Quiver Quantitative - Glass Lewis, a prominent proxy advisory firm, has issued a stark recommendation for shareholders of Boeing (NYSE:BA) (BA) to vote against reelecting three key directors at the upcoming board elections, signaling serious concerns about the company's safety culture and oversight. The directors in question include outgoing CEO Dave Calhoun, Akhil Johri, and David Joyce, who respectively chair Boeing’s audit and aerospace safety committees. This recommendation comes amidst ongoing scrutiny from regulators and stakeholders, intensified by a recent incident involving a 737 MAX 9 jet, where a door plug was blown off during flight, raising alarms about Boeing’s manufacturing processes and safety protocols.
The backdrop of this recommendation includes persistent challenges Boeing has faced in managing reputational and operational risks, notably highlighted by the Federal Aviation Administration's (FAA) recent demand for a comprehensive plan to address quality-control issues within 90 days. This directive followed a lengthy meeting with CEO Dave Calhoun in February, underscoring the gravity of the situation. Glass Lewis has expressed that the board, particularly the aerospace safety and audit committees, has not effectively addressed shareholder concerns related to safety, legal, and regulatory risks, and thus, voting against these directors could serve as a strong signal of shareholder dissatisfaction.
Market Overview: -Proxy advisor Glass Lewis recommends voting against three Boeing directors, including CEO Dave Calhoun, citing safety culture concerns. -The move highlights shareholder dissatisfaction with Boeing's handling of past incidents and safety oversight. -Boeing is under scrutiny from regulators and faces pressure to improve its safety record.
Key Points: -Glass Lewis criticizes the board, particularly the audit and aerospace safety committees, for shortcomings in safety culture transformation. -The recommendations target Calhoun, Johri (Chair of the Audit Committee), and Joyce (Chair of the Aerospace Safety Committee). -Shareholders are urged to vote against their re-election to express discontent with Boeing's safety priorities.
Looking Ahead: -The vote on director re-election serves as a referendum on Boeing's leadership and its commitment to safety improvements. -Boeing needs to demonstrate a stronger focus on safety to regain investor confidence and regulatory approval. -The company's efforts to rebuild its reputation and ensure long-term sustainability hinge on addressing safety concerns effectively.
Akhil Johri and David Joyce, both serving as independent directors since 2020 and 2021 respectively, have been specifically targeted in Glass Lewis's critique. Johri's previous experience at United Technologies Corporation (NYSE:RTX) (RTX/a>) and Joyce's leadership at GE (GE) Aviation from 2008 to 2020 provide them with significant industry insight, yet Glass Lewis argues that their contributions to Boeing’s board have fallen short of addressing the deep-seated issues that have tarnished Boeing’s safety reputation.
Despite these contentious board issues, Glass Lewis has endorsed the approval of executive compensations for 2023, including a 45% increase in CEO Calhoun’s pay package to nearly $33 million. This approval comes amidst Boeing’s tumultuous efforts to revamp its safety practices and restore its brand image, highlighting the complexities of corporate governance and accountability at one of the world’s leading aerospace manufacturers. As Boeing approaches its critical shareholder meeting, the outcomes of these votes will be closely watched by investors and industry analysts alike, given their significant implications for the company's strategic direction and operational ethos.
This article was originally published on Quiver Quantitative