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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE BOEING COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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[LOGO]
THE BOEING COMPANY
March 21, 2000
Dear Shareholder:
I am pleased to invite you to attend the Company's 2000 Annual Meeting of
Shareholders, which will be held on Monday, May 1, 2000, at the Von Braun
Center, 700 Monroe Street, Huntsville, Alabama. 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.
At the meeting, we will elect four directors and vote on an amendment to the
1997 Incentive Stock Plan. If they are presented, we will also vote on seven
shareholder proposals. We will report on the activities of the Company and there
will be an opportunity for you to submit questions or comments on matters of
interest to shareholders generally. Your Board of Directors recommends a vote
FOR the election of the nominees, FOR Proposal 2 and AGAINST all of the other
proposals.
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. You can vote by
telephone, over the Internet, or by mailing back a traditional proxy card.
Voting by any of the three methods 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, May 1, 2000
PLACE Von Braun Center, 700 Monroe Street, Huntsville, Alabama
ITEMS OF 1. To elect four people to the Board of Directors for
BUSINESS three-year terms expiring in 2003;
2. To vote on a proposal to amend the 1997 Incentive Stock Plan
to increase the number of authorized shares;
3. To vote on a shareholder proposal on foreign military
contracts;
4. To vote on a shareholder proposal linking executive
compensation to social performance;
5. To vote on a shareholder proposal on cumulative voting;
6. To vote on a shareholder proposal on an independent lead
director;
7. To vote on a shareholder proposal on annual election of the
entire Board of Directors;
8. To vote on a shareholder proposal to pay directors solely in
stock;
9. To vote on a shareholder proposal on deducting certain
litigation costs from executive compensation; and
10. 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, March 2, 2000.
If your Boeing stock is held in a brokerage account or by a bank
MEETING or other nominee, you are considered the beneficial owner of
ADMISSION 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. IF YOUR STOCK IS HELD IN
STREET NAME, YOU MUST BRING A LETTER OR ACCOUNT STATEMENT SHOWING
THAT YOU WERE THE BENEFICIAL OWNER OF THE STOCK ON THE RECORD
DATE IN ORDER TO BE ADMITTED TO THE MEETING.
VOTING BY Please submit a proxy as soon as possible so that your shares can
PROXY be voted at the meeting. Submitting the enclosed form of proxy
will appoint John H. Biggs, Philip M. Condit, and Charles M.
Pigott as your proxies.
You may submit your proxy (1) by telephone, (2) over the
Internet, or (3) by mail. For instructions, please refer to
pages 2 through 4 of this proxy statement or the proxy card.
We will begin distributing this proxy statement, a form of proxy
and the 1999 Annual Report on or about March 21, 2000.
</TABLE>
/S/ JAMES C. JOHNSON
--------------------------------------
JAMES C. JOHNSON
VICE PRESIDENT, CORPORATE SECRETARY
AND ASSISTANT GENERAL COUNSEL
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TABLE OF CONTENTS
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PAGE
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General Information for Shareholders........................ 1
Outstanding Securities.................................... 1
Attendance at the Annual Meeting.......................... 1
Voting at the Annual Meeting or by Proxy.................. 2
Voting by Participants in Employee Plans.................. 2
Vote Required and Method of Counting Votes................ 3
Voting by Telephone or the Internet....................... 4
Receiving Proxy Materials on the Internet................. 4
Voting Results............................................ 5
Confidential Voting Policy................................ 5
Expenses of Solicitation.................................. 5
Independent Auditors...................................... 6
Proposal 1: Election of Directors........................... 7
Nominees.................................................. 8
Continuing Directors...................................... 9
Compensation of Directors................................. 11
Retirement Policy......................................... 11
Committees of the Board of Directors...................... 12
Board and Committee Meetings.............................. 13
Corporate Governance Principles........................... 13
Compensation Committee Interlocks and Insider
Participation........................................... 15
Related Party Transactions................................ 16
Section 16(a) Beneficial Ownership Reporting Compliance... 16
Stock Ownership........................................... 16
Executive Compensation.................................... 19
Summary Compensation Table.............................. 19
Option Grants in 1999................................... 21
Fiscal Year-End Option/SAR Values....................... 22
Long-Term Incentive Plans--Awards in 1999............... 22
Pension Plans........................................... 23
Employment Contracts and Termination of Employment
Arrangements........................................... 25
Compensation Committee Report on Executive
Compensation........................................... 28
Performance Graph....................................... 31
Proposal 2: Approval of Amendment of the 1997 Incentive
Stock Plan................................................ 32
Proposal 3: Shareholder Proposal on Foreign Military
Contracts................................................. 35
Proposal 4: Shareholder Proposal on Linking Executive
Compensation to Social Performance........................ 37
Proposal 5: Shareholder Proposal on Cumulative Voting....... 39
Proposal 6: Shareholder Proposal on an Independent Lead
Director.................................................. 41
Proposal 7: Shareholder Proposal on Annual Election of the
Entire Board.............................................. 43
Proposal 8: Shareholder Proposal to Pay Directors Solely in
Stock..................................................... 46
Proposal 9: Shareholder Proposal on Deducting Certain
Litigation Costs from Executive Compensation.... 48
Shareholder Information..................................... 50
Annual Report and Form 10-K................................. 50
Shareholder Proposals for 2001.............................. 50
Appendix A: 1997 Incentive Stock Plan, as Amended........... A-1
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THE BOEING COMPANY
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
------------------------
MAY 1, 2000
This proxy statement is issued in connection with the 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 2000 Annual Meeting of Shareholders (the
"Annual Meeting"). The approximate date on which this proxy material is first to
be sent to shareholders is March 21, 2000.
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
March 2, 2000, as the record date for identifying shareholders of the Company
entitled to vote at the Annual Meeting. On March 2, 2000, there were 907,568,355
shares of common stock outstanding and 867,579,581 of those shares were entitled
to vote. (The shares held in the ShareValue Trust are not voted. Shares to be
issued in exchange for shares of Rockwell International Corporation or McDonnell
Douglas Corporation that have not been exchanged are not eligible to vote.)
There were 155,353 registered shareholders on the record date and approximately
650,000 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 $35.9375 per share.
ATTENDANCE AT THE ANNUAL MEETING
For admission to the Annual Meeting, shareholders who own shares in their own
names should come to the Registered Shareholders check-in tables, where their
ownership will be verified.
THOSE WHO HAVE BENEFICIAL OWNERSHIP OF STOCK THAT IS HELD BY A BANK OR BROKER
(OFTEN REFERRED TO AS "HOLDING IN STREET NAME") SHOULD COME TO THE BENEFICIAL
OWNERS TABLES. 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 MARCH 2, 2000. IN ORDER TO VOTE AT THE MEETING, BENEFICIAL OWNERS
MUST BRING LEGAL PROXIES, WHICH THEY CAN OBTAIN ONLY FROM THEIR BROKERS OR
BANKS.
Registration will begin at 9:00 a.m. and the Annual Meeting will begin at
10:00 a.m. We expect the Annual Meeting 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 17, 2000, at
The Boeing Company, P.O. Box 3707, Mail Code 13-08, Seattle, Washington
98124-2207.
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VOTING AT THE ANNUAL MEETING OR BY PROXY
Shares represented by a properly executed proxy 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 is executed and returned but no
instructions are given, the shares will be voted according to the
recommendations of the Board of Directors. The Board of Directors recommends a
vote FOR each of the nominees, FOR Proposal 2, and AGAINST Proposals 3 through
9.
The enclosed proxy card gives discretionary authority to the persons named on
the proxy card to vote the shares in their best judgment if any matters other
than those shown on the proxy card are properly brought before the Annual
Meeting. The Company received a letter from an individual requesting a
discussion of certain matters at the Annual Meeting, including the continued use
of EquiServe as the inspector of election, internal and external expenses
relating to responding to shareholder proposals (including a proposal in this
year's proxy statement), the reasons for not listing proponents' names in the
proxy statement and certain matters relating to that individual's proposal in
this year's proxy statement. If the individual who sent this letter, or his
representative, proposes that any matter related to these discussion items be
brought to a vote and such matter is properly brought to a vote, the persons
named on the proxy card intend to exercise the discretionary authority given to
them by the proxy card to vote as they deem appropriate.
A registered shareholder who executes a proxy 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 that is dated later. If the
registered shareholder attends the Annual Meeting in person, 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 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 Thrift Plan of McDonnell Douglas Corporation -- Subsidiary
Plan (009)
3. Employee Savings Plan of McDonnell Douglas Corporation -- Component
Plan (016)
4. Employee Thrift Plan of McDonnell Douglas Corporation -- Hourly Plan (024)
5. Employee Investment Plan of McDonnell Douglas Corporation -- Hourly East
Plan (027)
6. Employee Investment Plan of McDonnell Douglas Corporation -- Hourly West
Plan (028)
7. Employee Payroll Stock Ownership Plan ("PAYSOP") of McDonnell Douglas
Corporation (017)
8. Rockwell International Corporation Salaried Retirement Savings Plan
9. Rockwell International Corporation Retirement Savings Plan for Certain
Employees
10. Rockwell International Corporation Non-Represented Hourly Retirement
Savings Plan
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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 Company's proxy card, includes
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 through 6: 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 7: shares for which no instructions are received will not be voted.
- Plans 8, 9 and 10: the trustee will vote in its own discretion.
VOTE REQUIRED AND METHOD OF COUNTING VOTES
Under Delaware law and the Company's Restated Certificate of Incorporation, the
presence at the Annual Meeting, in person or by duly authorized proxy, of the
holders of one-third of the outstanding shares of stock entitled to vote
constitutes a quorum for the transaction of business. Each share of Boeing 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, 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 THOSE
PROPOSALS.
Brokers who hold shares for the accounts of their clients may vote such shares
either as directed by their clients or in their own discretion if permitted by
the stock exchange or other organization of which they are members. Members of
the New York Stock Exchange are permitted to vote their clients' proxies in
their own discretion as to the election of directors if the clients have not
furnished voting instructions within ten days of the meeting. Certain proposals
other than the election of directors are "non-discretionary" and brokers who
have received no instructions from their clients do not have discretion to vote
on those items. When a broker votes a client's shares on some but not all of the
proposals at a meeting, the missing votes are referred to as "broker non-votes".
Those shares will be included in determining the presence of a quorum at the
Annual Meeting, but are not considered "present" for purposes of voting on the
non-discretionary proposals. They have no impact on the
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outcome of such proposals. The Company understands that, pursuant to New York
Stock Exchange rules, Proposals 3 through 9 on the agenda for the Annual Meeting
are non-discretionary proposals.
VOTING BY TELEPHONE OR THE INTERNET
Registered shareholders and participants in the Plans listed above 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 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
previously 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 do not receive the
Company's proxy card. Instead, they receive voting instruction forms from their
banks, brokers or ADP Investor Communications Services, an agent for brokers and
banks. Street name owners may also be able to vote by telephone or the Internet.
They should follow the instructions on the voting 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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IF YOU HOLD YOUR BOEING SHARES DIRECTLY IF YOU HOLD YOUR SHARES IN AN ACCOUNT WITH A
REGISTERED WITH EQUISERVE, OR IN ONE OF THE BROKER OR BANK THAT USES ADP INVESTOR
EMPLOYEE PLANS LISTED ABOVE: COMMUNICATIONS SERVICES:
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To vote by phone: 1-877-779-8683 (within the To vote by phone: the voting form enclosed
U.S. and Canada only, toll-free) or with your proxy statement will show the
1-201-536-8073 (collect). telephone number to call.
To vote on the Internet: www.eproxyvote.com/ba To vote on the Internet: www.proxyvote.com
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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
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 stock
account with the
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Company's transfer agent, EquiServe L.P. 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, 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 2001 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 EquiServe.
If you change your e-mail address, please follow the procedures at the
appropriate Internet site to enter your new address.
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. If your broker or bank uses ADP Investor
Communications Services, you can sign up to receive electronic proxy materials
at WWW.INVESTORDELIVERY.COM.
VOTING RESULTS
The Company will announce preliminary voting results at the Annual Meeting. It
will publish the final, official results in the quarterly report on Form 10-Q
for the first quarter of the year. That report will be filed with the Securities
and Exchange Commission and will also be available at the Boeing Internet home
page, WWW.BOEING.COM, under both "Corporate Secretary" and "Investor Relations."
CONFIDENTIAL VOTING POLICY
The Company's policy is 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, EquiServe, 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 $15,000, 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
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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, 2000.
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 12 members. Ten of them are
non-employee 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 2003. 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 non-employee director to resign at the annual meeting of
shareholders following that director's 72nd birthday. Accordingly, Dr. William
J. Perry has announced his intention to retire from the Board at the Annual
Meeting.
The Governance and Nominating Committee of the Board has recommended four
nominees, three of whom are currently serving as directors. 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
PAUL E. GRAY Director since 1990
PRESIDENT EMERITUS AND PROFESSOR OF ELECTRICAL ENGINEERING AT MASSACHUSETTS
INSTITUTE OF TECHNOLOGY ("MIT"), age 68. 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.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
10,924
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 Zoltek Companies Inc. and Chairman
of the Board of Trustees of Washington University in St. Louis.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
16,767,279
JOHN M. SHALIKASHVILI
RETIRED CHAIRMAN OF THE JOINT CHIEFS OF STAFF, U.S. DEPARTMENT OF DEFENSE, age
63. General Shalikashvili served as the thirteenth Chairman of the Joint Chiefs
of Staff from 1993 to 1997. In that position, he was the senior officer of the
U.S. military and principal advisor to the President of the United States, the
Secretary of Defense and the National Security Council. Prior to his tenure as
Chairman of the Joint Chiefs of Staff, he served as Commander in Chief of all
U.S. forces in Europe and as NATO's tenth Supreme Allied Commander in Europe. He
has been appointed as a special advisor to the Secretary of State and to the
President on the ratification of the Comprehensive Test Ban Treaty. General
Shalikashvili is a visiting professor at Stanford University's Center for
International Security and Cooperation. Additionally, he serves as a director of
Frank Russell Trust Company, L-3 Communications Holdings, Inc., Plug
Power Inc., and United Defense Industries Inc.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
200
HARRY C. STONECIPHER Director since 1997
PRESIDENT AND CHIEF OPERATING OFFICER, THE BOEING COMPANY, age 63.
Mr. Stonecipher served as President and Chief Executive Officer of McDonnell
Douglas Corporation (aerospace) from 1994 until its merger with Boeing in 1997,
when he became President and Chief Operating Officer of Boeing. 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 Milacron, Inc.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
1,686,344
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CONTINUING DIRECTORS
JOHN H. BIGGS Director since 1997
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, TEACHERS INSURANCE AND ANNUITY
ASSOCIATION-COLLEGE RETIREMENT EQUITIES FUND ("TIAA-CREF"), age 63. 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 in 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..................
30,721
JOHN E. BRYSON Director since 1995
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER, EDISON
INTERNATIONAL, age 56. Mr. Bryson has served as Chairman of the Board and Chief
Executive Officer of Edison International (electric power and structured
finance) since 1990 and as President since January 2000. He is a director of The
Times Mirror Company, Pacific American Income Shares, Inc., LM Institutional
Fund Advisors I, Inc. 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..................
14,030
PHILIP M. CONDIT Director since 1992
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, THE BOEING COMPANY, age 58.
Mr. Condit was elected Chairman of the Board effective February 1, 1997. He has
served as Chief Executive Officer since April 29, 1996, and was President from
August 1992 until becoming Chairman. Mr. Condit is also a director of
Hewlett-Packard Company. His current term as a Boeing director expires in 2002.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
550,548
KENNETH M. DUBERSTEIN Director since 1997
CHAIRMAN AND CHIEF EXECUTIVE, THE DUBERSTEIN GROUP, age 55. 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., Fannie Mae, Global Vacation Group and St.
Paul Companies and a governor of the American Stock Exchange and the NASD, Inc.
His current term as a Boeing director expires in 2002.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
12,409
JOHN B. FERY Director since 1989
RETIRED CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, BOISE CASCADE
CORPORATION, age 70. 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. His
current term as a Boeing director expires in 2002.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
21,396
9
<PAGE>
CHARLES M. PIGOTT Director since 1972
CHAIRMAN EMERITUS, PACCAR INC, age 70. 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..................
60,424
LEWIS E. PLATT Director since 1999
RETIRED CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
HEWLETT-PACKARD COMPANY, age 58. Mr. Platt served as President and Chief
Executive Officer of Hewlett-Packard Company (measurement, computing and
communications equipment) from November 1992 until July 1999, and as a director
and Chairman from September 1993 until his retirement in December 1999. In 1995,
he was appointed to the Advisory Committee on Trade Policy Negotiations by
President Clinton. Mr. Platt is currently Chief Executive Officer and a director
of Kendall-Jackson Wine Estates Limited. He also serves on the Wharton School
Board of Overseers and the Cornell University Council, and as a Trustee of the
David and Lucille Packard Foundation. His current term as a Boeing director
expires in 2002.
SHARES, OPTIONS EXERCISABLE WITHIN 60 DAYS AND SHARE INTERESTS..................
2,795
ROZANNE L. RIDGWAY Director since 1992
FORMER ASSISTANT SECRETARY OF STATE FOR EUROPE AND CANADA, age 64. Ms. 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, 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..................
24,100
10
<PAGE>
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 Governance
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 Governance and Nominating Committee. In any case, such
director will retire permanently as a director no later than the annual meeting
of
11
<PAGE>
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 the following standing committees: Audit,
Compensation, Finance, and Governance and Nominating. 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 non-employee 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>
GOVERNANCE
AUDIT COMPENSATION FINANCE AND NOMINATING
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
John E. Bryson John H. Biggs Charles M. Pigott John B. Fery
Paul E. Gray Kenneth M. Duberstein John E. Bryson John H. Biggs
Charles M. Pigott John B. Fery Paul E. Gray Kenneth M. Duberstein
Lewis E. Platt John F. McDonnell Lewis E. Platt John F. McDonnell
William J. Perry William J. Perry
Rozanne L. Ridgway Rozanne L. Ridgway
</TABLE>
AUDIT COMMITTEE
The Audit Committee selects and engages the independent auditors, subject to
ratification by the Board. 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 1999.
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 plan for employees. The Compensation Committee held six
meetings in 1999.
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
12
<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 1999.
GOVERNANCE AND NOMINATING COMMITTEE
The Governance and Nominating Committee reviews and makes recommendations to the
Board of Directors with respect to the responsibilities and functions of the
Board and Board committees, and with respect to Board compensation. The
committee makes recommendations to the Board of Directors concerning the
composition and governance of the Board, including recommending candidates to
fill vacancies on, or to be elected or reelected to, the Board. The committee
will consider the names and qualifications of candidates for the Board submitted
by shareholders in accordance with the procedures referred to on page 50 of this
proxy statement. The committee oversees evaluation of the directors, Board
committees and the Board. The committee also makes recommendations to the Board
concerning candidates for election as Chief Executive Officer and other
corporate officers. At least once each year, the committee reviews the
performance of the Chief Executive Officer and the Company's plans for senior
management succession. The Governance and Nominating Committee held six meetings
in 1999.
BOARD AND COMMITTEE MEETINGS
During 1999, the Board of Directors held seven meetings and the committees
described above held a total of 24 meetings. Average attendance at all such
meetings was 95%. Each continuing director attended at least 84% of the Board
and committee meetings he or she was eligible to attend.
CORPORATE GOVERNANCE PRINCIPLES
In order to help our shareholders understand Boeing's Board practices, we are
including below a description of our current principles. The Governance and
Nominating Committee reviews these practices. As part of its review, the
committee also evaluates board practices at other well-managed companies and
those that are the focus of commentators on corporate governance. The Board
recommended that these principles be communicated to shareholders in this proxy
statement.
CEO PERFORMANCE EVALUATION
At the end of each year, the CEO presents his performance objectives for the
upcoming year to the non-employee directors for their approval. The non-employee
directors then meet privately to discuss the CEO's performance for the current
year and review that evaluation with the CEO. The Compensation Committee uses
this performance evaluation in the course of its deliberations when considering
the compensation of the CEO.
BOARD PERFORMANCE EVALUATION
With the goal of increasing the effectiveness of the Board and its relationship
to management, the Governance and Nominating Committee evaluates the Board's
performance as a whole. The evaluation process, which occurs at least every two
years, includes a survey of the individual views of all non-employee directors,
which are then shared with the full Board and with management.
13
<PAGE>
CEO SUCCESSION
The Board views CEO selection as one of its most important responsibilities. The
CEO reports annually to the Governance and Nominating Committee on planning for
CEO succession either in the event of a sudden emergency or, longer range, when
it is time for the CEO's retirement. When a succession of the CEO occurs, this
Committee manages the process of identifying and selecting the new CEO with the
full participation of each of the non-employee directors.
BOARD SIZE AND COMPOSITION
The Board believes that approximately 10 to 15 members is an appropriate size
for the Boeing Board. The Board also believes that the Boeing Board should be
made up of a substantial majority of independent, non-employee directors. The
Governance and Nominating Committee reviews annually the appropriate skills and
characteristics required of Board members in light of the current make-up of the
Board. This assessment includes issues of diversity, age, international
expertise and skills such as understanding of manufacturing, finance, marketing,
technology and public policy, etc. The principal qualification for a director is
the ability to act on behalf of all of the shareholders. The Board currently has
12 members, two of whom are employees of the Company.
SELECTION OF DIRECTORS
Under the By-Laws, the Board has authority to fill vacancies in the Board and to
nominate candidates for election by the shareholders. The screening process is
handled by the Governance and Nominating Committee with direct input from the
Chairman and Chief Executive Officer and from the other directors. This
Committee reviews employment and other relationships of directors, and the Board
believes there is no current relationship between any non-employee director and
Boeing that would be construed in any way as compromising the independence of
any director.
DIRECTOR RETIREMENT
Each non-employee director must retire at the annual meeting following his or
her 72nd birthday. Directors who change the occupation they held when initially
elected are expected to offer to resign from the Board. At that time, the
Governance and Nominating Committee reviews the continued appropriateness of
Board membership under the new circumstances. The Board has adopted a policy
calling for employee directors, including the CEO, to retire from the Board at
the time of a change in their status as an officer of Boeing.
DIRECTOR COMPENSATION AND STOCK OWNERSHIP
The Governance and Nominating Committee periodically reviews and compares Boeing
Board compensation to director compensation at peer companies, which are
benchmarks for the Company's financial performance. It is the Board's policy
that a significant portion of director compensation be in the form of Boeing
stock or stock equivalent units.
BOARD AGENDA AND MEETINGS
The Chairman and Chief Executive Officer establishes the agendas for Board
meetings. Each director is free to suggest items for the agenda, and each
director is free to raise at any Board meeting subjects that are not on the
agenda for that meeting. The Board reviews and approves Boeing's yearly
operating plan and specific financial goals at the start of each year, and the
Board monitors
14
<PAGE>
performance throughout the year. The Board also reviews long-range strategic
issues at regular Board meetings.
EXECUTIVE SESSIONS OF OUTSIDE DIRECTORS
The non-employee directors meet privately in executive sessions to review the
performance of the CEO and to review recommendations of the Compensation
Committee concerning compensation for the employee directors and other members
of senior management. The non-employee directors meet in executive session at
least twice a year without management present to consider such matters as they
deem appropriate.
COMMITTEES OF THE BOARD
Only non-employee directors serve on the Board's four standing committees, which
are Audit, Compensation, Finance, and Governance and Nominating. Chairpersons
and members of these four committees are rotated periodically, as appropriate.
At each meeting of the Audit Committee, committee members meet privately with
representatives of Deloitte & Touche LLP, the Company's independent auditors,
and with the Company vice president responsible for carrying out the internal
audit function.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
During 1999:
- - None of the members of the Compensation Committee was an officer (or former
officer) or employee of the Company or any of its subsidiaries;
- - None of the members of the Compensation Committee entered into (or agreed to
enter into) any transaction or series of transactions with the Company or any
of its subsidiaries in which the amount involved exceeds $60,000;
- - None of the Company's executive officers served on the compensation committee
(or another board committee with similar functions or, if there was no
committee like that, the entire board of directors) of any entity where one of
that entity's executive officers served on the Company's Compensation
Committee;
- - None of the Company's executive officers was a director of another entity
where one of that entity's executive officers served on the Company's
Compensation Committee; and
- - None of the Company's executive officers served on the compensation committee
(or another board committee with similar functions or, if there was no
committee like that, the entire board of directors) of another entity where
one of that entity's executive officers served as a director on the Company's
Board.
15
<PAGE>
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 1999, except that
Mr. McDonnell inadvertently reported late the transfer in 1998 of shares of
Boeing stock to a family trust of which Mr. McDonnell is trustee, the transfer
in 1999 of shares from that trust to another family trust, and the transfer in
1999 of shares of Boeing stock to another family trust of which Mr. McDonnell is
trustee.
STOCK OWNERSHIP
The table below shows ownership of Boeing stock as of March 2, 2000, by:
(a) each director and nominee, (b) the Chief Executive Officer, and each of the
other five most highly compensated executive officers (collectively, the "Named
Executive Officers"), (c) all directors, nominees and executive officers as a
group, and (d) the entities known by the Company to be beneficial owners of more
than 5% of the outstanding shares of stock (as of December 31, 1999).
The columns are as follows:
- The first column, Number of Shares Beneficially Owned, shows for each
person the number of shares of Boeing stock directly and indirectly owned
as of March 2, 2000, 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 May 1, 2000, 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 March 2, 2000. While these units may not be
voted or transferred, they are listed below because they represent a
significant part of the total economic interest of the directors and
executive officers in Boeing stock.
- The fourth column shows the total of the shares, options and share
interests in the first three columns.
- The fifth and 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.
16
<PAGE>
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.
STOCK OWNERSHIP TABLE
<TABLE>
<CAPTION>
SHARES
THAT MAY BE
ACQUIRED BY TOTAL AS
SHARES EXERCISING SHARE PERCENT
BENEFICIALLY OPTIONS WITHIN INTERESTS OF SHARES
NAME OF BENEFICIAL OWNER OWNED 60 DAYS HELD TOTAL OUTSTANDING
- ------------------------ ------------ -------------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND NOMINEES
John H. Biggs.......................... 24,610 1,200 4,911(1) 30,721 *
John E. Bryson......................... 3,600(2) 5,700 4,730(1) 14,030 *
Kenneth M. Duberstein.................. 6,360 1,200 4,849(1) 12,409 *
John B. Fery........................... 6,356 13,080 1,960(1) 21,396 *
Paul E. Gray........................... 6,397 3,600 927(1) 10,924 *
John F. McDonnell...................... 16,603,652(3) 1,200 162,427(1) 16,767,279 1.85%
William J. Perry....................... 1,000 1,200 4,362(1) 6,562 *
Charles M. Pigott...................... 40,186 13,080 7,158(1) 60,424 *
Lewis E. Platt......................... 1,000 0 1,795(1) 2,795 *
Rozanne L. Ridgway..................... 1,160 12,120 10,820(1) 24,100 *
John M. Shalikashvili.................. 200 0 0 200 *
NAMED EXECUTIVE OFFICERS (**also serve
as directors)
Philip M. Condit**..................... 21,136 439,608 89,804(4) 550,548 *
James F. Albaugh....................... 100 18,924 127,132(4) 146,156 *
Deborah C. Hopkins..................... 500 12,000 126,943(4) 139,443 *
Alan R. Mulally........................ 34,983 164,128 110,264(4) 309,375 *
Michael M. Sears....................... 20,902(5) 0 133,742(4) 154,644 *
Harry C. Stonecipher**................. 176,189(5) 936,000 574,155(4) 1,686,344 *
All directors, nominees and executive
officers as a group.................. 17,113,736(5) 1,892,036 1,546,207 20,551,979 2.26%
BENEFICIAL OWNERS OF MORE THAN 5%
FMR Corp............................... 49,516,308(6) 0 0 49,516,308 5.29%
State Street Bank and Trust Company.... 82,713,344(7) 0 0 82,713,344 9.08%
</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 11. Mr. McDonnell also has interests
equal to 161,674 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, 16,043,382 are held in trusts for the benefit of members
of the McDonnell family. Either Mr. McDonnell or his wife (or, in the case
of two of the trusts, his brother, James S. McDonnell) is a trustee of each
of those trusts. In addition, the James S. McDonnell Foundation, of which
John F. McDonnell is a trustee, holds 6,197,015 shares of Boeing stock,
which are not included in the total shown above. Also not included in the
total shown above are 5,000,000 shares of Boeing stock held in two trusts of
which John F. McDonnell is trustee and his brother is a beneficiary.
17
<PAGE>
(4) 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.
(5) The numbers shown for Messrs. Sears and Stonecipher include 9,360 and
46,800 shares, respectively, of restricted stock. These shares were
originally 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"), and were converted into shares
of Boeing stock as a result of the Merger. The holders receive dividends and
have the right to vote the shares. The shares vest and become unrestricted
in increments through 2002.
(6) The following information is based on a Schedule 13G filed on February 11,
2000, by FMR Corp., 82 Devonshire Street, Boston, Massachusetts 02109
("FMR"). FMR reports that at December 31, 1999, it had sole power to vote or
direct the vote of 4,852,685 shares and sole power to dispose or direct the
disposition of all 49,516,308 of the shares shown above. It reports no
shared voting power or shared dispositive power over such shares.
(7) The following information is based on a Schedule 13G filed on February 8,
2000, 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, 1999, it had sole power
to vote or direct the vote of 16,461,552 shares and sole power to dispose or
direct the disposition of 82,479,475 of the shares shown above. It also
reports that it shared voting power over 64,859,029 shares and shared
dispositive power over 233,869 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 64,784,953 shares held in the VIP trust at
December 31, 1999.
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.
18
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the annual and long-term compensation of the
Named Executive Officers for fiscal years 1999, 1998, and 1997. 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 28.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM COMPENSATION
COMPENSATION AWARDS PAYOUTS
OTHER SECURITIES ALL
ANNUAL UNDER- OTHER
NAME AND COMPEN- RESTRICTED LYING LTIP COMPEN-
PRINCIPAL SALARY BONUS SATION STOCK OPTIONS PAYOUTS SATION
POSITION IN 1999 YEAR ($) ($)(1) ($) ($)(2) (#)(3) ($) ($)(4)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Philip M. Condit 1999 $1,093,079 $1,900,800 $ 0 $1,431,543 0 0 $ 86,270
Chairman and Chief 1998 998,896 0 0 192,156 0 0 81,755
Executive Officer 1997 884,675 446,000 0 204,378 120,000 0 69,520
James F. Albaugh(5)
Senior V.P. and President, 1999 480,462 380,200 0 4,821,879 0 0 29,702
Space and Communications 1998 285,782 213,800 0 184,377 0 0 17,941
Deborah C. Hopkins(5)
Senior V.P. and Chief 1999 473,271 633,600 0 4,983,419 30,000 0 144,262
Financial Officer 1998 6,923 0 0 0 0 0 750,000
Alan R. Mulally 1999 620,097 792,000 80,280(6) 657,192 0 0 40,960
Senior V.P. and President, 1998 536,601 242,000 78,404(6) 5,200,839 200,000 0 35,666
BCAG 1997 341,668 175,700 0 69,028 20,600 0 21,900
Michael M. Sears(7)
Senior V.P. and President, 1999 479,770 506,900 0 4,897,465 0 0 30,550
Military Aircraft & 1998 429,069 235,100 12,178 235,109 0 0 28,165
Missiles 1997 395,246 261,900 461,994 0 0 1,734,838 29,445
Harry C. Stonecipher(7) 1999 946,539 1,425,600 0 1,217,122 0 0 60,212
President and Chief 1998 899,007 0 139,425(8) 246,567 0 0 57,570
Operating Officer 1997 895,345 489,300 2,333,896(8) 4,105,998 0 8,051,518 268,624
</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 incentive award (30% for 1997), using as the purchase price the
FAIR MARKET VALUE (as defined on page 11) 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.
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 28.
19
<PAGE>
For Messrs. 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
(5) 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 2000 for service in 1999, and the
number and value of RSUs, Career Shares, and matching deferred stock units
granted to each of the Named Executive Officers in 1999. The values are
based on the closing market price of Boeing stock on the dates of grant.
RESTRICTED STOCK UNITS GRANTED FOR 1999
<TABLE>
NUMBER OF UNITS VALUE
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..... 34,162 0 4,622 0 $1,263,995 $ 0 $167,548 $ 0
James F. Albaugh..... 6,831 106,509 1,849 415 252,759 4,486,687 67,026 15,407
Deborah C. Hopkins... 11,387 106,509 2,080 0 421,332 4,486,687 75,400 0
Alan R. Mulally...... 14,234 0 2,773 842 526,665 0 100,521 30,007
Michael M. Sears..... 9,109 106,509 2,034 0 337,046 4,486,687 73,733 0
Harry C.
Stonecipher........ 25,622 0 4,160 2,918 947,997 0 150,800 118,325
</TABLE>
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 2000. The value of all such shares and
units is based on the closing price of Boeing stock on December 31, 1999,
which was $41.4375 per share, except for the BSUs granted in 2000, whose
value is based on the closing price of the stock on February 28, 2000, which
was $37.00.
ALL RESTRICTED STOCK AND UNITS
<TABLE>
<CAPTION>
NUMBER VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------------
Philip M. Condit............................................ 83,930 $ 3,326,262
James F. Albaugh............................................ 123,299 5,078,885
Deborah C. Hopkins.......................................... 124,495 5,108,234
Alan R. Mulally............................................. 108,157 4,418,575
Michael M. Sears............................................ 133,369 5,486,041
Harry C. Stonecipher........................................ 610,210 25,171,891
- ------------------------------------------------------------------------------------
</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 1999,
1998, and 1997, 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
20
<PAGE>
the Named Executive Officers on the line for 1999 are as set forth below. In
addition, Ms. Hopkins received $115,329 in connection with her relocation to
Seattle.
<TABLE>
<CAPTION>
(A) (B) (C)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Philip M. Condit........................................ $17,085 $65,585 $3,600
James F. Albaugh........................................ 0 27,962 1,740
Deborah C. Hopkins...................................... 0 27,358 1,575
Alan R. Mulally......................................... 1,519 37,206 2,235
Michael M. Sears........................................ 0 28,786 1,764
Harry C. Stonecipher.................................... 0 56,792 3,420
- ----------------------------------------------------------------------------------------
</TABLE>
(5) Mr. Albaugh became Senior Vice President of the Company in September 1998.
Ms. Hopkins joined the Company as Senior Vice President and Chief Financial
Officer in December 1998.
(6) The amount shown for 1999 represents perquisites, including $37,481 for
personal use of Company aircraft and $26,100 in tax reimbursement. Of the
amount shown for 1998, $52,709 represents perquisites, including $36,900 for
personal use of Company aircraft.
(7) Messrs. 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. 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 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 $20,232 for personal use of Company aircraft.
OPTION GRANTS IN 1999
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------
NUMBER PERCENT
OF OF TOTAL
SECURITIES OPTIONS
UNDER- GRANTED TO POTENTIAL REALIZABLE VALUE AT
LYING EMPLOYEES ASSUMED ANNUAL RATES OF STOCK PRICE
OPTIONS IN EXERCISE EXPIRA- APPRECIATION FOR OPTION TERM(2)
GRANTED FISCAL PRICE TION -------------------------------------------
NAME (#)(1) YEAR ($/SH) DATE 0% ($) 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
P. M. Condit.............. 0 -- -- -- -- -- --
J.F. Albaugh.............. 0 -- -- -- -- -- --
D.C. Hopkins.............. 30,000 0.87% $35.9141 2/22/2009 $0 $677,586 $1,717,135
A.R. Mulally.............. 0 -- -- -- -- -- --
M.M. Sears................ 0 -- -- -- -- -- --
H.C. Stonecipher.......... 0 -- -- -- -- -- --
Share price............................................................. $58.50 $93.15
All current optionees (more than 30,600 employees and retirees)......... 0 $78 million $197 million
All shareholders(3)..................................................... 0 $2,051 million $55,881 million
Gain of all optionees as % of gain of all shareholders.................. 0 .35% .35%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The per share exercise price is the Fair Market Value of Boeing stock (as
defined on page 11) on the date of grant, and the term of these options is
ten years, subject to earlier termination in the event of termination of
employment. The options vest after one year's employment from the date of
grant. As to each grant, 40% becomes exercisable after one year from the
date of grant, an additional 30% after three years, and the remaining 30%
after five years. The schedule on which options become exercisable is
subject to acceleration for retirement, death, disability or layoff after
vesting.
21
<PAGE>
(2) Potential realizable values are based on assumed compound annual
appreciation rates specified by the SEC. These increases in value are based
on speculative assumptions and are not intended to forecast possible future
appreciation, if any, of the Company's stock price.
(3) Each amount represents the increase in total market value of outstanding
Boeing common stock consistent with the stock price appreciation
assumptions above. On the date on which these options were granted,
February 22, 1999, there were 976,291,705 shares of common stock
outstanding.
FISCAL YEAR-END OPTION/SAR VALUES
The table below sets forth information with respect to the number and assumed
value of outstanding options and stock appreciation rights ("SARs") held by the
Named Executive Officers at year end. No options or SARs were exercised by the
Named Executive Officers in 1999.
<TABLE>
- ----------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/ IN-THE-MONEY OPTIONS/
SARS AT FISCAL SARS AT FISCAL YEAR-END
YEAR-END(#) ($)(1)
--------------------- ------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Philip M. Condit.................................. 378,141 151,730 $ 4,371,484 $ 643,869
James F. Albaugh.................................. 17,846 2,156 0 0
Deborah C. Hopkins................................ 0 30,000 0 162,891
Alan R. Mulally................................... 149,150 151,958 678,719 162,902
Michael M. Sears.................................. 0 0 0 0
Harry C. Stonecipher.............................. 936,000 234,000 25,392,838 6,348,209
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts are based on the Fair Market Value of Boeing stock on the last
trading day of the year, December 31, 1999, which was $41.3438. There is no
guarantee that, if and when these options are exercised, they will have this
value.
LONG-TERM INCENTIVE PLANS--AWARDS IN 1999
The table below sets forth information with respect to Performance Shares
granted to the Named Executive Officers in 1999.
<TABLE>
<CAPTION>
CONTINGENT FUTURE PAYOUTS
NUMBER PERFORMANCE AT SPECIFIED STOCK PRICES
OF SHARES, OR OTHER -------------------------------------------
UNITS OR PERIOD LESS THAN
OTHER UNTIL $58.38 $58.38 $69.80 $72.91
RIGHTS MATURATION THRESHOLD THRESHOLD TARGET MAXIMUM
NAME (#) OR PAYOUT (#) (#) (#) (#)
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Philip M. Condit.............................. 127,099 1999-2004 0 31,775 127,099 158,874
James F. Albaugh.............................. 41,596 1999-2004 0 10,399 41,596 51,995
Deborah C. Hopkins............................ 46,796 1999-2004 0 11,699 46,796 58,495
Alan R. Mulally............................... 62,394 1999-2004 0 15,599 62,394 77,993
Michael M. Sears.............................. 45,756 1999-2004 0 11,439 45,756 57,195
Harry C. Stonecipher.......................... 103,990 1999-2004 0 25,997 103,990 129,987
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
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 1999
Performance Share awards are contingent on the Company's achieving threshold,
target, and superior stock price appreciation to $58.38, $69.80, and $72.91,
respectively, within five years from the date of grant. The threshold
performance hurdle equates to a 61% increase in stock price and would add
approximately $22 billion to the Company's market value.
22
<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, 2000, 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>
- -------------------------------------------------------------------------------------------------
YEARS OF CREDITED SERVICE
-------------------------------------------------------------------------
REMUNERATION 15 20 25 30 35 40
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
$ 300,000..... $ 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
2,100,000.... 504,000 672,000 840,000 1,008,000 1,176,000 1,344,000
2,400,000.... 576,000 768,000 960,000 1,152,000 1,344,000 1,536,000
2,700,000.... 648,000 864,000 1,080,000 1,296,000 1,512,000 1,728,000
3,000,000.... 720,000 960,000 1,200,000 1,440,000 1,680,000 1,920,000
3,300,000.... 792,000 1,056,000 1,320,000 1,584,000 1,848,000 2,112,000
3,600,000.... 864,000 1,152,000 1,440,000 1,728,000 2,016,000 2,304,000
- -------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
Credited service begins on the commencement of employment. The Named Executive
Officers have the following years of credited service:
<TABLE>
<S> <C>
- ----------------------------------------------------------------------
Philip M. Condit............................................ 34.5
James F. Albaugh............................................ 15.5
Deborah C. Hopkins.......................................... 1.0
Alan R. Mulally............................................. 30.5
Michael M. Sears............................................ 30.0
Harry C. Stonecipher........................................ 10.5
- ----------------------------------------------------------------------
</TABLE>
Under the Supplemental Executive Retirement Plan, pension benefits are based on
years of credited service times 1.6% of average annual salary plus average
annual incentive compensation for the last five years of employment. Annual
incentive compensation includes the amounts shown in the Bonus column of the
Summary Compensation Table on page 19 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............................................ $1,922,776
James F. Albaugh............................................ 499,468
Deborah C. Hopkins.......................................... 688,665
Alan R. Mulally............................................. 838,588
Michael M. Sears............................................ 740,186
Harry C. Stonecipher........................................ 1,884,900
- ------------------------------------------------------------------------
</TABLE>
Mr. Stonecipher and Ms. Hopkins have agreements that may increase the amount of
retirement benefit received from the Company. (See Employment Contracts and
Termination of Employment Arrangements, below.) Mr. Sears has a Supplemental
Pension Agreement that may increase his retirement benefit from the Company.
Pursuant to Mr. Stonecipher's agreement, he will receive credit for twice as
many years of service as he actually works for the Company, 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 an employer prior to his employment
with McDonnell Douglas 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. Had
Mr. Stonecipher attained age 65 and retired on January 1, 2000, the supplemental
payment under the agreement would have been approximately $210,000 per year.
- ------------------------
(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 were 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.
24
<PAGE>
Pursuant to Ms. Hopkins' agreement, she will receive an additional 13 years of
service under the Supplemental Executive Retirement Plan, provided she retires
from the Company on or after attaining age 62. The additional 13 years are not
reflected in the credited service shown above. In the event Ms. Hopkins
terminates employment from the Company before reaching age 62, no supplemental
benefits will be paid under the agreement. Had Ms. Hopkins attained age 65 and
retired on January 1, 2000, the supplemental payment under the agreement would
have been approximately $143,000 per year.
The Supplemental Pension Agreement with Mr. Sears provides that upon his
retirement, the Company will supplement his benefit under the Supplemental
Executive Retirement Plan by the amount necessary to equal the amounts he would
have received under retirement plans of McDonnell Douglas, if they had continued
in effect until his retirement. Had Mr. Sears attained age 65 and retired on
January 1, 2000, no the supplemental payment under the agreement would have been
due.
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 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, 31,200 of which vested at the end of 1999 and 15,600 of which will vest
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 an employer prior to his employment with McDonnell Douglas had he stayed
with that employer
25
<PAGE>
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").
The Employment Agreement terminates upon the earliest of May 16, 2001,
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.
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
will 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 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
26
<PAGE>
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 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.
EMPLOYMENT AGREEMENT WITH MS. HOPKINS. In 1998, the Company entered into an
agreement with Ms. Hopkins to secure her services as Senior Vice President and
Chief Financial Officer of the Company. Pursuant to the agreement, Ms. Hopkins
is to receive annual and long-term incentive compensation. Annual compensation
includes a base salary of $450,000 for 1999 and annual incentive compensation
for 1999 equal to at least 80% of salary. Ms. Hopkins was paid a signing bonus
of $750,000 when she joined the Company to compensate for the loss of cash and
equity compensation from her prior employer. Beginning in 2000, Ms. Hopkins'
annual incentive compensation is to be determined under the Company's Incentive
Compensation Plan. Ms. Hopkins' long-term incentive compensation is to consist
of annual grants of Performance Shares and Career Shares with grant values
consistent with those for other senior executive officers within her
classification. Upon joining the Company, Ms. Hopkins received a grant of
Performance Shares equal to 4.5 times her base salary and a grant of Career
Shares with a grant value of $180,000.
For the purpose of calculating Ms. Hopkins' benefits under the Company's
Supplemental Executive Retirement Plan, she will receive credit for 13
additional years of service, subject to her remaining with the Company until age
62. If the Company terminates her employment for any reason prior to
December 31, 2001, other than for an intentional violation of Company policies
or practices, she will be entitled to a lump-sum payment equal to the base
salary and target incentive awards she would have earned from the date of
termination through December 31, 2001 (less applicable withholding).
27
<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.
During 1999, the Committee was composed of five non-employee members of the
Board--Messrs. Biggs, Duberstein, Fery, Perry and Ms. Ridgway.
The goals of the Company's integrated executive compensation programs are to
1. Attract, retain, and motivate a highly competent executive team;
2. Align executive compensation with shareholder interests;
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 19. The Committee reviews
salary recommendations for executive officers and establish 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 a stable group of benchmark companies, which
includes major aerospace and other large industrial corporations. These
companies were selected on the basis of their comparable size and operating
performance; the group includes two of the aerospace and defense companies in
the S&P Aerospace Index used in the performance comparison graph on page 31.
Boeing executive officer salary levels for 1999 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 two of the Named Executive
Officers, in accordance with the terms of their employment agreements. Survey
data indicated that the 1999 base salaries of the Named Executive Officers,
including the Chief Executive Officer, 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.
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INCENTIVE AWARD DETERMINATION. 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 1999, Company and operating group performance was evaluated based on the
Company's overall profitability, as measured by earnings from operations, cash
flow, return on net assets, product development cost performance, and strategic
factors as measured by customer and employee satisfaction, safety, and
diversity. 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.
While the Company's total return to shareholders improved significantly in 1999,
for the five-year period December 31, 1994 through December 31, 1999, it was
still below the S&P 500 and did not rank among the top 50% of the selected
premier companies.
For 1999, the Committee's assessment was that the Company's financial
performance exceeded expected levels. Net earnings were up from 1998, and the
Company met or exceeded goals for inventory turns, facility consolidation,
overhead reduction, and the supplier base. The Company generated significant
free cash flow. The operating groups produced a record number of commercial
airliners, won significant military contracts, and expanded service businesses,
while divesting several non-core businesses.
Based on their contributions to the above-target performance, the six current
Named Executive Officers received 1999 annual incentive awards averaging 191% of
base salary. Because of the Company's performance overall, the Compensation
Committee awarded the Chief Executive Officer an incentive award of 264% of base
salary.
For the Named Executive Officers, the 1999 awards were paid out approximately
60% in cash and 40% in Boeing Stock Units, which are discussed below.
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 incentive award, based on the
Fair Market Value of Boeing stock on the day of the award. The BSUs vest three
years after the award. Each executive chooses in advance whether to have them
paid out in shares of Boeing stock, deferred stock units, or cash. The values of
the BSUs 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.
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 called 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 threshold stock price levels represent
predetermined compound five-year growth rates relative to the
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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 1999 Performance Shares granted to the Named Executive
Officers, including the Chief Executive Officer, are shown in the Long-Term
Incentive Plans--Awards in 1999 Table on page 22.
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's
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 responsibilities within the Company, the
number of Career Shares an executive is granted is based on the executive's pay
grade and salary. The values of the 1999 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 restricted stock units in specific
cases based on individual performance or for purposes of retaining or attracting
key executives. In 1999, the Committee determined that grants of restricted
stock units to three of the Named Executive Officers were appropriate. The
values of the restricted stock units granted to 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, 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 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. However, Performance Shares awarded to the Named Executive Officers do
not qualify as performance-based compensation that is fully deductible by the
Company under Section 162(m) of the Code.
John H. Biggs, Chairman
Kenneth M. Duberstein
John B. Fery
William J. Perry
Rozanne L. Ridgway
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PERFORMANCE GRAPH
The following graph shows changes in the value of $100 invested at year-end 1994
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.
The stock price performance shown in the graph is not necessarily indicative of
future price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BOEING S&P 500 S&P AEROSPACE
<S> <C> <C> <C>
94 100 100 100
95 170 138 165
96 233 169 213
97 217 225 221
98 146 289 204
99 189 351 199
</TABLE>
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PROPOSAL 2
APPROVAL OF AMENDMENT OF
THE 1997 INCENTIVE STOCK PLAN
The Board of Directors, subject to approval of the Company's shareholders, has
adopted an amendment to The Boeing Company 1997 Incentive Stock Plan (the
"Plan") to increase the number of shares that may be issued under the Plan.
Currently, the Plan authorizes 30 million shares of Boeing stock for issuance as
Performance Shares, restricted stock, stock options and stock appreciation
rights. The amendment would increase this by 31 million, to 61 million shares.
As of March 2, 2000, approximately 7,452,000 shares of Boeing stock were
available for grant under the Plan.
Since its adoption in 1997, the Plan has been used primarily for the Company's
Performance Share program. The Performance Share program is designed to tie
executive rewards more directly to the increase of shareholder value by
requiring a minimum compound average annual increase in share price of 10%
within a five-year period before any awards can be paid. As shown in the table
on page 22 headed "Long-Term Incentive Plans--Awards in 1999," the threshold,
target and maximum hurdles for the 1999 Performance Share awards are stock
prices of $58.38 (10% compound average annual growth), $69.80 (14% compound
average annual growth), and $72.91 (15% compound average annual growth),
respectively.
The Plan may also be used for the grant of stock options and restricted stock
units for purposes of retaining or recruiting key executives or rewarding
individual performance, and in connection with the assumption or substitution of
awards held by employees of acquired companies.
The Board believes that the adoption of the amendment to the Plan would, among
other things, enhance the long-term shareholder value of the Company by offering
opportunities to the Company's employees, officers, consultants, agents, and
advisors to acquire a proprietary interest in the Company and to link their
interests and efforts to the long-term interests of the Company's shareholders.
The Board believes that existing Performance Share and other grants under the
Plan have contributed substantially to the successful achievement of these
objectives.
Set forth below is a summary of certain important features of the amended Plan,
which summary is qualified in its entirety by reference to the full text of the
Plan, as amended, which is published in the proxy statement as Appendix A. The
proposed amendment is shown in italics in Appendix A.
DESCRIPTION OF THE PLAN
The Plan is administered by the Compensation Committee (the "Committee") of the
Board of Directors, whose members are all non-employee directors of the Company.
The Plan allows the Committee to make awards of Performance Shares, restricted
stock, stock options, and stock appreciation rights to employees, officers,
consultants, agents, advisors and independent contractors of the Company or of
entities directly or indirectly controlled by the Company or in which the
Company has a significant equity interest. As of March 2, 2000, approximately
112,500 persons were eligible to participate in the Plan. The types of awards
are more fully described below. The Committee may delegate its authority to a
committee of one or more senior executive officers who are also members of the
Board, except that it cannot delegate decisions regarding grants or awards to
employees subject to Section 16 of the Securities Exchange Act of 1934, as
amended.
An aggregate of 61 million shares of Boeing common stock is authorized for
issuance under the Plan. No more than 6 million shares are authorized for grant
as restricted stock awards that are not subject to restrictions based on the
achievement of specified performance goals, and no more than 3 million
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shares may be granted as restricted stock that is subject to restrictions based
on continuous employment for less than three years (except when employment is
terminated because the employee dies, retires, is laid off, or becomes
disabled). In any one calendar year, no individual may receive awards under the
Plan representing more than 1.2 million shares. The Board, in its sole
discretion, may increase the aggregate number of shares available under the Plan
by an additional 3 million shares if Boeing acquires another company and either
(a) assumes its outstanding stock option or stock grant commitments or
(b) makes grants in connection with the acquisition. The aggregate numbers of
shares available for awards and the price of stock options and number of shares
under outstanding awards will be adjusted in the event of changes in
capitalization, including a stock dividend, stock split, or recapitalization.
PERFORMANCE SHARE AND RESTRICTED STOCK AWARDS. The Committee may grant awards in
Boeing common stock or denominated in units of common stock. An award may be
contingent on continued service or the attainment of certain performance goals
related to profits, profit growth, profit-related return ratios, cash flow, or
shareholder returns, with such goals stated in absolute terms or relative to
comparison companies or indices to be achieved during a period of time. The
Committee may decide to include dividends or dividend equivalents as part of an
award and may accrue dividends, with or without interest, until the award is
paid.
STOCK OPTIONS. The Committee may grant either incentive stock options, which
comply with Section 422 of the Code, or nonqualified stock options. The
Committee will set option exercise prices and terms. Regardless of option type,
however, the exercise price of an option may not be less than 100% of the Fair
Market Value (for these purposes, the mean of the high and low per share trading
prices for Boeing common stock as reported in THE WALL STREET JOURNAL or such
other source as the Committee deems reliable) on the date of grant. The Fair
Market Value on March 2, 2000, was $36.2813. Options do not vest unless the
recipient remains employed for at least 12 months after grant. The term of an
incentive stock option may not be more than ten years.
STOCK APPRECIATION RIGHTS ("SARS"). The Committee may grant SARs to employees as
a right in tandem with the number of shares underlying stock options granted to
such employees under the Plan or on a stand-alone basis with respect to a number
of shares for which a stock option has not been granted. SARs are the right to
receive payment per share of the SAR exercised in stock or in cash equal to the
excess of the share's Fair Market Value on the date of exercise over its Fair
Market Value on the date the SAR was granted. An SAR may not be exercised unless
the recipient remains an employee for at least 12 months from the date of grant.
Exercise of an SAR issued in tandem with stock options will result in the
reduction of the number of shares underlying the related stock option to the
extent of the SAR exercise. The Committee may establish a maximum appreciation
value for any SAR.
Performance Share, restricted stock, stock option, and SAR awards are not
transferable or assignable. Payments under the Plan may be deferred to a future
date or dates (accruing interest) subject to certain terms and conditions. The
Company may deduct sufficient sums to pay withholding required for federal,
state, and local taxes and to pay amounts due to the Company from the recipient
of an award made under the Plan. The Plan may be amended by the Board of
Directors or the Committee, except that shareholder approval is required for any
amendment that would increase the number of shares authorized for issuance under
the Plan or if such approval is required by Section 422 or 162(m) of the Code.
The Plan became effective as of May 1, 1997 and will terminate on April 30,
2007, unless sooner terminated by the Board.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN: The Company has been advised by
counsel that the material federal income tax consequences to the Company and its
employees of the grant and exercise
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of options and SARs under existing and applicable provisions of the Code and
regulations will generally be as follows:
NONQUALIFIED OPTIONS AND SARS: A recipient will not have any income at the time
a nonqualified option or SAR is granted nor will the Company be entitled to a
deduction at that time. When a nonqualified option is exercised, the optionee
will have ordinary income (whether the option price is paid in cash or by
surrender of already owned Boeing common stock), in an amount equal to the
excess of the Fair Market Value of the shares to which the option exercise
pertains over the option price. When an SAR is exercised, the recipient will
recognize ordinary income equal to the sum of (a) the gross cash proceeds
payable and (b) the Fair Market Value on the exercise date of any shares
received. The Company will be entitled to a tax deduction with respect to a
nonqualified option or SAR at the same time and in the same amount as the
recipient, assuming that the deduction is not disallowed by Section 162(m) of
the Code (which limits the Company's deduction in any one year for certain
remuneration paid to certain executives in excess of $1 million) or otherwise
limited under the Code.
INCENTIVE STOCK OPTIONS ("ISOS"): An optionee will not have any income at the
time an ISO is granted. Furthermore, an optionee will not have regular taxable
income at the time the ISO is exercised. However, the excess of the Fair Market
Value of the shares at the time of exercise over the exercise price will be a
preference item that could create an alternative minimum tax liability. If an
optionee disposes of the shares acquired on exercise of an ISO after the later
of two years after the grant of the ISO and one year after exercise of the ISO,
the gain (i.e., the excess of the proceeds received over the option price), if
any, will be long-term capital gain eligible for favorable tax rates under the
Code. If the optionee disposes of the shares within two years of the grant of
the ISO or within one year of exercise of the ISO, the disposition is normally a
"disqualifying disposition," and the optionee will recognize ordinary income in
the year of the disqualifying disposition equal to the excess of the amount
received for the shares (or, in the case of a gift, the Fair Market Value of the
shares at the time the ISO is exercised) over the option price. The balance of
the gain or loss, if any, will be long-term or short-term capital gain depending
on whether the shares were held for the short-or long-term capital gains holding
periods.
The Company is not entitled to a deduction as the result of the grant or
exercise of an ISO. If the optionee has ordinary income taxable as compensation
as a result of a disqualifying disposition, the Company will be entitled to a
deduction at the same time and in the same amount as the optionee, assuming that
the deduction is not disallowed by Section 162(m) of the Code.
Approval of the amendment to the Plan will require the affirmative vote of a
majority of the outstanding shares of stock present in person or by proxy and
entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR PROPOSAL 2.
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PROPOSAL 3
SHAREHOLDER PROPOSAL
ON FOREIGN 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
"RESOLVED: Shareholders request the Company to disclose all significant
promises (including technology transfers), made to foreign governments
or foreign firms in connection with foreign military sales, intended to
offset their US dollar cost of weapons purchased by foreign nations."
PROPONENTS' SUPPORTING STATEMENT
"What are Offsets?
"Offsets are agreements by U.S. weapons manufacturers and the U.S. government to
direct some benefits--usually jobs or technology--back to the purchasing country
as a condition of sale. The value of offsets sometimes exceeds the weapons'
cost.
"Direct offsets transfer purchasing dollars and/or work and military technology
(often through licensing or joint production) to the recipient country to
produce a U.S. weapon system, its components, or sub-components.
"Indirect offsets may involve investments in the purchasing country,
counter-trade agreements to market foreign goods, or transfers of commercial
technology.
"U.S. taxpayers finance offsets by (1) paying for the research and development
of weapons and (2) providing grants, loans and loan guarantees for the sale.
Offsets also lead to the loss of U.S. jobs.
"Are Offset Agreements Proprietary?
"The U.S. arms industry guards information on offsets closely, claiming
'proprietary privilege'. However, purchasing countries often disclose such
information for their own political purposes, e.g., to convince their citizens
that they are gaining some tangible benefits from the millions or billions of
dollars they are spending on arms.
"The proponents believe that insofar as U.S. arms manufacturers (1) engage in
foreign policy by negotiating private offset agreements with foreign
governments, and (2) export domestic jobs while claiming that foreign military
sales create jobs, they forfeit their proprietary claims to this information.
Sound public policy demands transparency and public debate on these matters.
"Offset Examples
"Last year, Boeing Company offered lucrative production-sharing contracts with
Israeli military manufacturers, in connection with the company's bidding on a
contract with Israel. The NY TIMES
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reported that Boeing promised Israel $500 million in production-sharing business
in Israel, and then raised the amount to $1 billion in local investments.
"Between 1993 and 1996 U.S. defense companies entered into new offset agreements
valued at $15.1 billion in support of $29.1 billion worth of defense contracts.
(Executive summary, Commerce Department, Bureau of Export Administration report,
'Offsets in Defense Trade 1998'). It seems that every dollar a U.S. company
received from an arms sale associated with offsets returned 52 cents in offsets
to the purchasing country.
"The $1.8 billion sale of F/A-18 fighters to Spain in 1982 included
$1.5 billion in offsets such as agreements to market Spanish-made steel coils,
chemicals, sunflower seed oil, sailboats, paper products, zinc and marble in the
United States.
"The $2.3 billion sale of F/A-18 fighters to Canada in 1982 included offsets
that could total 150 percent of the contract value, according to the OMB.
"Arms Exports Don't Create Jobs
"The faith-based proponents submit this resolution for Board consideration
because arms exports do not create jobs. Current weapons proliferation and the
export of jobs and technology through offsets raise profound moral and ethical,
as well as fiscal, questions that shareholders should address."
BOARD OF DIRECTORS' RESPONSE
Boeing is a global company conducting business in the international marketplace.
A portion of the Company's international business consists of the sale of
military equipment. These sales of military equipment and services are made only
in strict compliance with U.S. government regulations that control where
products may be sold overseas and what products may be exported. The Department
of Defense identifies countries whose policies are determined to be hostile to
American values and prohibits military sales in those countries. Government
regulations also impose strict licensing controls on the export of equipment and
technology to protect the long-term economic and national security interests of
the United States. Boeing complies with all these U.S. government restrictions
and regulations.
Contractual agreements for offset transactions, such as technology licensing,
production sharing or co-marketing, are commonplace in international sales for
both commercial and military products. TO THE EXTENT THE COMPANY ENGAGES IN SUCH
TRANSACTIONS, IT DOES SO ONLY IN COMPLIANCE WITH U.S. GOVERNMENT REGULATIONS AND
AS NEGOTIATED WITH THE CUSTOMER. FAILURE TO ENTER INTO SUCH ARRANGEMENTS COULD
RESULT IN THE LOSS OF CUSTOMERS, AND COULD TRANSLATE INTO LOST JOBS AND
DIMINISHED SHAREHOLDER VALUE. The Company believes that robust and bilateral
trading leads to job creation at both ends of international transactions and is
beneficial to international economic stability and growth.
Under U.S. government regulations, the Company is required to report extensive
information regarding export of military products to the Department of State,
including specific information with respect to offset transactions. This
government regulation is evidenced by the Defense Offsets Disclosure Act of
1999, which requires a description of any offset agreements with respect to
foreign military sales or direct commercial sales and establishes a National
Commission of government and private sector individuals to review the use of
offsets in the defense trade. The comprehensive commission report will review
the collateral impact of offsets on industry sectors other than those of the
contractor, the role of offsets with respect to competitiveness, and the impact
on national security of the use of co-production, subcontracting and technology
transfers.
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The Company understands that some shareholders may wish to know details of the
Company's military sales contracts with respect to offset transactions. However,
much of the information requested is competitively sensitive. In addition, many
offset arrangements are subject to confidentiality agreements with the customer.
United States law recognizes this fact and affords confidential treatment to
information that is reported to the government regarding offset transactions.
Publication of such information would put Boeing at a disadvantage in its
business, may breach contractual arrangements and would not be in the best
interest of the Company or the majority of its shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 3.
PROPOSAL 4
SHAREHOLDER PROPOSAL
ON LINKING EXECUTIVE COMPENSATION
TO SOCIAL PERFORMANCE
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
"RESOLVED: Shareholders request the Board to institute a special
Executive Compensation Review to find ways to link compensation of its
key executives not only with fiscal performance but to social corporate
performance as well. This shall include, but not be limited to, the
company's efforts to promote basic human rights domestically and
internationally within its operations. It shall also include a
comparison of the compensation packages for company officers with the
lowest paid company employees in the U.S. and around the world. This
review's results shall be made available to requesting shareholders by
September 1, 2001."
PROPONENTS' SUPPORTING STATEMENT
"WHEREAS: Increases in executive compensation outpace employee wage increases.
Base pay of CEOs accelerated 6.1% in 1998, while overall U.S. wages and benefits
climbed 3.5%.
- "According to The Wall Street Journal's annual Executive Pay survey (Apr.
8, 1999) 'the really big payoff has come from their blizzard of option
exercises'. It showed that 160 corporate leaders representing 350 U.S.
businesses exercised stock options in 1998 for a median gain of
$2,770,185, up from $1,868,268 in 1997. Our CEO, Philip M. Condit, while
not taking a bonus in 1998 due to poor performance, had a total of
realized option gains of $1,835,000 and unrealized option gains of
$2,633,100, at a time when total Boeing shareholder return for 1998
declined sharply from the prior year.
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- "Corporate executives themselves believe CEO pay is too high. When
corporate executives nationwide were asked in 1997 'How would you assess
compensation of top officers of large U.S. corporations?', 47% responded
'too much'. (BUSINESS WEEK, May 12, 1997).
- "While the company's performance recently witnessed a turnaround, its
previous two years' performance sent the stock sliding. This took place
during a time when our company was challenged about social issues
domestically and internationally. Domestically the U.S. Labor Department
filed three complaints against Boeing in July, 1999 regarding alleged
racial discrimination in its operations in Seattle, Mesa and Wichita.
Meanwhile the company refused to support shareholder resolutions in 1998
and 1999 calling for adherence to basic human rights AT ITS OWN OPERATIONS
IN CHINA. In its February 25, 2000 Annual Report on Human Rights, the U.S.
State Department criticized China for a 'marked deterioration in human
rights.' According to the New York Times (Feb. 1, 2000), Beijing has
stepped up its intimidation against Catholic clergy loyal to the Pope and
has destroyed church buildings.
- "Shareholders need to be vigilant and challenge executive pay packages
that reward poor social or financial corporate performance, asking
themselves: if top officers' pay for a given year should be reduced if the
company were to suffer from poor corporate citizenship that harms our
corporate image, such as costly fines, protracted labor tensions, poor
image related to lobbying on behalf of corrupt governments, or significant
loss of market share to Airbus.
- "IBM has reported to shareholders how it incorporates social issues into
its compensation philosophy. We believe this reflects an understanding of
the need to balance social criteria with fiscal concerns."
BOARD OF DIRECTORS' RESPONSE
The Compensation Committee of the Board of Directors, which consists of five
non-employee directors, oversees all the Company's executive compensation
programs. As explained in the Committee's report beginning on page 28, the goals
of the Company's integrated executive compensation programs are to attract,
retain and motivate a highly competent executive team, align executive
compensation with shareholder interests, link pay to Company, group and
individual performance, and achieve a balance between incentives for short-term
and long-term performance.
The Company recognizes that, in addition to delivering solid, sustained
financial performance, it must generally be a socially responsible corporate
citizen, both domestically and in other countries where it operates throughout
the world. In fact, specific performance criteria for the president of each
operating group address how the group is performing with respect to diversity.
The Company is also 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 Company is not insensitive to issues of individual rights and
environmental degradation in other countries where the Company does business.
The Board agrees that executive compensation must be closely scrutinized; this
is the function performed by the Compensation Committee. The Board believes,
therefore, that the time, effort and expense necessary to complete the special
review and produce the report requested is not justified.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 4.
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PROPOSAL 5
SHAREHOLDER PROPOSAL
ON CUMULATIVE VOTING
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.
However, approval of this proposal would not itself establish cumulative voting.
If approved, the proposal would serve as a recommendation to the Board. The
Board would still be required to consider whether a change in the present system
of voting is in the best interests of the Company. Adopting cumulative voting
would require amendment of the Company's Certificate of Incorporation. The
affirmative vote of at least 75% of the outstanding shares would be required for
approval of a shareholder amendment to provide for cumulative voting for
directors.
SHAREHOLDER RESOLUTION
"RESOLVED: REINSTATE CUMULATIVE VOTING. The shareholders of Boeing
request the Board of Directors take the necessary steps to adopt a
policy of cumulative voting. Cumulative voting means each stockholder
may cast votes for director candidates equal to the number of shares
owned, multiplied by the number of directors to be elected. Thus
shareholders may cast all their votes for a single candidate or split
votes between multiple candidates."
PROPONENTS' SUPPORTING STATEMENT
"Why reinstate Cumulative Voting for the election of Boeing Directors?
- 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.
- Cumulative Voting was required by Boeing's corporate By-laws as recently
as 1986.
- Cumulative voting guarantees that any shareholder with a significant stake
is assured a voice on the board.
- It also encourages management to maximize share value by making it easier
for a would-be acquirer to gain board representation.
- Cumulative voting allows a significant group of stockholders to elect a
Director or Directors of its choice--bringing independent perspectives to
board decisions.
"What issues highlight the need to maximizing [sic] Boeing's share value through
improved corporate governance practices such as Cumulative voting?
"Boeing's dismal earnings in 1998 led 63 of the U.S. top-rated mutual funds
to shed their stock in the 4(th) quarter of 1998.
AVIATION WEEK, March 1, 1999
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"Boeing buys back old Boeing 757s from British Airways to facilitate an
order for new Boeing 717s. Boeing loses 717 order to Airbus days later.
PRESS-TELEGRAM, October 2, 1999 and October 12, 1999
"The Federal Aviation Administration is considering issuing an airworthiness
directive ordering inspection of and possible replacement of generators on
Boeing 777s.
USA TODAY, Nov. 3, 1999
"(2-engine 777 reliability is critical as it is in direct competition with
the 4-engine A340 on long over-water flights)
"If a company's performance reverses significantly, it is time for the
shareholders to send a message to the Board, reminding them that they have to
hold management--and the Board themselves--to a higher standard.
"VOTE YES ON PROPOSAL 5 TO:
REINSTATE CUMULATIVE VOTING"
BOARD OF DIRECTORS' RESPONSE
The Company believes that cumulative voting would undermine effective
functioning of the Board of Directors, by introducing factionalism and discord
within the Board. 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 narrow interests 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
and all of its shareholders well and will continue to work as successfully in
the future as it has in the past. Ten of the Company's 12 directors are
independent, non-employee directors. All are nominated by the Company's
Governance and Nominating Committee, which consists entirely of independent
directors. This guarantees the continued independence of the Board in
representing all shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 5.
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PROPOSAL 6
SHAREHOLDER PROPOSAL
ON AN 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: INDEPENDENT LEAD DIRECTOR, Boeing shareholders request the
Board of Directors take all necessary steps to adopt a policy of
requiring an independent outside Lead Director when the office of Chair
and CEO are held by the same person."
PROPONENT'S SUPPORTING STATEMENT
"An independent outside Lead Director will enable independent oversight of
management to improve Boeing performance after these reports:
- 'Boeing has become the gang that can't shoot straight,' said Scott
Hamilton, editor of COMMERCIAL AVIATION REPORT. 'Every time they solve a
problem, another crops up.'
USA TODAY, Nov. 3, 1999
- 'Clearly, there are ongoing managerial issues at Boeing,' said Barbara
Brooks of Strategy Group, a corporate strategy consultant. 'Is management
too insular?' Something endemic is happening.
USA TODAY, Nov. 3, 1999
- There are recent stories on massive production problems and management
confusion at Boeing--a corporate unraveling which, as FORTUNE wrote early
this year, has been a 'truly ugly story.'
WASHINGTON POST, Nov. 3, 1999
- Boeing does not have a proactive board--industry analyst Paul Nisbet.
AVIATION WEEK, Sept. 7, 1998
"A lead director is in the best interest of shareholders. A lead director helps
establish a formal structure to promote an active role by independent
directors--Investor Responsibility Research Center.
"CalPERS, a $100 billion fund and 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 Chair and CEO (like Boeing), the board names an independent
outside director.
"An independent lead director will increase the likelihood that a company's
independent directors will actively monitor and evaluate the performance of the
CEO and are not beholden to the CEO. This would enhance the ability of a
company's board of directors to make mid-course corrections rather than wait
until the company is in a crisis to act.
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"The Code of Best Practice from the Cadbury Report said that if the roles of
Chair and CEO are combined then there must be a strong and independent element
on the board with a recognized senior member.
"Many boardrooms today have one independent director who is recognized by
management and the independent directors as a strong leader. Publicly
identifying a person as the leader of the independent directors will further the
goal of providing greater accountability for the company's performance.
"Adopt as policy an INDEPENDENT LEAD DIRECTOR when the offices of Chair and CEO
are held by the same person to ensure that Boeing will react to business trends
in a timely manner. Vote yes for an:
"INDEPENDENT LEAD DIRECTOR YES ON 6"
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 27 years, a majority of the Board has been
composed of independent directors who have never been employees of the Company.
During the last 21 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, 10 of the
Company's 12 directors are independent of the Company. Each of those members is
a nationally renowned current or former member of government, academia or
business. No directors who are employees serve on any of the Board's four
standing committees. Each of the Company's independent directors brings to bear
substantial leadership experience in areas relevant to the Company's business,
including service on other boards of directors. In effect, the Board has
consistently been composed of "independent lead 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 develops 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 outside directors of the Board meet in executive session at least
twice a year. The Board annually reviews the operating plan and long-range
strategic issues. These activities demonstrate Board leadership and
independence.
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 6.
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PROPOSAL 7
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. Approval of this proposal would require the affirmative vote of a
majority of the shares of Boeing stock present in person or by proxy and
entitled to vote at the Annual Meeting. However, approval of this proposal would
not itself repeal the Board classification provisions found in the Company's
By-Laws. If approved, the proposal would serve as a recommendation to the Board.
The Board would still be required to consider whether a change in the present
system of electing directors is in the best interests of the Company.
Eliminating the classified Board would require amendment of the Company's
By-Laws. Under the Company's By-Laws, the affirmative vote of at least 75% of
the outstanding shares would be required for approval of a shareholder amendment
to eliminate the classified Board.
SHAREHOLDER RESOLUTION
"RESOLVED: ADOPT PROPOSAL THAT WON 51% OF THE YES-NO SHAREHOLDER VOTES
CAST AND 49.9% OF VOTES CAST INCLUDING ABSTENTIONS IN 1999: ANNUAL
ELECTION OF ALL DIRECTORS. Boeing shareholders request the Board of
Directors take all necessary steps to adopt annual election of all
directors as corporate policy.
"This includes the requirement that a majority vote of outstanding
shares, voting on a single resolution, is required to change this
resolution once enacted. This resolution will not affect the unexpired
terms of current directors."
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.
"Directors need greater accountability. After pulling out of a $4 billion
corporate nose-dive in 1998, new orders are now trailing Airbus by a 2-to-1
margin. The quality and performance of these major Boeing programs is
questioned:
- 747, 757, 767 and 777 jetliners
- F/A-18 Super Hornet
- Delta III launch vehicle
- Apache attack helicopter
- Chinook 44-seat helicopter
"Meanwhile management at the highest level of the company has stepped backwards.
The key Board of Directors Compensation and Nominating committees have 5
identical directors--with these independence conflicts:
- Mr. Biggs is an interlocking director with Mr. McDonnell at Ralston
Purina.
- Mr. Perry is a director for United Technologies, a major Boeing supplier.
- Mr. Pigott has held his board seat for 28 years.
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"SHAREHOLDERS NEED THE RIGHT TO VOTE ANNUALLY ON SPECIFIC CONFLICTS OF INTEREST
AND MINIMAL COMMITMENT ON THE BOEING BOARD IN THE PROPONENT'S OPINION:
- 3 directors own minimum stock in the proponent's opinion.
- 5 Boeing directors sit on the same outside boards as other Boeing
directors.
- Mr. Pigott is entrenched with a 28-year term.
- Mr. Perry is a director for United Technologies, a major supplier of
engines for Boeing jetliners.
"WHAT NEWS REPORTS HIGHLIGHT CHALLENGES FOR BOEING DIRECTORS?
"Boeing was forced to temporarily halt delivery of four commercial jet models
for several days because a cockpit part to protect electronics from condensation
was made improperly and could burn too easily.
ASSOCIATED PRESS, November 4, 1999
"Boeing gets stinging report on F/A-18 Super Hornet. Company has $8 billion
contract at risk. The General Accounting Office cites 84 problems with the
fighter-bomber and recommends to defer funds. Deficiencies include ability to
accelerate, turn, climb and roll.
LOS ANGELES TIMES, June 17, 1999
"The first 2 Delta III failures cost Boeing more than $100 million and set back
its Delta III program by more than 2 years.
ASSOCIATED PRESS, Nov. 18, 1999
"Many Boeing 'Apache' attack helicopters stay grounded. Half of the fleet of 743
Apaches could take months to repair, the Pentagon said.
REUTERS, Nov. 9, 1999
"The discovery of a crack in a RAF [Royal Air Force] helicopter's system led to
hundreds of Chinooks grounded across the world, including the U.S. Army's
466-strong fleet.
GUARDIAN, Aug. 11, 1999
"The best boards continue to raise the bar, convinced that a stronger board can
only help improve competitiveness--BUSINESS WEEK Dec. 8, 1997. Vote yes for:
"ANNUAL ELECTION OF ALL DIRECTORS
YES ON 7"
BOARD OF DIRECTORS' RESPONSE
The Board of Directors has evaluated the changes suggested by the proposal on
several occasions throughout the year. This evaluation has included guidance
from outside advisors, including a consultant on corporate governance issues.
The Board of Directors still believes that its classified Board structure, which
has been in place since it was approved by the shareholders in 1986, continues
to be in the best interests of the Company and its shareholders.
Under the Company's By-Laws, 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. An active, professional board benefits in many ways
from classifying its directors. Most notable among these benefits are increased
stability, improved long-term planning and enhanced independence.
44
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The three-year staggered terms are designed to provide stability and 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, as well as its product strategy.
Directors who have experience with the Company and knowledge about its business
are a valuable resource and are better positioned to make the fundamental
decisions that are best for the Company and its shareholders. The Board observes
that numerous well-respected U.S. corporations and institutional investors have
classified boards.
The Board believes that electing directors to staggered three-year terms
enhances long-term strategic planning. We believe that the Board continuity made
possible by the classified Board structure 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 and its shareholders. The
annual election of only one-third of the Board also helps to prevent abrupt
changes in corporate policies, based on misplaced short-term objectives, that
might result if the entire Board could be replaced in one year.
We believe that electing directors to three-year, as opposed to one-year, terms
also enhances the independence of non-management directors by providing them
with a longer assured term of office. The existence of three-year terms for
directors also assists the Company in attracting director candidates who are
willing to make a longer-term commitment to the Company.
The Board also believes that a classified Board structure enhances the Board's
ability to negotiate the best results for shareholders in a takeover situation.
One benefit of having a classified board is that it encourages a person seeking
to obtain control of the Company to negotiate with the Board. As at least two
annual shareholders meetings generally will be required to effect a change in
control of the Board, the classified structure gives the incumbent directors the
time and leverage necessary to evaluate the adequacy and fairness of any
takeover proposal, negotiate on behalf of all shareholders and weigh alternative
methods of maximizing shareholder value for all shareholders. It is important to
note, however, that although the classified Board is intended to cause a person
seeking to obtain control of the Company to negotiate with the Board, the
existence of a classified board will not, in fact, prevent a person from
accomplishing a hostile acquisition.
THE BOARD BELIEVES THAT THE BENEFITS OF THE CURRENT CLASSIFIED BOARD STRUCTURE
DO NOT COME AT THE COST OF DIRECTORS' ACCOUNTABILITY TO SHAREHOLDERS. WE BELIEVE
THAT DIRECTORS ELECTED TO THREE-YEAR TERMS ARE JUST AS ACCOUNTABLE TO
SHAREHOLDERS AS DIRECTORS ELECTED ANNUALLY, SINCE ALL DIRECTORS ARE REQUIRED TO
UPHOLD THEIR FIDUCIARY DUTIES TO THE COMPANY AND ITS SHAREHOLDERS, REGARDLESS OF
THE LENGTH OF THEIR TERM OF OFFICE. The annual election of one-third of the
directors provides shareholders with an effective means to effect change and
communicate their views on the performance of the Company and its directors.
The Proponent's Supporting Statement references many matters that the Board does
not believe relate to a classified Board, such as the tenure of directors,
directors' positions on other boards, and director stock ownership. Approval of
the proposal would have no impact on any of these issues.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 7.
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PROPOSAL 8
SHAREHOLDER PROPOSAL
TO PAY DIRECTORS SOLELY IN STOCK
A shareholder has advised the Company that it intends to present the following
resolution at the Annual Meeting. In accordance with applicable proxy
regulations, the proposed resolution and supporting statement, for which the
Board of Directors and the Company accept no responsibility, are set forth
below. Approval of this proposal would require the affirmative vote of a
majority of the outstanding shares of Boeing stock present in person or by proxy
and entitled to vote at the Annual Meeting.
SHAREHOLDER RESOLUTION
"RESOLVED: PAY NON-EMPLOYEE DIRECTORS SOLELY WITH COMPANY STOCK AND TIE
THEIR PAY TO PERFORMANCE. Boeing shareholders request the Board of
Directors to revise the Company's Compensation of Directors program by
adopting a policy of paying annual Board retainer and meeting fees for
non-employee directors based solely on the value of Company shares and
how well Boeing performs compared with its peers.
- The revised program shall award Deferred Stock Units in lieu of cash. The
annual retainer amount will be $35,000 (maximum) for Board work.
- The issuance of Deferred Stock Units shall replace the current annual
retainer fees, daily meeting fees and Deferred Compensation Plan.
- A bonus of Deferred Stock Units worth $10,000 (maximum) may be awarded at
the annual meeting, on a pro-rated basis, only if the increase in the
Company's earnings per share (EPS) places the Company between the 60(th)
and 80(th) percentiles in this category compared with all of the other
companies that comprise the S&P Aerospace Index.
- An additional pro-rated bonus equal to $15,000 (maximum) may be awarded if
the increase in Boeing's EPS places it at or above the 80(th) percentile.
- At their first annual meeting, non-employee directors may receive an
initial option to purchase 3,000 (maximum) shares of common stock. At each
subsequent meeting, the director may receive an option to purchase an
additional 2,400 (maximum) shares only if Boeing's EPS over the prior year
places it at or above the 50(th) percentile."
PROPONENT'S SUPPORTING STATEMENT
"Boeing is the largest aerospace company in the world. An enormous amount of
prestige goes along with sitting on the Company's Board of Directors. Boeing
will never experience a shortage of qualified applications from business leaders
who wish to serve as Directors.
"This initiative authorizes the Board to reduce their annual compensation by 3%.
However, directors will be wholly compensated with shares of stock. In effect,
the revised plan will challenge the Board to work effectively to ensure that
Boeing's value keeps pace with inflation. Additionally, directors can earn
bonuses if the company performs well compared with its peers.
"In last year's ANNUAL REPORT, the Board promised to review all its programs
with the overriding goal of achieving 'a level of profitability that will put us
up among the leaders in industry in annual returns to shareholders.'
46
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"There are 14 aerospace companies in the Fortune 500. Among them, Boeing ranked
1 in terms of revenue but fell to 3(rd) in gross profits. In profits as a
percentage of shareholder equity, assets and revenues, it ranked at the bottom
in the 12(th), 13(th), and 14(th) positions, respectively. In annual returns to
shareholders it ranked 13(th), only one spot removed from dead last.
"Our directors undoubtedly have the courage to stand behind their convictions.
Committing themselves to a compensation program based solely on stock ownership
and performance is a demonstration of that courage. It is a forceful message to
shareholders that the Board stands confidently ready to defend its goals and to
share in the fruits of having achieved them."
BOARD OF DIRECTORS' RESPONSE
The aerospace industry is complex and highly competitive. To remain a world
leader in this business, Boeing must be able to attract and retain non-employee
directors of the highest caliber, who bring a diversity of talents and
experience to their Board service. In order to do this successfully, the Company
must offer a fair, competitive and flexible non-employee director compensation
program. (Directors who are employees of the Company do not receive any
compensation for their service as directors.) The Board believes that the
compensation program suggested by the proposal is unduly restrictive when
applied to large complex businesses such as the Company's and could deprive the
Board and the Company of the best director candidates. Limiting compensation as
proposed would restrict the persons who would be able to serve as directors to
those who had independent cash incomes from other sources. The proposal also
places undue emphasis on short-term gains rather than the enhancement of the
Company's long-term goals. In fact, the proposal is unnecessary. IN 1998 AND
1999, DIRECTORS DEFERRED AN AVERAGE OF 64% OF THE COMPENSATION THEY COULD HAVE
RECEIVED IN CASH INTO STOCK UNITS. AS SHOWN IN THE STOCK OWNERSHIP TABLE ON
PAGE 17, THESE DEFERRALS HAVE RESULTED IN THE BOARD MEMBERS AMASSING SIGNIFICANT
ECONOMIC INTEREST IN THE COMPANY. IN ADDITION, UNDER THE COMPANY'S
SHAREHOLDER-APPROVED 1992 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS, EACH
DIRECTOR RECEIVES AN INITIAL OPTION FOR 3,000 SHARES AND AN ADDITIONAL OPTION
FOR 2,400 SHARES EACH YEAR.
THE BOARD BELIEVES THAT THE CURRENT COMPENSATION PROGRAM IS FAIR AND APPROPRIATE
IN LIGHT OF THE OBLIGATIONS AND RESPONSIBILITIES OF A TOP TEN FORTUNE 500
COMPANY DIRECTOR. AS EXPLAINED ON PAGE 11, THE COMPANY'S CURRENT DIRECTOR
COMPENSATION PACKAGE PROVIDES FOR A SUBSTANTIAL AMOUNT OF DIRECTOR COMPENSATION
TO BE PAID IN DEFERRED STOCK UNITS UNDER THE DEFERRED COMPENSATION PLAN FOR
DIRECTORS, AS WELL AS ALLOWING DIRECTORS TO DEFER ALL OR PART OF THEIR CASH
COMPENSATION IN THE FORM OF STOCK UNITS.
The Board believes that the equity portion of the compensation package
appropriately aligns directors' interests with those of the shareholders. In
fact, the Board of Directors compensation arrangements are frequently reviewed
to ensure that they reflect an appropriate level of equity. The cash portion of
the compensation package provides directors the flexibility to use cash as their
particular needs may require.
The Board believes that adoption of the proposal would impose an inflexible
policy regarding compensation of non-employee directors that could restrict the
Company's ability to compete with other companies in attracting and retaining
qualified non-employee directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 8.
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PROPOSAL 9
SHAREHOLDER PROPOSAL
ON DEDUCTING CERTAIN LITIGATION COSTS
FROM EXECUTIVE COMPENSATION
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
"WHEREAS, Boeing, has historically countered claims of unlawful
misconduct by Boeing agents that result in civil lawsuit, by aggressive
litigation to discourage further suits, has served only to increase
incidence and severity of misconduct, at substantial cost and risk of
investment to the Shareholders. Such costs include litigation costs
exceeding $500,000 in Trial Attorney fees per case alone; with total
litigation costs being a significant percentage of Net Corporate Profits
in recent years.
"A pattern of 'Discovery Violations' by Corporate Attorneys (Case
Managers) and retained 'Trial Attorneys', has become a normal course of
conduct at Boeing, which under 'FISONS'(1) legal precedent, may result
in sanctions by a trial court:
'IN AMOUNT THAT WILL DETER THE PERPETRATOR OF DISCOVERY
MISCONDUCT, FROM EVER CONTEMPLATING SUCH AN ACT AGAIN.'
"Such sanctions may equal the Civil Law Limitation of 25% of net
earnings.
"Resolved, that shareholders request the Board of Directors to take all
necessary steps to provide costs associated with litigation for UNLAWFUL
MISCONDUCT by Agents of Boeing, where JUDGMENT IS RETURNED IN WHOLE OR
PART, SUPPORTING MISCONDUCT alleged by a claimant, shall be paid out of
the 'Discretionary Compensation Funds' set aside for Executive
Compensation by the Compensation Committee; and the monetary value of
any other tangible and/or intangible benefits not specifically excluded
as 'Executive Base Salary', until such funds are exhausted.
"This Resolution recommends that the Board of Directors mandate that
Management be at risk of loss of Executive Benefits--instead of risk to
Shareholders Equity and Dividends--to offer more than lip service and
sham of lawfully compliant Corporate Procedure overlay (WHICH IS
COUNTERMANDED AND/OR IMPLEMENTED AS UNLAWFUL MISCONDUCT THROUGH
FUNCTIONAL ORGANIZATION POLICY AND PROCEDURE)."
PROPONENT'S SUPPORTING STATEMENT
"The facts on which this proposal is based came to light in litigation by the
proponent. He prevailed in Suit for Disability Discrimination. He was described
as an exemplary, 'nearly irreplaceable' employee
- ----------------
"(1) Washington State Physicians Insurance Exchange & Association, et al,
Respondent, v. Fisons Corporation, Appellant; 122 Wash 2(nd) 299; P.2d
1054; 1993 Wash. LEXIS 241; CCH Prod. Liab. Rep. P13,675."
48
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of twelve years. Yet, when he became ill, requested accommodations that would
have retained his expertise and considerable earning capacity for Boeing, 'AT NO
COST,' it was denied.
"The lawsuit, showed fault for Boeing's 'Functional Organizations' engaging in
unlawful misconduct, lay with management. Damages and costs awarded exceeds
[sic] $1.4 million. Records Subpoenaed from Boeing's Trial Attorneys showed
their fees alone (to end of Jury Trial) were over $300,000. Post Trial Motions
and Appeal fees raised that to $500,000. Another $250,000 was probably expended
in-house.
"In Martini; Herrick; Jones; Williams v. Boeing; (et. al.), 'Fisions
[sic]--Smoking Gun' Discovery Violations occurred; responsibility for which
rests with 'Corporate Case Managers.'
"Dozens of potentially 'Worthy' cases currently do not reach trial only because
of financial limitations of claimants in litigation against Boeing.
"With the advent of ADA, State Law mandates and litigation support for claimants
against employer misconduct (Particularly Discrimination); Punitive Damage
awards (not applicable in Washington State); increased public awareness of the
costs to Society of such conduct; and degree of corporate liability for such
conduct; IT IS IMPERATIVE THAT CORPORATE MANAGEMENT TAKE AFFIRMATIVE STEPS TO
END GAMING WITH SHAREHOLDER FUNDS, AT ALL LEVELS."
BOARD OF DIRECTORS' RESPONSE
This proposal and supporting statement contain a number of statements about
Boeing and various litigation matters which the Company believes are inaccurate
It is focused not on policies and standards for setting executive compensation,
but rather on Boeing's policies and standards for defending against allegations
of unlawful misconduct by its agents and for funding the costs of such
litigation. However, by requiring the Company to set an artificial cap on
executive compensation and then linking the payment of that compensation to the
funding of litigation costs, the proposal would adversely affect both the
Company's ability to litigate such claims and its ability to set appropriate
compensation policies. The proposal would affect the Company's litigation
strategy by forcing management to take into account the potential effect of an
adverse judgment on compensation for executives who likely would not in any way
have been associated with or responsible for an adverse judgment. By
establishing limits on executive compensation that are not based on job market,
competition or individual or overall Company performance, the proposal would
remove from the Compensation Committee the flexibility to implement executive
compensation programs that would attract and retain the experienced and
dedicated leaders necessary for the Company's business. Therefore, the Board
believes it would not be in the best interest of the shareholders to establish
such an arbitrary limitation on the compensation paid to its executive officers.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 9.
The Company will provide the names and addresses of the proponents of the
shareholder proposals above and the number of shares they hold upon oral or
written request for such information. Requests may be sent to the Corporate
Secretary, The Boeing Company, P.O. Box 3707, Mail Code 13-08, Seattle,
Washington 98124-2207, or submitted by calling (206) 544-1056.
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SHAREHOLDER INFORMATION
In accordance with Delaware law, a list of shareholders of record entitled to
vote at the Annual Meeting will be available at the location of the Annual
Meeting on May 1, 2000. In the ten days prior to the meeting, the list will be
available on business days between the hours of 9 a.m. and 4 p.m. P.S.T., at the
office of the Corporate Secretary at 7755 East Marginal Way South, Seattle,
Washington. A shareholder may examine the list for any legally valid purpose
related to the Annual Meeting.
ANNUAL REPORT AND FORM 10-K
The 1999 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,
1999, 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. The Form 10-K, this proxy statement and the 1999
Annual Report are also available at the Company's World Wide Web site,
HTTP://WWW.BOEING.COM.
SHAREHOLDER PROPOSALS FOR 2001
The Company's next annual meeting will be held on April 30, 2001. 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 20, 2000. 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 31,
2000 and no later than January 30, 2001. A copy of the pertinent By-Laws
provisions is available on request to the Corporate Secretary, The Boeing
Company, P.O. Box 3707, Mail Code 13-08, Seattle, Washington 98124-2207.
THE BOEING COMPANY
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APPENDIX A
THE BOEING COMPANY 1997 INCENTIVE STOCK PLAN
(AS AMENDED EFFECTIVE MAY 1, 2000)
1. PURPOSE
The purpose of this 1997 Incentive Stock Plan (the "Plan") is to attract, retain
and motivate key employees, officers, consultants, agents, advisors and
independent contractors of The Boeing Company (the "Company") by providing them
the opportunity to acquire a proprietary interest in the Company and to link
their interests and efforts to the long-term interests of the Company's
shareholders.
2. PLAN ADMINISTRATION
2.1 THE COMPENSATION COMMITTEE
The Plan shall be administered by the Compensation Committee (the "Committee")
of the Company's Board of Directors (the "Board"). Except for the terms and
conditions explicitly set forth in the Plan, the Committee shall have the
authority, in its sole discretion, to determine all matters relating to awards
under the Plan, including selection of the individuals to be granted awards, the
type of awards granted, the number of shares of the Company's common stock (the
"Common Stock") subject to an award, all terms, conditions, restrictions and
limitations, if any, of an award, and the terms of any award agreement or
notice.
2.2 OTHER PLANS
The Committee shall also have authority to grant awards as an alternative to or
as the form of payment for grants or rights earned or due under other
compensation plans or arrangements of the Company, including the plan of any
entity acquired by the Company.
2.3 DELEGATION TO STOCK PLAN COMMITTEE
Except for the power to amend the Plan as provided in Section 12, the Board or
the Committee, in its sole discretion, may delegate the Committee's authority
and duties under the Plan to the Stock Plan Committee of the Board or to such
other committee appointed by the Board consisting of one or more senior
executive officers of the Company who are also members of the Board, under such
conditions and limitations as the Board or the Committee may from time to time
establish, except that only the Committee may make any determinations regarding
awards to participants who are subject to Section 16 of the Securities Exchange
Act of 1934, as amended (the "1934 Act").
2.4 FINALITY OF COMMITTEE DETERMINATIONS
All decisions made by the Committee or its delegate pursuant to the provisions
of the Plan and all determinations and selections made by the Committee or its
delegate pursuant to such provisions and related orders or resolutions of the
Board shall be final and conclusive.
3. ELIGIBILITY
Awards may be granted under the Plan to those officers and employees of the
Company as the Committee, the Board or a delegate designated in accordance with
Section 2.3 from time to time
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selects. Awards may also be made to consultants, agents, advisors and
independent contractors who provide services to the Company. Individuals who are
not employees of the Company may not be granted Incentive Stock Options (as
defined in Section 6.2). For purposes of this Section 3, the "Company," with
respect to all awards under the Plan other than Incentive Stock Options,
includes any entity that is directly or indirectly controlled by the Company or
any entity in which the Company has a significant equity interest, as determined
by the Committee. With respect to Incentive Stock Options, the "Company"
includes any parent or subsidiary of the Company in accordance with Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER AND SOURCE
The stock offered under the Plan shall be shares of Common Stock and may be
unissued shares or shares now held or subsequently acquired by the Company as
treasury shares, as the Board, or a Board committee to which the Board may
delegate such authority, may from time to time determine. Subject to adjustment
as provided in Sections 4.3 and 5, the aggregate number of shares that may be
issued under the Plan shall not exceed SIXTY-ONE MILLION (61,000,000). Subject
to adjustment as provided in Sections 4.3 and 5, the aggregate number of shares
that may be issued under awards granted pursuant to Section 6.4 that are not
subject to restrictions based on the achievement of specified performance goals
shall not exceed six million (6,000,000). The aggregate number of shares that
may be covered by awards granted to any one individual in any one calendar year
shall not exceed one million two hundred thousand (1,200,000).
4.2 SHARES AVAILABLE
Any shares subject to an award granted under the Plan that is forfeited,
terminated or canceled or, in the case of awards granted under Section 6.4, any
shares that do not vest shall again be available for the granting of awards
under the Plan. In instances where a stock appreciation right is settled in
cash, the shares covered by such award shall remain available for the granting
of other awards. Likewise, the payment of cash dividends and dividend
equivalents paid in cash in conjunction with outstanding awards shall not be
counted against the shares available for issuance.
4.3 ACQUISITIONS
The Board, in its sole discretion, may increase the aggregate number of shares
of Common Stock to be delivered under Section 4.1 by up to three million
(3,000,000) shares in the event the Company acquires any other corporation or
business entity and the Company agrees to assume the acquired entity's
obligations for outstanding stock options or stock grant commitments or
otherwise grants awards to individuals in connection with such acquisition.
5. ADJUSTMENT OF SHARES AVAILABLE
The aggregate numbers and kind of shares available for awards under the Plan,
the maximum number and kind of shares that may be subject to awards to any
individual under the Plan, the number and kind of shares covered by each
outstanding award, and the exercise price per share (but not the total price)
for stock options, stock appreciation rights or similar awards outstanding under
the Plan shall all be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock resulting from any split-up,
combination or exchange of shares, consolidation, spin-off or recapitalization
of shares or any like capital adjustment or the payment of any stock dividend.
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6. AWARDS
6.1 TYPES OF AWARDS
The Committee shall have the authority, in its sole discretion, to determine the
type or types of awards to be granted under the Plan. Such awards may include,
but are not limited to, Incentive Stock Options, Nonqualified Stock Options (as
defined in Section 6.2), stock appreciation rights or restricted stock awards.
Such awards may be granted either alone, in addition to or in tandem with any
other type of award granted under the Plan.
6.2 STOCK OPTIONS
The Committee may grant stock options, designated as "Incentive Stock Options,"
which comply with the provisions of Section 422 of the Code or any successor
statutory provision, or "Nonqualified Stock Options." The price at which shares
may be purchased upon exercise of a particular option shall be determined by the
Committee but shall not be less than 100% of the Fair Market Value of such
shares at the time such option is granted. For purposes of the Plan, "Fair
Market Value" as to a particular day equals the mean of the high and low per
share trading prices for the Common Stock as reported for such day in THE WALL
STREET JOURNAL or such other source as the Committee deems reliable. The
Committee shall set the term of each stock option, but no Incentive Stock Option
shall be exercisable more than 10 years after the date such option is granted
and, to the extent the aggregate Fair Market Value (determined as of the date
the option is granted) of Common Stock with respect to which Incentive Stock
Options granted to a particular individual become exercisable for the first time
during any calendar year (under the Plan and all other stock option plans of the
Company) exceeds $100,000 (or such corresponding amount as may be set by the
Code), such options shall be treated as Nonqualified Stock Options.
6.3 STOCK APPRECIATION RIGHTS
The Committee may grant stock appreciation rights to individuals, either in
tandem with stock options that have been or are granted under the Plan or with
respect to a number of shares on which an option is not granted. A stock
appreciation right shall entitle the holder to receive, with respect to each
share of stock as to which the right is exercised, payment in an amount equal to
the excess of the share's Fair Market Value on the date the right is exercised
over its Fair Market Value on the date the right was granted. Such payment may
be made in cash or in shares of Common Stock valued at the Fair Market Value as
of the date of the surrender, or partly in cash and partly in shares of Common
Stock, as determined by the Committee in its sole discretion. The Committee may
establish a maximum appreciation value payable for stock appreciation rights.
6.4 RESTRICTED STOCK AWARDS
(a) The Committee may grant restricted stock awards under the Plan in Common
Stock or denominated in units of Common Stock. The Committee, in its sole
discretion, will make such awards subject to conditions and restrictions, as set
forth in the instrument evidencing the award, which may be based on continuous
service with the Company or the attainment of certain performance goals related
to profits, profit growth, profit-related return ratios, cash flow or
shareholder returns, where such goals may be stated in absolute terms or
relative to comparison companies or indices to be achieved during a period of
time. No more than three million (3,000,000) shares may be issued subject to
restrictions based on continuous employment or services for less than three
years (except where employment or services are terminated because an individual
dies, retires, is laid off or becomes disabled).
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(b) The Committee may choose, at the time of granting an award or at any time
thereafter up to the time of payment of the award, to include as part of such
award an entitlement to receive dividends or dividend equivalents, subject to
such terms as the Committee may establish. All dividends or dividend equivalents
that are not paid currently may, in the Committee's sole discretion, accrue
interest and be paid to the participant if, when and to the extent such award is
paid.
6.5 PAYMENT; DEFERRAL
Awards granted under the Plan may be settled through cash payments, the delivery
of Common Stock or the granting of awards or combinations thereof as the
Committee shall determine. Any award settlement, including payment deferrals,
may be subject to such conditions, restrictions and contingencies as the
Committee shall determine. The Committee may permit or require the deferral of
any award payment, subject to such rules and procedures as it may establish,
which may include provisions for the payment or crediting of interest, or
dividend equivalents, including converting such credits to deferred stock unit
equivalents.
7. OPTION EXERCISE
7.1 EMPLOYMENT OR SERVICE REQUIREMENT
Each award agreement or notice for a stock option or stock appreciation right
shall contain a provision that the option or right shall not be exercisable
unless the optionee remains in the Company's employ or service at least
12 months after the granting of the option or right.
7.2 PRECONDITION TO STOCK ISSUANCE
No shares shall be delivered pursuant to the exercise of any stock option or
stock appreciation right, in whole or in part, until qualified for delivery
under such securities laws and regulations as may be deemed by the Committee to
be applicable thereto and until, in the case of the exercise of an option,
payment in full of the option price thereof (in cash or stock as provided in
Section 7.4) is received by the Company. No holder of an option or stock
appreciation right, or any legal representative, legatee or distributee shall be
or be deemed to be a holder of any shares subject to such option or right unless
and until such shares are issued.
7.3 NO FRACTIONAL SHARES
No stock option may at any time be exercised with respect to a fractional share.
No fractional share shall be issued in the event shares are issued pursuant to
the exercise of a stock appreciation right; however, a fractional stock
appreciation right may be exercised for cash.
7.4 FORM OF PAYMENT
An optionee may exercise a stock option using as the form of payment (a) cash or
cash equivalent (b) stock-for-stock payment (as described in Section 7.5),
(c) any combination of the above or (d) such other means as the Committee may
approve.
7.5 STOCK FOR STOCK
An optionee who owns Common Stock may use such shares, the value of which shall
be determined as the Fair Market Value of such shares on the date the stock
option is exercised, as a form of payment to exercise stock options under the
Plan. The Committee, in its sole discretion, may restrict or rescind this right
by notice to optionees. A stock option may be exercised in such manner only by
tendering
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(actually or by attestation) to the Company whole shares of Common Stock having
a Fair Market Value equal to or less than the exercise price. If an option is
exercised by surrender of stock having a Fair Market Value less than the
exercise price, the optionee must pay the difference in cash.
8. TRANSFERABILITY
The right of any award recipient to exercise an award granted under the Plan
shall, during such recipient's lifetime, be exercisable only by such recipient,
and shall not be assignable or transferable by such recipient other than by will
or the laws of descent and distribution.
9. WITHHOLDING TAXES; OTHER DEDUCTIONS
The Company shall have the right to deduct from any settlement of an award made
under the Plan, including the delivery or vesting of shares, (a) an amount
sufficient to cover withholding as required by law for any federal, state or
local taxes and (b) any amounts due from the recipient of such award to the
Company or to any subsidiary of the Company or to take such other action as may
be necessary to satisfy any such withholding or other obligations, including
withholding from any other cash amounts due or to become due from the Company to
such recipient an amount equal to such taxes or obligations.
10. TERMINATION OF EMPLOYMENT OR SERVICES
The terms and conditions under which an award may be exercised following
termination of a participant's employment or services with the Company shall be
determined by the Committee; provided, that if a participant's employment or
services terminate for any reason within 12 months of the grant date of a stock
option or stock appreciation right, such option or right shall expire as of the
date of such termination of employment or services and the participant and the
participant's legal representative shall forfeit any and all rights pertaining
to such award.
11. TERM OF THE PLAN
The Plan shall become effective as of May 1, 1997 and shall remain in full force
and effect through April 30, 2007, unless sooner terminated by the Board. After
the Plan is terminated, no future awards may be granted but awards previously
granted shall remain outstanding in accordance with their applicable terms and
conditions and the Plan's terms and conditions.
12. PLAN AMENDMENT
The Committee or the Board may amend, suspend or terminate the Plan at any time;
provided that no such amendment shall be made without the approval of the
Company's shareholders (a) that would increase the number of shares available
for issuance in accordance with Section 4 or (b) if such approval is required
(i) to comply with Section 422 of the Code with respect to Incentive Stock
Options or (ii) for purposes of Section 162(m) of the Code.
13. BIFURCATION OF THE PLAN
Notwithstanding anything in the Plan to the contrary, the Board, in its sole
discretion, may bifurcate the Plan so as to restrict, limit or condition the use
of any provision of the Plan to participants who are officers subject to
Section 16 of the 1934 Act without so restricting, limiting or conditioning the
Plan with respect to other participants.
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THE BOEING COMPANY 2000 ANNUAL MEETING OF
SHAREHOLDERS
Von Braun Center
700 Monroe Street
Huntsville, AL 35801
May 1, 2000 10:00 AM
<TABLE>
<S> <C>
GENERAL DIRECTIONS
FROM I-65 [MAP]
- Take the I-565 spur to
Huntsville.
- Take exit 19C, stay in the
right lane.
- Turn right on Monroe Street.
- Continue on Monroe Street--
the Von Braun Center is on
the right side of the
street.
PARKING
- Parking is located across
the street from the Von
Braun Center Concert Hall
Parking Garage.
- Parking tickets will be
validated.
LOGISTICS
- Registration will begin at [MAP]
9:00 a.m.
- The meeting will begin at
10:00 a.m. and is expected
to last no more than 2
hours.
ACCESSIBILITY
- The Von Braun Center is
accessible to shareholders
with disabilities and is
compliant with the Americans
with Disabilities Act.
</TABLE>
[LOGO] Printed on recycled paper. SKU 0707-PS-00
<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/. You will
be asked to enter the 9 digit Account Number located in the second group of
numbers appearing beneath the perforation line on the reverse side.
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
MAY 1, 2000
The undersigned hereby appoints John H. Biggs, Philip M. Condit and Charles M.
Pigott (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 May 1, 2000
(the "Meeting"), and at any adjournment thereof, as indicated on the reverse
side of this card with respect to Proposals 1 through 9, and with
discretionary authority as to any other matters that may properly come before
the Meeting, in accordance with and as described in the Notice and Proxy
Statement for the Meeting.
If there are shares of stock allocated to the undersigned in any of the
retirement, savings and employee stock ownership plans listed in the Proxy
Statement under the heading "Voting by Participants in Employee Plans," the
undersigned hereby instructs the trustee to vote all of such shares at the
Meeting and any adjournment thereof, as indicated on the reverse side of this
card with respect to Proposals 1 through 9, and authorizes the trustee to vote
in its judgment or to empower the Proxy Committee to vote in the Proxy
Committee's judgment, on such other business as may properly come before the
Meeting and any adjournment thereof.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 AND
AGAINST PROPOSALS 3 THROUGH 9.
IMPORTANT: UNLESS VOTING ELECTRONICALLY OR BY PHONE, PLEASE
MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE.
-------------
SEE REVERSE
SIDE
-------------
- -------------------------------------------------------------------------------
<PAGE>
[BOEING 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 11:00 A.M., E.T., MAY 1, 2000
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. YOU WILL BE
ASKED TO ENTER THE 9 DIGIT ACCOUNT NUMBER LOCATED IN
THE SECOND GROUP OF NUMBERS APPEARING BENEATH THE
PERFORATION LINE BELOW.
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.
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR PROPOSALS 1 AND 2.
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<CAPTION>
<S> <C>
FOR AGAINST ABSTAIN
1. Election of directors: (01) Paul E. Gray, 2. Amend the / / / / / /
(02) John F. McDonnell, (03) John M. Shalikashvili 1997 Incentive
and (04) Harry C. Stonecipher. Stock Plan.
FOR WITHHELD
ALL / / FROM ALL / /
NOMINEES NOMINEES
for all nominees except as noted below.
/ /
-----------------------------------
THE BOARD OF DIRECTORS RECOMMENDS VOTES
AGAINST PROPOSALS 3 THROUGH 9.
FOR AGAINST ABSTAIN
3. Foreign military / / / / / /
contracts.
4. Link executive / / / / / /
compensation to
social performance.
5. Cumulative voting / / / / / /
in the election of
directors.
6. Independent lead / / / / / /
director.
7. Annual election of / / / / / /
the entire Board of
Directors.
8. Pay directors solely / / / / / /
in stock.
9. Deduct litigation / / / / / /
costs from executive
compensation.
Mark here for
address change
and note at left.
/ /
Mark here for
comments and
note at left.
/ /
Signature(s)____________________ Date__________ Signature(s)____________________ Date__________
Please sign exactly as the name appears on your account. If the shares are registered in the
names of two or more persons, each should sign. If acting as attorney, executor, trustee or in
another representative capacity, sign name and title.
</TABLE>
