(Source – CNN)
In a move that has raised eyebrows, shareholders of embattled airplane manufacturer Boeing approved a nearly $33 million pay package for outgoing CEO Dave Calhoun at the company’s annual general meeting on Friday. This marks the highest compensation package ever awarded to a Boeing CEO and represents a staggering 45% increase from the $22.6 million Calhoun received in 2022. The substantial boost in his pay largely stems from a significant stock bonus, supplementing his million-dollar-plus salary.
Calhoun, who has been at the helm of Boeing since 2020, announced his decision to step down by the end of the year in March. The shareholder vote on Friday was specifically to approve Calhoun’s 2023 pay package. Notably, Calhoun chose to forgo an additional annual incentive bonus of $2.8 million for the year, a decision he reportedly made in light of the Alaska Airlines incident, as confirmed by the board.
Upon his retirement, Calhoun is set to receive an additional windfall: a $45 million mix of stock awards and options that will vest over time, further amplifying his departure benefits.
Safety Concerns and Financial Struggles
The approval of such a hefty compensation package comes at a time when Boeing is under intense scrutiny for a series of safety incidents. These include a notable mid-air blowout of part of a fuselage in January, which spurred numerous investigations into the company’s safety practices. These incidents have led to an executive shakeup and commitments from the company to enhance its safety standards.
Boeing’s financial health has been precarious for the past five years, compounded by the fallout from fatal crashes of its 737 Max aircraft in late 2018 and early 2019. These tragedies resulted in a 20-month grounding of the company’s best-selling plane. Additionally, the COVID-19 pandemic severely impacted the aviation industry, causing a significant drop in air travel and resulting in deep losses for airlines that are Boeing’s primary customers.
“Our compensation program is designed to align leadership pay with the long-term performance of our business,” stated Steve Mollenkopf, Boeing’s new chairman, in defense of the high compensation package amidst ongoing safety issues. He emphasized that the pay structure is intended to reflect the company’s commitments to maintaining the highest safety and quality standards.
Balancing Compensation with Performance
Since the grounding of the 737 Max in 2019, Boeing has reported adjusted losses exceeding $31 billion, with expectations of continued financial challenges. Despite these setbacks, the board remains confident in the compensation strategy, believing it aligns with both the progress made in restoring the company’s operational and financial health and the acknowledgment of unmet performance criteria.
“The board is confident that the current compensation structure continues to directly align with performance and balances both the meaningful progress made to restore operational and financial strength along with the fact that certain performance criteria have not been met,” Mollenkopf elaborated.
As Boeing navigates through these turbulent times, the decision to award Calhoun such a substantial pay package underscores the complex interplay between executive compensation, corporate performance, and the ongoing challenges facing one of the world’s largest aerospace manufacturers.
