOR EUROPE AND CANADA, age 63. 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, Emerson Electric Company, RJR Nabisco, Inc., 3M
Corporation, The Sara Lee Corporation, and Union Carbide Corporation. Her
current term as a Boeing director expires in 2001.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
19,587
HARRY C. STONECIPHER Director since 1997
PRESIDENT AND CHIEF OPERATING OFFICER, THE BOEING COMPANY, age 62. 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 of the Board, President and Chief Executive Officer of Sundstrand
Corporation from 1991 to 1994. Mr. Stonecipher is also a director of Computer
Management Sciences, Inc., Milacron, 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..................
1,408,264
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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 under the Deferred Compensation Plan for Directors.
Additionally, the Company pays each non-employee director an annual committee
retainer, for all committee service, of $10,000 for those who serve as chairman
of a committee and $6,000 for those who do not. Each non-employee director
receives a fee of $2,000 for each day on which he or she attends a Board 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 deferred stock unit account under the
Deferred Compensation Plan for Directors. Effective June 1998, the Company
matches all deferrals by non-employee directors to stock unit accounts with a
contribution of an additional 25% of such stock units.
The number of deferred stock units credited to each director's account is the
number of shares of Boeing 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 stock as reported
in THE WALL STREET JOURNAL for the New York Stock Exchange Composite
Transactions.
Deferred stock units earn the equivalent of dividends, which are credited as
additional stock units. Directors do not have the right to vote or transfer
deferred stock units. Cash-based accounts earn interest. Amounts held under the
Deferred Compensation Plan for Directors are intended to be distributed after
the director retires from the Board of Directors or otherwise terminates service
on the Board. Deferred stock units will be distributed as shares of Boeing
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 3,000 shares of stock. After each
subsequent annual meeting during the non-employee director's term, the director
receives an option to purchase an additional 2,400 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 a Boeing employee
retirement plan or (ii) the officer no longer fulfills a primary role in the
Company, as determined by the Organization and Nominating Committee. In any
case, such director will retire permanently as a director no later than the
annual
10
<PAGE>
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 current
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 six meetings in
1998.
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 plans 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, stock options and restricted stock
units awarded to certain officers of the Company and the terms and conditions on
which they are granted. It administers the incentive compensation plans and the
deferred compensation plans for employees. The Compensation Committee held six
meetings in 1998.
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>
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
six meetings in 1998.
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 41 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 seven
meetings in 1998.
BOARD AND COMMITTEE MEETINGS
During 1998, the Board of Directors held six meetings and the committees
described above held a total of 25 meetings. Each director attended 100% of the
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 Boeing directors are executive
officers. The Company does not consider the amounts involved in such
transactions to be material in relation to its business and believes that such
amounts are not material in relation to the business of such other corporations
or the interests of the directors involved.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and certain of its officers to send reports of their
ownership of Boeing stock and of changes in such ownership to the Securities and
Exchange Commission (the "SEC") and the New York Stock Exchange. SEC regulations
also require the Company to identify in this proxy statement any person subject
to this requirement who failed to file any such report on a timely basis. Based
on the Company's review of the 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 1998, except that 1,600
shares held by a trust of which Mr. Bryson is co-trustee were inadvertently
omitted from his initial Section 16 filing.
12
<PAGE>
STOCK OWNERSHIP
The table below shows ownership of Boeing stock as of February 22, 1999, by (a)
each director, (b) the Chief Executive Officer, each of the other five most
highly compensated executive officers, and two former executive officers who
served as such in 1998 (collectively, the "Named Executive Officers"), (c) all
directors and executive officers (including the two former executive officers)
as a group, and (d) the one entity known by the Company to be a beneficial owner
of more than 5% of the outstanding shares of stock (as of December 31, 1998).
The first column, Number of Shares Beneficially Owned, shows for each person the
number of shares of stock directly and indirectly owned as of February 22, 1999,
including shares owned by, or jointly with, his or her spouse and shares owned
by minor children. The second column shows the number of shares such person
could acquire on or before April 23, 1999, 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 22, 1999. The final column shows
for each person the percentage of all shares outstanding 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 stock.
All numbers in the table are rounded to the nearest whole shares. No family
relationship exists among any of the directors or executive officers of the
Company.
13
<PAGE>
STOCK OWNERSHIP TABLE
<TABLE>
<CAPTION>
NUMBER OF
SHARES
THAT MAY BE
ACQUIRED TOTAL NUMBER OF
NUMBER OF WITHIN NUMBER OF SHARES AND
SHARES 60 DAYS BY SHARE INTERESTS AS
BENEFICIALLY EXERCISING INTERESTS PERCENT OF SHARES
NAME OF BENEFICIAL OWNER OWNED OPTIONS HELD OUTSTANDING
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DIRECTORS AND NOMINEE
John H. Biggs............................... 24,610 0 2,768(1) *
John E. Bryson.............................. 3,600(2) 4,020 4,355(1) *
Kenneth M. Duberstein....................... 6,360 0 2,819(1) *
John B. Fery................................ 6,356 10,680 1,066(1) *
Paul E. Gray................................ 5,677 1,920 605(1) *
John F. McDonnell........................... 17,126,827(3) 0 160,805(1) 1.77%
William J. Perry............................ 1,000 0 2,480(1) *
Donald E. Petersen.......................... 8,400 5,280 11,697(1) *
Charles M. Pigott........................... 40,186 10,680 5,029(1) *
Lewis E. Platt.............................. 1,000 0 0 *
Rozanne L. Ridgway.......................... 1,160 9,720 8,707(1) *
George H. Weyerhaeuser...................... 18,224(4) 10,680 2,521(1) *
NAMED EXECUTIVE OFFICERS
(**also serve as directors)
Philip M. Condit**.......................... 17,383 378,141 57,575(5) *
James F. Albaugh............................ 100 17,846 8,336(5) *
Alan R. Mulally............................. 13,207 69,150 126,344(5) *
James F. Palmer............................. 57,738(6) 0 43,386(5) *
Michael M. Sears............................ 27,141(6) 0 14,438(5) *
Harry C. Stonecipher**...................... 185,378(6) 702,000 520,886(5) *
Boyd E. Givan............................... 37,271 247,848 9,080(5) *
Ronald B. Woodard........................... 41,626 208,278 17,123(5) *
All directors, nominee and executive
officers as a group....................... 17,675,726 1,920,825 1,053,851 2.12%
BENEFICIAL OWNER OF MORE THAN 5%
State Street Bank and Trust Company......... 78,031,844(7) 0 0 7.99%
</TABLE>
- ---------
(1) These numbers represent deferred stock units issued under the Deferred
Compensation Plan for Directors. All non-employee directors receive part of
their Board retainer in deferred stock units. In addition, they may choose
to defer all or part of their cash compensation in the form of stock units.
See Compensation of Directors on page 10. Mr. McDonnell also has interests
equal to 160,372 shares in the Boeing stock fund of a 401(k) retirement
plan.
(2) This figure includes 1,600 shares held in a trust for a member of Mr.
Bryson's family. Mr. Bryson serves as co-trustee but disclaims beneficial
ownership of the shares.
(3) Of these shares, 16,962,191 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 6,591,307 shares of Boeing stock,
which are not included in the total shown above.
(4) This number does not include 29,000 shares held by a Sub S Corporation of
which Mr. Weyerhaeuser is Chairman and President. Mr. Weyerhaeuser owns 10%
of the stock of the Sub S Corporation and the trusts of other family members
own another 30%. Each year, Mr. Weyerhaeuser is given a proxy to vote the
shares in the Sub S Corporation held by those trusts. He disclaims
beneficial ownership of the Boeing stock held by the Sub S Corporation,
except to the extent of his own pecuniary interest in it. This number also
does not include 700
14
<PAGE>
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.
(5) Share interests granted to executive officers are discussed in footnote (2)
to the Summary Compensation Table and in the Compensation Committee Report
on Executive Compensation.
(6) The numbers shown for Messrs. Palmer, Sears, and Stonecipher include shares
of restricted stock issued pursuant to the McDonnell Douglas Corporation
1994 Performance and Equity Incentive Plan, prior to the merger of McDonnell
Douglas with Boeing in 1997 (the "Merger"). Those shares were converted into
15,600, 15,600 and 78,000 shares, respectively, as a result of the Merger.
The holders receive dividends and have the right to vote the shares, which
will vest and become unrestricted in increments from 1999 through 2002.
(7) The following information is based on a Schedule 13G filed on February 11,
1999, by State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, acting in various fiduciary capacities ("State
Street"). State Street reports that at December 31, 1998, it had sole power
to vote or direct the vote of 12,687,737 shares and sole power to dispose or
direct the disposition of 13,650,332 of the shares shown above. It also
reports that it shared voting power over 64,296,713 shares and shared
dispositive power over 64,381,512 shares. State Street is Trustee for the
Company's Voluntary Investment Plan, a 401(k) retirement savings plan
("VIP"). It has informed the Company that the shared voting and dispositive
amounts reported include 63,871,023 shares held in the VIP trust at December
31, 1998.
The Trustee has dispositive power for the shares in the VIP trust to the
extent necessary to follow valid instructions from participants regarding
withdrawals, transfers or loans from such plans. Participants in the VIP may
direct the Trustee how to vote their proportionate interest in those shares.
Unallocated shares and allocated shares for which written instructions are
not timely received by the Trustee are voted by the Trustee in the same
manner and proportion as the allocated shares in the VIP stock fund for
which voting instructions are timely received.
15
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the annual and long-term compensation of the
Named Executive Officers for fiscal years 1998, 1997, and 1996. 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 26.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM COMPENSATION
COMPENSATION AWARDS
OTHER SECURITIES
ANNUAL UNDER- PAYOUTS ALL OTHER
NAME AND COMPEN- RESTRICTED LYING LTIP COMPEN-
PRINCIPAL SALARY BONUS SATION STOCK OPTIONS PAYOUTS SATION
POSITION IN 1998 YEAR ($) ($)(1) ($) $(2) (#)(3) ($) ($)(4)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Philip M. Condit 1998 $ 998,896 $ 0 $ 0 $ 192,156 0 $ 0 $ 81,755
Chairman 1997 884,675 446,000 0 204,378 120,000 0 69,520
and Chief Executive Officer 1996 694,829 639,000 0 258,701 150,000 0 57,958
James F. Albaugh(5) 1998 285,782 213,800 0 184,377 0 0 17,941
Senior V.P. and President,
Space and Communications
Alan R. Mulally(5) 1998 536,601 242,000 78,404(6) 5,200,839 200,000 0 35,666
Senior V.P. and President, 1997 341,668 175,700 0 69,028 20,600 0 21,900
Commercial Airplanes
James F. Palmer(5)(7) 1998 378,846 146,200 121,693(8) 165,573 0 0 24,600
Senior V.P. and President, 1997 345,192 258,091 476,208 1,620,281 0 2,044,625 25,584
Shared Services Group
Michael M. Sears(5)(7) 1998 429,069 235,100 12,178 235,109 0 0 28,165
Senior V.P. and President, 1997 395,246 261,900 461,994 0 0 1,734,838 29,445
Military Aircraft and
Missiles
Harry C. Stonecipher(5)(7) 1998 899,007 0 139,425(9) 246,567 0 0 57,570
President and Chief 1997 895,345 489,300 2,333,896(9) 4,105,998 0 8,051,518 268,624
Operating Officer
Boyd E. Givan(5) 1998 392,261 137,700 0 88,399 0 0 314,518
Senior V. P. and Chief 1997 452,376 129,600 0 70,530 40,000 0 38,568
Financial Officer 1996 422,606 262,800 0 111,212 54,000 0 38,407
Ronald B. Woodard(5) 1998 460,987 187,200 72,223 96,053 0 0 949,877
Senior V.P. and President, 1997 490,269 123,500 0 76,642 42,000 0 36,420
Commercial Airplanes 1996 446,744 279,900 0 119,042 80,000 0 34,224
</TABLE>
(1) Annual incentive compensation (consisting of cash payments reported in the
Bonus column and Boeing Stock Units ("BSUs") reported in the Restricted
Stock column) is based on performance in the year shown, but is determined
and paid the following year.
(2) The amount reported in the Restricted Stock column for each officer is the
value of (a) BSUs awarded in February of the following year and (b)
Restricted Stock Units ("RSUs"), Career Shares and matching deferred stock
units awarded during the year. The number of BSUs awarded was the number of
shares of Boeing stock that could be purchased with 40% of the officer's
target incentive award (30% for 1997 and 1996), adjusted for Company,
operating group, and individual performance, using as the purchase price the
FAIR MARKET VALUE (as defined on page 10) of the 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 the stock on the
date of the award.
16
<PAGE>
BSUs and RSUs are stock units that earn the equivalent of dividends, which
are accrued in the form of additional BSUs or RSUs each quarter. BSUs vest
and are payable three years after the award. The officer may choose to
receive for each BSU one share of stock or cash equal to the Fair Market
Value of one share at the time of vesting. RSUs vest on the schedule
determined by the Compensation Committee and are paid out in stock. Career
Shares are stock units that are paid out in stock, contingent on the
officer's staying with the Company until retirement. Career Shares earn
dividend equivalents, which accrue in the form of additional Career Shares.
Matching deferred stock units are paid under the Company's Deferred
Compensation Plan for Employees. For each deferral into a stock unit account
of salary (up to 50%), annual cash incentive awards, vested BSUs and earned
Performance Shares, the Company contributes an additional 25% of such stock
units. For a discussion of these awards, see the Compensation Committee
Report on Executive Compensation, which begins on page 26.
For Messrs. Palmer, Sears and Stonecipher, the amount reported on the line
for 1997 also includes the value 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. See
footnote (6) to the Stock Ownership Table.
The following table shows the aggregate number and value of BSUs granted to
each of the Named Executive Officers in 1999 for service in 1998, and the
number and value of RSUs, Career Shares, and matching deferred stock units
granted to each of the Named Executive Officers in 1998. The values are
based on the closing market price of Boeing stock on the dates of grant.
RESTRICTED STOCK UNITS GRANTED FOR 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
NUMBER OF UNITS VALUE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MATCHING MATCHING
DEFERRED DEFERRED
CAREER STOCK CAREER STOCK
BSUS RSUS SHARES UNITS BSUS RSUS SHARES UNITS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Philip M. Condit........... 0 0 3,791 0 $ 0 $ 0 $ 192,156 $ 0
James F. Albaugh........... 3,968 0 758 56 143,833 0 38,421 2,123
Alan R. Mulally............ 4,494 110,957 1,706 0 162,910 4,951,456 86,473 0
James F. Palmer............ 2,712 0 1,327 0 98,311 0 67,262 0
Michael M. Sears........... 4,366 0 1,516 0 158,266 0 76,842 0
Harry C. Stonecipher....... 0 0 3,412 1,916 0 0 172,946 73,621
Boyd E. Givan.............. 0 0 1,744 0 0 0 88,399 0
Ronald B. Woodard.......... 0 0 1,895 0 0 0 96,053 0
</TABLE>
17
<PAGE>
The following table shows the aggregate number and value of BSUs, RSUs,
Career Shares, matching deferred stock units, LTIP Shares granted under the
Company's previous long-term incentive plan, and other shares of restricted
stock or restricted stock units held by each of the Named Executive Officers
at year end, plus the BSUs awarded in 1999. The value of all such shares and
units is based on the closing price of Boeing stock on December 31, 1998,
which was $32.625 per share, except for the BSUs granted in 1999, whose
value is based on the closing price of the stock on February 22, 1999, which
was $36.25.
ALL RESTRICTED STOCK AND UNITS
<TABLE>
<CAPTION>
NUMBER VALUE
- ------------------------------------------------------------------------------
<S> <C> <C>
Philip M. Condit........................................ 41,419 $1,351,302
James F. Albaugh........................................ 5,338 188,539
Alan R. Mulally......................................... 123,571 4,047,789
James F. Palmer......................................... 51,600 1,693,278
Michael M. Sears........................................ 21,499 717,244
Harry C. Stonecipher.................................... 573,296 18,703,770
Boyd E. Givan........................................... 9,080 296,235
Ronald B. Woodard....................................... 14,092 459,752
</TABLE>
(3) The numbers reported in the Securities Underlying Options column for each
officer are the numbers of shares for which options were granted in 1998,
1997, and 1996, as adjusted for the 2-for-1 stock split that occurred on
June 6, 1997.
(4) Amounts reported in the All Other Compensation column include the sums of
the values of (a) dividend equivalents and interest on dividend equivalents
on LTIP Shares granted under the Company's previous long-term incentive plan
and not yet converted into stock, (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 1998 are as set forth below. The amounts
shown for Mr. Givan and Mr. Woodard include $279,000 and $915,121,
respectively, paid pursuant to their agreements with the Company. See
Employment Contracts and Termination of Employment Arrangements, beginning
on page 23.
<TABLE>
<CAPTION>
(A) (B) (C)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Philip M. Condit.................................... $ 17,883 $ 63,033 $ 840
James F. Albaugh.................................... 0 17,101 840
Alan R. Mulally..................................... 1,439 33,387 840
James F. Palmer..................................... 0 22,643 1,968
Michael M. Sears.................................... 0 25,984 2,181
Harry C. Stonecipher................................ 0 56,730 840
Boyd E. Givan....................................... 7,286 21,672 560
Ronald B. Woodard................................... 4,707 29,209 840
</TABLE>
(5) Mr. Albaugh became Senior Vice President of the Company on September 1,
1998. Mr. Mulally became Senior Vice President of the Company in February
1997 and succeeded Mr. Woodard as President of the Commercial Airplanes
Group on September 1, 1998. Mr. Palmer became Senior Vice President in
August 1997. Mr. Sears became Senior Vice President on September 1, 1998.
Mr. Stonecipher became President and Chief Operating Officer in August 1997.
Mr. Givan retired effective September 1, 1998.
(6) Of this amount, $52,709 represents perquisites, including $36,900 for
personal use of Company aircraft.
18
<PAGE>
(7) Messrs. Palmer, Sears and Stonecipher were executives of McDonnell Douglas
Corporation before it became a part of Boeing on August 1, 1997. The 1997
compensation shown for them includes the following amounts paid by McDonnell
Douglas before the Merger or in connection with the Merger: Mr. Palmer --
Salary, $210,577; Bonus, $18,491; Other Annual Compensation, $459,408; and
LTIP Payouts, $2,044,625; Mr. Sears -- Salary, $241,400; Other Annual
Compensation, $459,408; and LTIP Payouts, $1,734,838; Mr. Stonecipher --
Salary, $585,000; Other Annual Compensation, $2,328,975; Restricted Stock,
$3,945,000; LTIP Payout, $8,051,518; and All Other Compensation, $35,318.
(8) Of this amount, $71,810 represents perquisites, including $36,783 for
temporary living expenses and $31,432 for personal travel.
(9) Of the amount shown for 1998, $139,058 represents perquisites, including
$65,278 for club memberships and $52,587 for personal use of Company
aircraft. Of the amount shown for 1997, $50,086 represents perquisites,
including $20,232 for personal use of Company aircraft.
OPTION GRANTS IN 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
INDIVIDUAL GRANTS
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
<CAPTION>
NUMBER
OF
SECURITIES PERCENT
UNDER- OF TOTAL POTENTIAL REALIZABLE VALUE AT
LYING OPTIONS ASSUMED ANNUAL RATES OF STOCK PRICE
OPTIONS GRANTED TO EXERCISE EXPIRA- APPRECIATION FOR OPTION TERM(2)
GRANTED EMPLOYEES IN PRICE TION -----------------------------------------
NAME (#)(1) FISCAL YEAR ($/SH) DATE 0% ($) 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Philip M. Condit.............. 0 -- -- -- -- -- --
James F. Albaugh.............. 0 -- -- -- -- -- --
Alan R. Mulally............... 200,000 5.3 45.0625 6/29/08 0 $5,667,913 $14,363,603
James F. Palmer............... 0 -- -- -- -- -- --
Michael M. Sears.............. 0 -- -- -- -- -- --
Harry C. Stonecipher.......... 0 -- -- -- -- -- --
Boyd E. Givan................. 0 -- -- -- -- -- --
Ronald B. Woodard............. 0 -- -- -- -- -- --
Share price....................................................................... 73.40 116.88
All optionees (more than 23,300 employees and retirees)........................... 0 107 million 271 million
28,623 72,536
All shareholders(3)............................................................... 0 million million
Gain of all optionees as % of gain of all shareholders............................ 0 .37% .37%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The per share exercise price is the Fair Market Value of Boeing stock (as
defined on page 10) on the date of grant, and the term of these options 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
grant. As to each grant, 40% becomes exercisable after one year from the
date of grant, an additional 30% after three years, and the remaining 30%
after five years. The exercise price may be paid by cash or by delivery of
shares of Boeing stock already owned. The schedule on which options become
exercisable is subject to acceleration for retirement, death, disability or
layoff after vesting.
(2) Potential realizable values are based on assumed compound annual
appreciation rates specified by the SEC. These increases in value are based
on speculative assumptions and are not intended to forecast possible future
appreciation, if any, of the Company's stock price.
(3) Each amount represents the increase in total market value of outstanding
Boeing stock consistent with the stock price appreciation assumptions above.
On June 29, 1998, the date on which these options were granted, there were
1,009,993,596 shares of Boeing stock outstanding.
19
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN 1998
AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS/ IN-THE-MONEY OPTIONS/
ACQUIRED SARS AT FISCAL YEAR-END SARS AT FISCAL
ON VALUE (#) YEAR-END ($)(2)
EXERCISE REALIZED ------------------------ ----------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Philip M. Condit................. 85,000 $1,834,998 320,391 209,480 $2,241,608 $ 391,444
James F. Albaugh................. 0 0 5,416 14,586 0 0
Alan R. Mulally.................. 4,500 157,078 54,524 246,584 316,302 113,759
James F. Palmer.................. 0 0 0 0 0 0
Michael M. Sears................. 0 0 0 0 0 0
Harry C. Stonecipher............. 0 0 702,000 468,000 12,748,531 8,499,020
Boyd E. Givan.................... 101,711 2,082,149 247,848 0 1,500,460 0
Ronald B. Woodard................ 37,424 652,598 106,428 101,850 538,418 258,563
- ---------------------------------------------------------------------------------------------------------
</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 stock on the last
trading day of the year, December 31, 1998, which was $32.375. There is no
guarantee that, if and when these options are exercised, they will have this
value.
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1998
The table below sets forth information with respect to Performance Shares
granted to the Named Executive Officers in 1998.
<TABLE>
<CAPTION>
CONTINGENT FUTURE PAYOUTS
NUMBER PERFORMANCE AT SPECIFIED STOCK PRICES
OF SHARES, OR OTHER ----------------------------------------------------
UNITS OR PERIOD LESS THAN
OTHER UNTIL $81.63 $81.63 $97.59 $101.95
RIGHTS MATURATION THRESHOLD THRESHOLD TARGET MAXIMUM
NAME (#) OR PAYOUT (#) (#) (#) (#)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Philip M. Condit........................... 104,246 1998-2003 0 26,062 104,246 130,308
James F. Albaugh........................... 9,477 1998-2003 0 2,369 9,477 11,846
Alan R. Mulally............................ 38,381 1998-2003 0 9,595 38,381 47,976
James F. Palmer............................ 29,852 1998-2003 0 7,463 29,852 37,315
Michael M. Sears........................... 22,745 1998-2003 0 5,686 22,745 28,431
Harry C. Stonecipher....................... 85,292 1998-2003 0 21,323 85,292 106,615
Boyd E. Givan.............................. 39,234 1998-2003 0 9,809 39,234 49,043
Ronald B. Woodard.......................... 42,646 --(1) 0 0 0 0
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Upon Mr. Woodard's termination of employment, on February 1, 1999, his 1998
Performance Shares were forfeited in accordance with their terms.
The Performance Share program is designed to focus executives on stock price
appreciation by requiring a minimum compound average annual increase in share
price of 10% within a five-year period before any awards can be paid. The 1998
Performance Share awards are contingent on the Company's achieving threshold,
target, and superior stock price appreciation of $81.63, $97.59, and $101.95,
respectively, within five years from the date of grant. The threshold
performance hurdle equates to a 60% increase in stock price and would add
approximately $30 billion to the Company's market value.
20
<PAGE>
Performance shares vest at such time as the average daily closing price of a
share of Boeing stock on the New York Stock Exchange over a 20-consecutive-day
period achieves a specified hurdle. The Performance Shares will be paid in
Boeing stock on the date the specified performance hurdle is met. The
Performance Shares earn dividend equivalents, which will be accrued in the form
of additional Performance Shares and paid in Boeing 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 threshold price is
achieved, 25% of the Performance Shares will vest. If stock price milestones
between threshold 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 maximum price is achieved. If the Company's stock price does not
achieve the specified performance hurdles, the Compensation Committee of the
Board of Directors 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.
PENSION PLANS
The following table shows the estimated annual pension benefits payable to an
executive officer, assuming retirement on January 1, 1999, at age 65 after
selected periods of service. Total pension benefits for executive officers are
determined under the Company's Supplemental Executive Retirement Plan, which is
an unfunded, unqualified, defined benefit plan. A portion of that benefit will
be paid under the Company's Pension Value Plan, which is a qualified defined
benefit plan whose benefits are limited by applicable Federal tax laws and
regulations. The remainder of the benefit will be paid under the Supplemental
Executive Retirement Plan. The benefits shown in the table are based on
straight-life annuity amounts. The plans also permit selection of a joint and
survivor annuity with reductions in the benefits shown. The benefits shown in
the table are not subject to any deduction for Social Security benefits.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
<CAPTION>
YEARS OF CREDITED SERVICE
----------------------------------------------------------------
REMUNERATION 15 20 25 30 35 40
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
3$00,000... $ 72,000 $ 96,000 $ 120,000 $ 144,000 $ 168,000 $ 192,000
600,000... 144,000 192,000 240,000 288,000 336,000 384,000
900,000... 216,000 288,000 360,000 432,000 504,000 576,000
1,200,000.. 288,000 384,000 480,000 576,000 672,000 768,000
1,500,000.. 360,000 480,000 600,000 720,000 840,000 960,000
1,800,000.. 432,000 576,000 720,000 864,000 1,008,000 1,152,000
- -----------------------------------------------------------------------------
</TABLE>
Credited service begins on the commencement of employment. The current Named
Executive Officers have the following years of credited service:
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------
Philip M. Condit............................................................ 33.5
James F. Albaugh............................................................ 13.5
Alan R. Mulally............................................................. 29.5
James F. Palmer............................................................. 7.5
Michael M. Sears............................................................ 29.0
Harry C. Stonecipher........................................................ 8.5
- ---------------------------------------------------------------------------------------
</TABLE>
Under the Supplemental Executive Retirement Plan, pension benefits are based on
years of credited services times 1.6% of average annual salary plus average
annual incentive compensation for the last
21
<PAGE>
five years of employment. Annual incentive compensation includes the amounts
shown in the Bonus column of the Summary Compensation Table on page 16 and the
values of BSUs, which are shown in footnote (2) to the Summary Compensation
Table. Benefits calculated under the Supplemental Executive Retirement Plan are
limited to 100% of a participant's annual salary at termination and are reduced
by the amount of benefits received under the Pension Value Plan.(1) The total
annual averages for the current Named Executive Officers are now as follows:
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------
Philip M. Condit....................................................... $1,301,583
James F. Albaugh....................................................... 331,342
Alan R. Mulally........................................................ 513,486
James F. Palmer........................................................ 518,235
Michael M. Sears....................................................... 539,192
Harry C. Stonecipher................................................... 1,387,008
- ----------------------------------------------------------------------------------
</TABLE>
Mr. Albaugh is currently covered by the pension plans of Boeing North American.
These plans will be converted to the Boeing plans as of July 1, 1999.
Pursuant to Mr. Stonecipher's Employment Agreement with the Company (see
Employment Contracts and Termination of Employment Arrangements, below), Mr.
Stonecipher will receive credit for twice as many years of service as he
actually works for the Company and McDonnell Douglas, which is reflected in the
credited service shown above. 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. Had Mr. Stonecipher attained age 65 and retired on
January 1, 1999, the supplemental payment under the agreement would have been
approximately $330,000 per year.
Mr. Givan retired in 1998 under the Company's prior retirement plans. His annual
retirement benefit, which is being paid as a joint and surviving spouse annuity,
is $327,163. Mr. Woodard retired on February 1, 1999, under the Company's
current plan, and his annual retirement benefit, which also is being paid as a
joint and surviving spouse annuity, is $278,872.
- ------------------------
(1) The Pension Value Plan became effective as of January 1, 1999. Under the
Pension Value Plan, benefits are earned after one year of service, which is
retroactively credited upon completion. Benefits generally vest after five
years of service. Each year, a bookkeeping account in a participant's name
is credited with an amount equal to a percentage of the participant's base
pay depending on the participant's age, ranging from 3% for younger than age
30 to 11% for age 50 and older. Each participant's account also receives
interest credits based on the yield of the 30-year U.S. Treasury bond in
effect during November of the previous year, except that the rate may be no
lower than 5.25% or higher than 10%. When a participant retires, the amount
credited to the participant's account is converted into an annuity.
In addition, certain benefits earned by participants under prior retirement
plans of Boeing and McDonnell Douglas calculated as of December 31, 1998
were transferred to the Pension Value Plan as of January 1, 1999. Certain
benefits earned by participants under prior retirement plans of Boeing North
American will be transferred as of July 1, 1999. These benefits will
increase each year at the same rate the participant's salary increases. At
retirement, participants will receive these benefits in addition to the
Pension Value Plan annuity described above.
22
<PAGE>
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, 2000. 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 minimum
base salary of $900,000 per year, reviewed annually by the Compensation
Committee of the Board of Directors. He received incentive compensation for 1997
of $635,000, paid 70% in cash and 30% in BSUs. Beginning with 1998, Mr.
Stonecipher's incentive compensation is 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 stock in
accordance with the terms of the Agreement and Plan of Merger between the
Company and McDonnell Douglas Corporation: 477,415 Boeing stock equivalents
("BSEs"), 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
Boeing 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 BSEs do not have voting rights, and dividend
equivalent payments on the BSEs are reinvested into additional BSEs. All
converted restricted stock and stock options will be issued under and subject to
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 moving to Seattle, and
participation in the Company's other employee benefit plans available to senior
Boeing executives. Under the Employment Agreement, the Company made a "gross-up
payment" of $2,204,929 to Mr. Stonecipher for excise tax imposed on
change-in-control payments under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code").
23
<PAGE>
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 BSEs 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,
BSEs or stock options under the Employment Agreement remain unvested or
unexercised. The vesting of restricted stock and BSEs 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.
TERMINATION BENEFITS AGREEMENT WITH MR. SEARS. Mr. Sears entered into an
agreement (the "Termination Benefits Agreement") with McDonnell Douglas in 1996,
which was assumed by Boeing at the time of the Merger. The Termination Benefits
Agreement provides that in the event of termination of his employment for any
reason other than death, disability, retirement or for cause within three years
after the date of the Merger, or in the event he terminates employment for "good
reason" (as defined below), he will continue to receive for the remainder of a
three-year period beginning on August 1, 1997 (the "Continuation Period") the
following: (1) base salary at a rate equal to the greater of his rate at
termination or immediately prior to the Merger, (2) annual incentive
compensation calculated based on his annualized target incentive compensation
multiplied by the average percentage of his earned incentive award to his target
incentive award for the three years prior to termination or the Merger, and (3)
welfare benefits that he would have received had his employment not been
terminated. "Good reason" is defined to include (a) the failure of any successor
of McDonnell Douglas to assume the obligation to perform under the agreement,
(b) an ongoing breach of the agreement by McDonnell Douglas or its successor,
(c) a reduction in his base salary, bonus or certain benefits within three years
after the Merger, or (d) certain changes in title, duties or position and/or
geographic relocation within the three-year period. The Termination Benefits
Agreement also provides for a cash lump sum payment upon termination of
employment. It provides for payment of prorated annual incentive compensation
for the year of termination, vesting of all
24
<PAGE>
retirement benefits and the continued accrual of benefits for the Continuation
Period (at the rate of salary and annual incentive compensation paid during such
period) under the McDonnell Douglas defined benefit pension plans and the
entitlement to matching contributions that he would have received under the
McDonnell Douglas defined contribution pension plans during the Continuation
Period. All payments and benefits will be discontinued upon Mr. Sears' normal
retirement date or if he provides service to a competitor, supplier or customer
or discloses any confidential information. If any payments or benefits
(including payments and benefits under the Termination Benefits Agreement) are
determined to be "excess parachute payments" under Section 4999 of the Code, he
would be entitled to receive an additional payment (net of income and excise
taxes) to compensate him for excise tax imposed on such payments.
SETTLEMENT AND RELEASE AGREEMENT WITH MR. WOODARD. The Company and Mr. Woodard
have entered into a Settlement and Release Agreement (the "Agreement") in
connection with his termination of employment effective February 1, 1999. The
following is a description of the terms of the Agreement. Mr. Woodard was paid a
lump-sum settlement payment of $900,000, and became eligible to receive a
prorated annual incentive award for his services through November 1, 1998, based
on overall Company performance at an award percentage of 80% of his salary
through that date. This amount is shown in the Bonus column of the Summary
Compensation Table on page 16. Mr. Woodard's unvested Career Share award was
accelerated to become fully vested. His unvested Performance Share award was
forfeited in accordance with its terms. The Company also paid Mr. Woodard for a
tax liability related to his exercise of stock options and an amount equal to
the 12-month cost of medical and dental insurance, and gave him title to his
Company-provided automobile (in each case grossed up for taxes). The Company
will continue to match contributions pursuant to Mr. Woodard's pre-termination
pledges to various charitable institutions. Mr. Woodard agrees to provide
consulting services to the Company until the earlier of November 16, 2000, and
the date he commences other full-time employment. The Company will pay Mr.
Woodard a retainer of $19,000 per month for such consulting services.
CONSULTING AGREEMENT WITH MR. GIVAN. The Company and Mr. Givan have entered
into a consultant services agreement (the "Consulting Agreement") in connection
with his retirement effective September 1, 1998. The following is a description
of the terms of the Consulting Agreement. Mr. Givan was paid a lump-sum payment
of $250,000 and became eligible to receive an annual incentive award for his
services through August 31, 1998, if other current executives received such
awards. This amount is shown in the Bonus column of the Summary Compensation
Table on page 16. Mr. Givan's Career Share award was accelerated to become fully
vested as of September 1, 1998, and the vesting of his Performance Share award
was accelerated so that the award will remain outstanding in accordance with its
terms. The Company also paid Mr. Givan an amount equal to the value of his
Company-provided automobile (grossed up for taxes). Mr. Givan agrees to provide
consulting services to senior executives of the Company, and to continue to
provide advice and support on behalf of the Company, as appropriate, to certain
governmental, industry and educational groups.
25
<PAGE>
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 currently composed of five non-employee members of the Board,
Messrs. Petersen, Biggs, Perry, Pigott and Weyerhaeuser.
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 the Named Executive Officers who
appear in the Summary Compensation Table on page 16. The Committee reviews
salary recommendations for executive 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 establishes a target award for the
annual incentive, 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 the aerospace and
defense companies in the S&P Aerospace Index used in the performance comparison
graph on page 29. Boeing executive officer salary levels for 1998 were targeted
for the average 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 comparable
positions outside the Company and, with respect to Named Executive Officers, by
the terms of any employment agreement. Survey data indicated that the 1998 base
salaries of the Named Executive Officers, including Mr. Condit, are on average,
at or slightly below the average 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
(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 80% to 100% 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.
For the Named Executive Officers who received an annual incentive award for
1998, the awards were paid out approximately 60% in cash and 40% in Boeing Stock
Units, which are discussed below.
26
<PAGE>
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
produced a percentage factor that increased or decreased the incentive award
relative to the target for each executive officer.
In 1998, Company and operating group performance was evaluated based on the
Company's overall profitability, as measured by earnings from operations, return
on net assets, product development cost performance, and strategic factors as
measured by customer and employee satisfaction, safety, diversity, and achieving
merger synergies. Company performance also included an assessment of long-term
shareholder value measured by performance comparisons with the S&P 500 Stock
Index and a select group of premier companies. The Committee's final evaluation
of Company performance included subjective and internal analysis of the reasons
for changes in Company shareholder value.
With regard to the Company's long-term shareholder value measurements, for the
five-year period December 31, 1993 through December 31, 1998, as well as the
ten-year period from December 31, 1988 to December 31, 1998, the Company's total
return to shareholders was well below the S&P 500 and did not rank among the top
50% of the selected premier companies.
For 1998, the Committee's assessment was that the Company's financial
performance was well below expected levels. Although the Information, Space and
Defense Systems Group (consisting of the Space and Communications Group and the
Military Aircraft and Missile Systems Group) exceeded most financial and
operational targets, and the Company made progress on most of the strategic
factors, including major cost reductions through merger synergies, the results
were offset by poor financial performance in the Commercial Airplanes Group.
Based on the forgoing assessment, 1998 annual incentive awards were paid to four
of the six current Named Executive Officers at an average of 97% of their
assigned percentages, primarily based on their contributions to the above-target
performance of the Space and Communications Group, the Military Aircraft and
Missile Systems Group and the Shared Services Group. Because of the Company's
poor performance overall, management recommended to the Compensation Committee
that the Chief Executive Officer and the President and Chief Operating Officer
receive no annual incentive awards for 1998, and the Committee accepted the
recommendation.
BOEING STOCK UNITS. Boeing Stock Units ("BSUs") are restricted Boeing 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 40% of that officer's target incentive award,
adjusted for Company performance, based on the Fair Market Value of Boeing 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 stock or
cash. The values of the BSUs at the time of grant to the Named Executive
Officers, other than the Chief Executive Officer and the President and Chief
Operating Officer, who did not receive such awards, are shown in footnote (2) to
the Summary Compensation Table.
LONG-TERM INCENTIVES
In 1998, the Committee implemented a new performance-based long-term incentive
compensation program designed to tie executive rewards more directly to the
increase of shareholder value through stock price growth. Under this program,
executives are awarded rights to receive Boeing stock, or Performance Shares,
that are contingent on the Company's attaining shareholder return goals within a
specified time period. An increasing portion of the Performance Shares awarded
will be convertible to shares of Boeing stock as the stock price reaches and
maintains certain threshold levels. These
27
<PAGE>
threshold stock price levels represent predetermined compound five-year growth
rates relative to the stock price at the time the Performance Shares are
granted. Any Performance Shares not converted to Boeing stock after five years
will expire.
The terms of the 1998 Performance Shares granted to the Named Executive
Officers, including Mr. Condit, are shown in the Long-Term Incentive Plans --
Awards in 1998 Table on page 20.
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 that are paid out in Boeing stock and contingent on the participant
staying with the Company until retirement. Career Shares earn dividend
equivalents, which accrue in the form of additional Career Shares and which will
be paid in Boeing stock when and to the extent the Career Shares are paid. To
recognize the different levels of responsibility within the Company, the number
of Career Shares an executive is granted is based on the executive's pay grade
and salary and the price of Boeing stock. The number of Career Shares granted is
subject to discretionary adjustments based on individual performance or for
purposes of retention. The values of the 1998 Career Shares at the time of grant
to the Named Executive Officers, including the Chief Executive Officer, are
shown in footnote (2) to the Summary Compensation Table.
The Committee also considers the award of stock options and restricted stock in
specific cases based on individual performance or for purposes of retaining or
attracting key executives. The number of stock options and the value of
restricted stock units granted to one of the Named Executive Officers are shown
in the Summary Compensation Table and its footnote (2).
The Committee has established stock ownership guidelines for executives that
range from one to six times annual base salary, and from four to six times for
the Named Executive Officers. As an incentive to encourage and facilitate stock
ownership, the Company matches any deferral of salary (up to 50%), annual cash
incentive awards, vested BSUs or earned Performance Shares 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 values of
matching deferred stock units at the time of grant to the Named Executive
Officers, including the Chief Executive Officer, are shown in footnote (2) to
the Summary Compensation Table.
Stock ownership is a fundamental principle underlying the philosophy and
structure of the Company'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 executive compensation is designed to
focus employee attention on, and reward, continuously growing shareholder value.
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. The BSUs, but not the Performance Shares described above, are designed
to qualify as performance-based compensation that is fully deductible by the
Company for income tax purposes.
Donald E. Petersen, Chairman
John H. Biggs
William J. Perry
Charles M. Pigott
George H. Weyerhaeuser
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PERFORMANCE GRAPH
The following graph shows changes in the value of $100 invested at year-end 1993
in (a) Boeing 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS FIVE-YEAR CUMULATIVE TOTAL RETURNS
<S> <C> <C> <C>
BOEING S&P 500 S&P AEROSPACE
1993 100 100 100
1994 111 101 108
1995 188 139 179
1996 259 171 230
1997 240 228 239
1998 163 294 221
Boeing
S&P 500
S&P Aerospace
</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 graph is not necessarily indicative of future price
performance.
29
<PAGE>
PROPOSAL 2
SHAREHOLDER PROPOSAL
ON CRITERIA FOR MILITARY CONTRACTS
Several 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 Boeing 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 2000 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 stability;
- - 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.
30
<PAGE>
BOARD OF DIRECTORS' RESPONSE
All companies that sell major military products must comply with the
requirements of both the executive and legislative branches of the U.S.
Government. Boeing policies require compliance with all U.S. laws and
regulations that control the export of military products and the sale of
military products overseas. Many of the Company's overseas sales of military
products are made under 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 U.S. Government continually evaluates the conduct and integrity of
foreign nations to identify countries to which the sale of particular military
equipment is not in the United States' interest and prohibits military sales to
those countries.
The Company also has a strong commitment to integrity and has an active program
to promote ethical business standards. Our Ethics and Business Conduct Office
has an experienced staff, and ethics advisors are employed throughout the
Company. The Audit Committee of the Board of Directors oversees the program. The
Company's ethical business policy, procedures and program apply to all employees
engaged in every business activity, including lobbying and marketing activities.
Accordingly, we do not believe that the study and report requested by the
proponents would provide a meaningful addition to our ongoing efforts to promote
the highest standards of ethical business conduct.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 2.
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<PAGE>
PROPOSAL 3
SHAREHOLDER PROPOSAL
ON DOING BUSINESS IN AND WITH CHINA
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 Boeing 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 People's
Republic of China in a way that "delinks" human rights from MFN status;
-- Arguing against such linkage, President Clinton stated (1994)
"constructive engagement" in China through business contacts would
best ensure human rights;
-- In 1997 President Clinton admitted "constructive engagement" had not
produced positive results regarding human rights in China. His
administration's human rights report noted that China's "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;"
-- Only weeks after signing a global covenant calling for freedom of
speech and assembly in October, 1998 China took further steps to
suppress political organizations and dissent;
-- 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;"
-- Congressional resolutions introduced into both houses call 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, 2000,
basic human rights criteria for its business operations in and/or with
the People's Republic of China. Requesting shareholders shall be
notified of these principles and how Boeing intends to implement them by
July 1, 2000.
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;
32
<PAGE>
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 company or 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 company 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 committed to remaining one of the premier industrial
companies in the world. We will continue our history of operating with integrity
and the highest ethical business principles. We are committed to promoting the
rule of law and showing respect for employees and their rights of association
and assembly wherever we operate in the world.
The Board of Directors is not insensitive to individual rights in China. We
believe, however, that both the U.S. Government and U.S. businesses should
continue to consider the integral role of economic growth in promoting social
progress, political stability and the welfare of the Chinese people. We believe
that economic reforms and the involvement of governments and multinational
companies in China have dramatically improved the lives of hundreds of millions
of Chinese citizens.
We have found 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 would give the Chinese
people nothing more than basic 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.
In a July 9, 1998, hearing of the Senate Finance Committee regarding trade
relations with China, Secretary of State Madeleine Albright articulated U.S.
policy regarding business with China: "There is no greater opportunity or
challenge for U.S. foreign policy than to encourage China's integration as a
fully responsible member of the international system, and maintaining normal
trade relations reflects our commitment to this goal." The Board of Directors
fully supports this policy and believes that political and economic engagement
in China is an essential part of promoting enhanced individual freedom in China.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 3.
33
<PAGE>
PROPOSAL 4
SHAREHOLDER PROPOSAL
ON CUMULATIVE VOTING
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 Boeing 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
Strong support along the lines we suggest was shown at the last annual meeting
when 27% of the votes cast for or against this proposal were cast in favor of
it.
Cumulative voting enables a significant group of stockholders, though a
minority, to elect a candidate of their choice.
Cumulative voting will contribute to a more diverse board of directors and
encourage the election of independent directors with expertise in Boeing's
highly-technical business of jetliners, defense and space-science. Boeing's
independent directors have an almost total lack of experience in Boeing's major
technical fields and it shows in Boeing's sudden and drastic decline.
With cumulative voting, all of a shareholder's votes for directors (12 votes per
Boeing share) can be voted for the most qualified candidate(s).
Cumulative voting was required by Boeing's corporate by-laws as recently as
1986.
These news reports highlight Boeing's drastic reversal and the need for
independent directors with business experience relevant to Boeing's highly
technical product lines:
Airbus tops Boeing with orders for 287 jets in the first half of 1998.
AIR TRANSPORT WORLD September 1998
The 1998 AVIATION WEEK index of competitiveness rated Boeing's productivity the
worst of all large companies.
AVIATION WEEK August 10, 1998
Boeing investigates its Delta 3 failure with $1.5 billion in orders delayed.
AVIATION WEEK September 7, 1998
Boeing faces criminal investigation in delayed Sea Launch program. Meanwhile
Boeing pays $10 million fine, the largest ever for Arms Export Control Act
violation.
LOS ANGELES TIMES October 2, 1998
34
<PAGE>
US Airways choice of Airbus another blow to Boeing. Boeing was struggling with
"not being able to manufacture aircraft to the right schedule, not enough
personnel, too much downsizing. That's all coming home to roost," said Jane's
analyst Paul Beaver.
ASSOCIATED PRESS July 4, 1998
After months of downplaying the impact of Asia's financial crises, Boeing said
it would be forced to cut 747 production. The 747 brings Boeing 50% of its
airliner profits according to some accounts.
NEW YORK TIMES May 31, 1998
Union Pacific is an example of a transportation company that abolished
cumulative voting and the annual election of directors. Now Union Pacific is in
deep trouble and this avoidable disaster impacts the national economy.
California law still requires that unless stockholders have voted not to have
cumulative voting they still have it. Ohio also has the same provision.
If you agree, please mark your proxy for this resolution; otherwise it is
automatically cast against it, unless you have marked to abstain.
BOARD OF DIRECTORS' RESPONSE
This proposal is substantially the same as the proposal presented last year. The
Company believes that cumulative voting would undermine effective functioning of
the Board of Directors. Each Board member has a duty to represent all
shareholders. Each director should be accountable to all Company shareholders,
without any loyalty to a particular group. From this perspective, cumulative
voting is undesirable since a director elected by cumulated votes may be
principally concerned about representing and acting in the interest of the group
of shareholders responsible for his or her election, rather than in the
interests of all shareholders. We do not believe that a narrow constituency of
shareholders 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
to amend 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, in 1989, the State of California, considered among the most protective
of shareholder interests, amended its laws to permit the repeal of cumulative
voting. 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 will 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. All are nominated 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.
35
<PAGE>
Approval of this proposal, as a recommendation, would require the affirmative
vote of a majority of the outstanding shares of Boeing 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. The Company's
Certificate of Incorporation and By-Laws require the affirmative vote of at
least 75% of the outstanding shares on a proposal to amend the Company's
Certificate of Incorporation and By-Laws to provide for cumulative voting for
directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 4.
PROPOSAL 5
SHAREHOLDER PROPOSAL
ON 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 Boeing stock present in person or by proxy
and entitled to vote at the Annual Meeting.
SHAREHOLDER RESOLUTION
RESOLVED: ADOPT AN INDEPENDENT OUTSIDE LEAD DIRECTOR. Boeing
shareholders request the Board of Directors take all necessary steps to
amend the company's governing instruments for a permanent independent
outside Lead Director position.
PROPONENT'S SUPPORTING STATEMENT
An independent outside Lead Director will enable independent oversight of
management to improve Boeing performance after:
<TABLE>
<C> <S> <C> <C>
- Boeing announced $4-Billion in write-offs in the past 6 months.
- Has failed to manage the industry boom.
- Is now being overtaken by the fist hint of a bust.
- Now admits the Asian crises will cause a 30% cut in jumbo jet production.
THE ECONOMIST June 13, 1998
- Boeing is considering more cutbacks to next year's jet production after crumbling demand
from Asia.
- This comes amid new assembly troubles that threaten the company's 1998 profit
projections.
- Boeing faces the added expense and delay of reworking 100 planes now under assembly.
This equals 20% of the 550 Boeing commercial jets set for delivery for all of 1998.
- Boeing is inspecting aircraft and replacing suspect wiring.
REUTERS Oct. 22, 1998
- In the first 6 months of 1998 Airbus orders soared 260%
- Boeing orders are up only 40%.
AEROSPACE AMERICA Oct. 1998
</TABLE>
36
<PAGE>
<TABLE>
<C> <S> <C> <C>
- Boeing's assessment of its status in the integration of its military business with
McDonnell Douglas and Rockwell is sharply at odds with how industry observers view
Boeing's progress.
AVIATION WEEK May 11, 1998
- Boeing does not have a proactive board, said industry analyst Paul Nisbet.
AVIATION WEEK Sept. 7, 1998
</TABLE>
This is a short list of the many concerns to shareholders, employees and
customers that call for heightened management and director performance. The
Boeing directors need to be a performing asset.
Lead directors are in the best interest of shareholders, because they help
establish a formal structure to promote an active role by independent directors,
said the Investor Responsibility Research Center.
CalPERS, a leader in developing and advocating effective corporate
governance principles, said independence is the foundation of accountability. To
instill independent leadership CalPERS recommends that:
When one person is both Chairman of the Board and Chief Executive Officer
(like Boeing), the board name an independent outside director to coordinate with
other independent directors to:
1) Prepare agendas for the Board and Board Committee meetings.
2) Define the quality, quantity and TIMELINESS of the flow of information
between management and the board.
3) Request key material to alert Boeing to impending problems before they
become unmanageable.
4) Hire independent consultants who report directly to the board.
5) Act as liaison between the independent directors and the CEO.
6) Evaluate CEO performance and meet with the CEO to discuss the Board's
evaluation.
To express concern on Boeing's sudden $4-Billion ($4,000,000,000) reversal
during a tremendous industry boom, shareholders withhold their votes for
Directors. Withholding as little as 10% of the vote will convey a powerful
message that the shareholders expect improved corporate profitability.
ADOPT A PERMANENT POSITION OF INDEPENDENT LEAD DIRECTOR to ensure that
Boeing will react to business trends in a timely manner.
Reduce the potential for further reversals during the current Asian crisis,
particularly after management blundered during the recent industry boom.
INDEPENDENT LEAD DIRECTOR
YES ON 5
37
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BOARD OF DIRECTORS' RESPONSE
The Board of Directors does not believe that establishment of the position of
"Independent Lead Director" would enhance either the Board's independence or its
effectiveness. The Company has a long history of independent leadership by its
Board of Directors. For the past 26 years, a majority of the Board has been
composed of independent directors who have never been employees of the Company.
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 current or former employees of
the Company serving on the Board at the same time. 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 standing 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. 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 Audit Committee, which also is composed of independent directors,
carefully scrutinizes the Company's internal auditing and financial reporting
practices, as well as the quality and effectiveness of the Company's internal
controls.
The Board of Directors believes that its current composition and structure
provide 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 does not serve the interests of the
Company's shareholders and that the leadership of the Board, in light of its
continuing independence from the Company's management, is best determined by the
Board.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 5.
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<PAGE>
PROPOSAL 6
SHAREHOLDER PROPOSAL
ON ANNUAL ELECTION OF THE ENTIRE BOARD
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.
SHAREHOLDER RESOLUTION
RESOLVED: ELECT THE ENTIRE BOARD OF DIRECTORS EACH YEAR. Boeing shareholders
request the Board of Directors take all necessary steps to amend the company's
governing instruments, including the corporate by-laws. This includes the
requirement that a majority vote of outstanding shares, voting on a single
issue, is required to change this principle once enacted. This resolution will
not affect the unexpired terms of directors elected or appointed to the board
at, or prior to, the 1999 annual shareholder meeting.
PROPONENT'S SUPPORTING STATEMENT
It is intuitive that, directors accountable through annual election, perform
better. The current piecemeal director election gives directors 3-years of
isolation from the consequences of poor performance.
The accountability of 10 Boeing directors impacts the financial security of
125,000 stockholders and the livelihood of 220,000 employees.
Shareholder proposals achieved substantial support at the 1998 shareholder
meeting:
<TABLE>
<CAPTION>
% TOPIC SPONSOR CITY
- --------- ------------------------------------ ------------------------------------ ------------------------------------
<C> <S> <C> <C>
43% Annual election of directors John Chevedden Redondo Beach, CA
27% Cumulative voting John Gilbert New York City
25% Elect lead director Edward P. Olson Long Beach, CA
... and are resubmitted this year as Proposals 6, 4 and 5.
</TABLE>
Shareholders need the right to vote annually on specific conflicts of interest
and minimal commitment on the Boeing board:
- 6 Boeing directors sit on the same outside boards as other Boeing
directors
- 3 directors own minimum stock
- 2 directors are entrenched with 37-year and 27-year terms
- One director is affiliated with United Technologies, a company that does a
tremendous business with Boeing.
What news reports highlight challenges for Boeing directors?
- Boeing has carried our lowest Timeliness rank (5) since Oct. 1997.
VALUE LINE INVESTMENT SURVEY Page 554 dated Oct. 2, 1998
- Boeing stock is down 44% -- from high of $60 in July 1997.
BUSINESS WEEK Sept. 14, 1998
39
<PAGE>
- Airbus achieved $12 billion in orders and options at the Farnborough Air
Show -- nearly twice that of Boeing.
WALL STREET JOURNAL Sept. 10, 1998
- Some industry observers believe a strategic partnership between Lockheed
and Airbus will be a virtual certainty.
AVIATION WEEK April 20, 1998
- Philip Condit is named FINANCIAL WORLD'S "CEO of the Year."
- Boeing's airliner market share will be 75% by 2000, said Natwest
Securities analyst, Nicholas Heymann.
FINANCIAL WORLD April 15, 1997
- Boeing's prized new Delta III blew up on its Aug. 26, 1998 maiden flight
-- destroying a $225 million satellite.
- Boeing told analysts that 120 factory-fresh airliners may go homeless.
BUSINESS WEEK Nov. 9, 1998
- Boeing may be vulnerable to major quality problems.
AVIATION WEEK Jan. 19, 1998
- Airbus continues smooth production boost.
AVIATION WEEK Oct. 5, 1998
BUSINESS WEEK Nov. 25, 1996 listed a number of factors, including annual
election of directors, for the best board. The cover story said for the best
board:
"PLACE THE ENTIRE BOARD UP FOR ELECTION EVERY YEAR"
YES ON 6
BOARD OF DIRECTORS' RESPONSE
This proposal is substantially the same proposal that has been presented for the
last two years. The Board of Directors has again considered the changes
suggested by the proposal, but 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. The three-year staggered
terms are designed to ensure that a majority of the Company's directors at any
given time have prior experience as directors of the Company. This ensures that
the Board has solid knowledge of the Company's complex business and products,
its product strategy, its long-range plans and progress, and its evolving role
in the global aerospace market.
We believe that the current Board structure strikes the appropriate balance
between ensuring directors' accountability to shareholders and providing
sufficient continuity in the Board's composition and opportunity for more
effective long-range planning by the Board. We believe that some Board
continuity is essential to the proper oversight of a company like Boeing that
has high-technology products and programs that require major investments to be
made over long periods of time. A classified board is appropriate for Boeing and
ensures responsible, knowledgeable representation of the long-term interests of
Boeing shareholders.
40
<PAGE>
We also believe that a classified board reduces the chance that a third party
will effect a sudden, unsolicited change in the Company's direction. The
staggered board system permits the Company time to negotiate with the proponent
of the change and to pursue alternative proposals that could provide the best
results for all shareholders.
Approval of this proposal would require the affirmative vote of a majority of
the outstanding shares of Boeing stock present in person or by proxy and
entitled to vote at the Annual Meeting. However, such approval would not
automatically eliminate the classified board, as this proposal is only a
recommendation. In any event, the affirmative vote of at least 75% of the
outstanding shares and a properly stated amendment are necessary to amend the
Company's By-Laws to eliminate the classified board.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 6.
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 Code 13-08, Seattle,
Washington 98124-2207, or submitted by calling (206) 544-1056.
ANNUAL REPORT AND FORM 10-K
The 1998 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,
1998, 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 Code 3T-33, Seattle, Washington 98124-2207,
or calling (425) 393-4964. This proxy statement and the 1998 Annual Report are
also available at the Company's World Wide Web site, HTTP://WWW.BOEING.COM.
SHAREHOLDER PROPOSALS FOR 2000
The Company's next annual meeting will be held on April 24, 2000. An eligible
shareholder who wishes to have a qualified proposal considered for inclusion in
the proxy materials for presentation at that meeting must send the proposal to
the Corporate Secretary; it must be received at the Company's executive offices
no later than November 22, 1999. A shareholder must have continuously held at
least $2,000 in market value, or 1%, of the Company's outstanding stock for at
least one year by the date of submitting the proposal, and the shareholder must
continue to own such stock through the date of the meeting.
Any shareholder who intends to nominate candidates for election as directors or
present a proposal at the meeting pursuant to the Company's By-Laws, without
inclusion of such proposal in the Company's proxy materials, is required to
provide notice of such proposal to the Company. The Company's By-Laws provide
that any business to be transacted at the annual meeting of shareholders must be
a proper matter for shareholder action and properly brought before the meeting.
Notice must be received by the Corporate Secretary no earlier than December 26,
1999 and no later than January 25, 2000. A copy of the pertinent By-Laws
provisions is available on request to Corporate Secretary, The Boeing Company,
P.O. Box 3707, Mail Code 13-08, Seattle, Washington 98124-2207.
THE BOEING COMPANY
41
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THE BOEING COMPANY 1999 ANNUAL MEETING OF SHAREHOLDERS
The Westin Los Angeles Airport Hotel
5400 West Century Blvd., Los Angeles, CA 90045-5975
April 26, 1999 - 10:00 a.m.
- -------------------------------------------------------------------------------
GENERAL DIRECTIONS [MAP]
FROM I-405
- - Take Century Boulevard exit heading west towards
the Los Angeles Airport. The entrance to the Westin
Los Angeles Airport Hotel is one block past
La Cienega Boulevard on the left-hand side of
Century Boulevard.
FROM THE AIRPORT
- - Take Century Boulevard exit heading east. Continue
on Century Boulevard approximately four blocks. The
Westin Los Angeles Airport Hotel is located on the
right-hand side of Century Boulevard, 1/2 block past
Aviation Boulevard.
AIRPORT SHUTTLE
- - The Westin provides hotel guests with complimentary
24-hour shuttle service between the airport and hotel,
with vans running every 7-10 minutes. After claiming
your baggage, exit to the street and proceed to the
middle island and the green sign saying HOTEL
VANS. There is no need to call the Westin for
pick-up as the vans run continually. The Westin
Los Angeles Airport Hotel vans are white with
maroon stripes.
- - Registration will begin at 8:30 a.m. The [MAP]
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 562-797-5905 (voice) or 1-800-617-3384
(TDD) at least two weeks in advance of
the meeting.
PARKING
- - Limited validated parking is available in the Westin's
parking garage. Follow the "Hotel Self Parking" signs
at the entrance to the Westin. Those with disabilities
may park in marked stalls in the parking garage.
Valet parking service is also available in front of the
hotel for $12.00.
WESTIN LOS ANGELES AIRPORT HOTEL
5400 W. Century Blvd., Los Angeles, CA
[LOGO] Printed on recycled paper.
<PAGE>
ELECTION TO OBTAIN FUTURE MATERIALS
OF THE BOEING COMPANY
ELECTRONICALLY INSTEAD OF BY MAIL
Boeing shareholders may elect to receive future materials through the Internet
INSTEAD of receiving copies through the mail. Boeing is offering this service
to provide added convenience to its shareholders and to reduce printing and
mailing costs.
To take advantage of this option, shareholders must subscribe to one of the
various commercial services that offer access to the Internet World Wide Web.
Costs normally associated with electronic access, such as usage and telephone
charges, will be borne by the shareholder.
TO ELECT THIS OPTION, GO TO THE WEBSITE HTTP://WWW.ECONSENT.COM/BA/.
Shareholders who elect this option will be notified each year by e-mail how to
access the proxy materials and how to vote their shares on the Internet.
If you consent to receive the Company's future materials electronically, your
consent will remain in effect unless it is withdrawn by calling, writing, or
e-mailing our Transfer Agent, BankBoston (EquiServe), at 1-888-777-0923; P.O.
Box 8038, Boston, MA 02266-8038; www.equiserve.com. Also, if while this
consent is in effect you decide you would like to receive a hard copy of the
proxy materials, you may call, write, or e-mail our Transfer Agent.
You may access The Boeing Company
annual report and proxy statement at:
www.boeing.com/proxy
If you vote by phone or Internet, please do not mail back your proxy card.
Detach here if mailing
- -------------------------------------------------------------------------------
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
THE BOEING COMPANY
ANNUAL MEETING OF
SHAREHOLDERS
APRIL 26, 1999
The undersigned hereby appoints John H. Biggs, Charles M. Pigott, and Harry C.
Stonecipher (the "Proxy Committee"), and each of them, with the 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 26,
1999 (the "Meeting"), and at any adjournment thereof, as indicated on the
reverse side of this card with respect to Proposals 1 through 6, 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 6, 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
PROPOSAL 1 AND AGAINST PROPOSALS 2 THROUGH 6.
-----------
IMPORTANT: TO BE SIGNED AND DATED ON THE REVERSE SIDE SEE REVERSE
SIDE
-----------
<PAGE>
[LOGO]
c/o EquiServe
P.O. Box 9398
Boston, MA 02205-9398
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A
DAY * 7 DAYS/WEEK UNTIL 3:00 P.M., E.T., APRIL 25, 1999
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. To vote by phone or Internet, read the accompanying proxy statement and
annual report and then follow the easy steps:
TO VOTE BY PHONE: 1) CALL TOLL-FREE 1-877-PRX-VOTE (1-877-779-8683) ON A
TOUCH-TONE TELEPHONE OR CALL COLLECT 1-201-536-8073
ON A TOUCH-TONE TELEPHONE.
2) Enter your 14-digit VOTER CONTROL NUMBER located
above your address in the lower left of this form.
3) Follow the simple recorded instructions.
TO VOTE BY INTERNET: 1) GO TO THE WEBSITE WWW.EPROXYVOTE.COM/BA
2) Enter your 14-digit VOTER CONTROL NUMBER located
above your address in the lower left corner of this
form.
3) Follow the simple instructions on the screen. As
with all Internet access, usage and server fees must
be paid by the user.
YOU CAN ALSO ELECT TO RECEIVE FUTURE SHAREHOLDER
MATERIAL ELECTRONICALLY AT THIS WEBSITE.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL BACK YOUR PROXY CARD.
THANK YOU FOR VOTING! Detach Proxy Card Here
- -------------------------------------------------------------------------------
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
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<S><C>
- ----------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR PROPOSAL 1 AND
AGAINST PROPOSALS 2 THROUGH 6
- ---------------------------------------- FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of directors: (01) Philip M. Condit, 2. Criteria for / / / / / / 5. Independent lead / / / / / /
(02) Kenneth M. Duberstein, (03) John B. Fery, military director.
and (04) Lewis E. Platt contracts.
FOR / / WITHHELD / / 3. Doing business / / / / / / 6. Annual election of / / / / / /
ALL FROM ALL in and with the entire Board
NOMINEES NOMINEES China. of Directors.
For all nominees except as noted below
4. Cumulative / / / / / /
/ / voting in the
---------------------------------------- election of
directors.
Mark here for / /
comments and
note at left
Mark here for / /
address change
and note at left
Please sign exactly as name appears on your account. If the
shares are registered in the name of two or more persons, each
should sign. If acting as attorney, executor, trustee or in another
representative capacity, sign name and title.
Signature(s) _______________________________ Date _______________ Signature(s) _______________________________ Date _______________
PLEASE SIGN THIS PROXY AS NAME(S) APPEAR ABOVE.
</TABLE>
