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Boeing Proxy Voting Recommendations

Boeing, together with its subsidiaries, designs, develops, manufactures, sales, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services worldwide.

Most shareholders do not vote because reading through 70 pages of the proxy is not worth the time for the small difference your vote will make. Below, I tell you how I am voting and why. If you have read these posts related to my portfolio for the last 22 years and trust my judgment (or you don’t want to take the time to read it), go immediately to see how I voted my ballot. Voting will take you only a minute or two and every vote counts.

The annual meeting is coming up on April 30, 2018. I voted with the Board’s recommendations 58% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A).

Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.

Boeing: ISS Rating

From the Yahoo Finance profile: The Boeing Company’s ISS Governance QualityScore as of April 1, 2018 is 4. The pillar scores are Audit: 1; Board: 4; Shareholder Rights: 4; Compensation: 6.

Corporate governance scores courtesy of Institutional Shareholder Services (ISS). Scores indicate decile rank relative to index or region. A decile score of 1 indicates lower governance risk, while a 10 indicates higher governance risk. Therefore, we need to pay closer attention to executive compensation.

Boeing: Board Proposals

1.Boeing: Directors

Egan-Jones Proxy Services recommends “For,” with the exception of: 1C) Arthur D. Collins, Jr., 1D) Kenneth M. Duberstein, and 1M) Mike S. Zafirovski. According to Egan-Jones’ Proxy Guidelines, a director whose tenure on the Board is 10 years or more is considered affiliated, with the exception of diverse nominees. Since major committees, such as the audit committee should be composed only of independent directors, they recommend voting against the above directors. Although that makes some sense, I am not ready to accept that as a general rule. I voted “For,” with the exception of all members of the Compensation Committee: 1c Arthur D. Collins Jr., Chair, 1b David L. Calhoun, 1d Kenneth M. Duberstein, 1i Edward M. Liddy, 1m Mike S. Zafirovski.

2. Boeing: Executive Compensation

Boeing Company’s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO Dennis A. Muilenburg at $18.5M. I’m using Yahoo! Finance to determine market cap ($199B) and I am roughly defining large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Boeing is a large-cap company. According to the Equilar Top 25 Executive Compensation Survey 2015, the median CEO compensation at large-cap corporations was $10.3M in 2014, so pay was well over that amount. Boeing shares outperformed the S&P500 over the most recent one, two, and five year time periods. Boeing does not appear on As You Sow‘s list of the 100 Most Overpaid CEOs. Prior reports have shown that being on that list is correlated with lower returns in subsequent years.

Egan-Jones Proxy Services takes various measures to arrive at a proprietary rating compensation score, which measures wealth creation in comparison to other widely held issuers. “Good” is their rating given on compensation issues for Boeing. Egan-Jones concludes:

We believe that the Company’s compensation policies and procedures are centered on a competitive pay-for-performance culture, strongly aligned with the long-term interest of its shareholders and necessary to attract and retain experienced, highly qualified executives critical to the Company’s long-term success and the enhancement of shareholder value. Therefore, we recommend a vote FOR this Proposal.

For 2017, the annual total compensation of Boeing’s median employee (other than our CEO), was $111,204 and the annual total compensation of their CEO was $18,450,416. Based on this information, for 2017 Boeing’s CEO’s annual total compensation was 166 times that of the median of the annual total compensation of all employees. Given above median pay and my concerns about inequality, I voted “AGAINST” the say-on-pay  item.

3. Boeing: Ratify Auditors

I have no reason to believe the auditor has rendered an inaccurate opinion, is engaged in poor accounting practices, or has a conflict of interest. I voted “FOR.”

Boeing: Shareholder Proposals

4. Boeing: Report on Lobbying Payments and Policy

This proposal is very similar to many I have filed. Additional disclosure of the company’s lobbying-related policies and oversight mechanisms, along with its trade association memberships and payments, would help shareholders better assess the risks and benefits associated with the company’s participation in the public policy process. As Justice Kennedy noted in the Supreme Court’s Citizens United decision:

With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters. Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are ‘in the pocket’ of so-called moneyed interests.

However, you cannot hold corporations accountable if you do not have the information. Vote FOR.

5. Boeing: Reduce Ownership Threshold for Shareholders to Call Special Meeting

Again, this is similar to many proposals I have been submitting. A vote FOR this proposal is warranted, as decreasing the ownership threshold required to call a special meeting from 25 percent to 10 percent would enhance shareholder rights. Last year’s proposal received support from 37.5% of the votes cast (excluding abstentions), while a proposals in 2016 received support from 38%. Vote FOR.

6. Boeing: Require Independent Board Chairman

Again, I have submitted many similar proposals. Egan-Jones notes: “There is an inherent potential conflict in having an Inside director serve as the Chairman of the board. Consequently, we prefer that companies separate the roles of the Chairman and CEO and that the Chairman be independent to further ensure board independence and accountability.”  Vote FOR.

7. Boeing: Require Shareholder Approval to Increase Board Size to More Than 14

This is my proposal (James McRitchie), so of course Boeing increased the board size from 12 to 14 in the last year, without shareholder approval adding 2 CEOs to the board who may be more likely to defer to a fellow CEO. From Egan-Jones:

While we recognize the flexibility the Board needs in determining its size, we believe that any further increase in the number of directors should be subject to a vote so that shareholders could assess the advisability of the proposal and provide insights regarding the matter.  After evaluating the details pursuant to the shareholder proposal and in accordance with the Egan-Jones’ Proxy Guidelines, we recommend a vote FOR this Proposal.

Vote FOR.

Boeing CorpGov RecommendationsProxy Insight

Proxy Democracy was offline when I wrote this. Proxy Insight reported on Canada Pension Plan (CPPIB), Texas Teachers, Calvert and Trillium. I expect they will report out a few more votes before the meeting.  CPPIB and Texas Teachers both voted for everything but my proposal. Trillium voted against all the management proposals and for all the shareholder proposals (except mine). Texas Teachers voted for everything except the last two shareholder proposals.

Vote AGAINST: 1c, 1b, 1d, 1i, 1m and 2.

Vote FOR: 1a, 1e, 1f, 1g 1h, 1j, 1k, 1l, 3, 4, 5, 6, and 7.

Boeing: Issues for Future Proposals

SharkRepellentLooking at for other provisions unfriendly to shareowners:

  • No action can be taken without a meeting by written consent unless approved in advance by the board.
  •  Special meetings can only be called by shareholders holding not less than 25% of the voting power.
  • Proxy access provisions are Lite.  A shareholder or group of no more than 20 shareholders holding at least 3% of the outstanding common stock continuously for at least three (3) years may nominate directors, so long as the number of directors elected via proxy access does not exceed 20% of the board. Nominees who receive less than 25% of the votes would be ineligible for nomination under the proxy access provision for the next two (2) annual meetings.

Boeing: Mark Your Calendar

If you wish to submit a proposal for inclusion in our 2019 proxy statement, you must follow the procedures set forth in Rule 14a-8 of the Securities Exchange Act of 1934. To be eligible for inclusion, we must receive your proposal at the address below no later than Friday, November 16, 2018. Send to: Office of the Corporate Secretary, The Boeing Company, 100 North Riverside Plaza, MC 5003-1001, Chicago, Illinois 60606-1596


Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime). I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs. For more on the subject, see CEO Pay Machine Destroying America.


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