Despite a host of problems, Boeing’s CEO got $23.6 million last year

Boeing CEO Dave Calhoun, who announced last week he’ll step down later this year, received compensation last year currently worth $23.6 million, according to a calculation based on data in a federal filing released Friday.

That’s despite Boeing’s $2.2 billion loss in 2023, a year bedeviled by repeated production halts due to quality issues in the Commercial Airplanes division and major write-offs and delays in the Defense and Space unit.

In Friday’s filing, the board praised Calhoun’s response to the latest Boeing crisis, which began Jan. 5 when a door-sized panel blew out from the passenger cabin on an Alaska Airlines 737 MAX in midair.

“While the Alaska Airlines Flight 1282 accident shows that Boeing has much work yet to do, the Board believes that Mr. Calhoun has responded to this event in the right way by taking responsibility for the accident, engaging transparently and proactively with regulators and customers and taking important steps to strengthen Boeing’s quality assurance,” the board wrote.

According to Boeing, the filing overstates Calhoun’s compensation by $9.2 million, resulting in the $23.6 million figure provided here.

That takes account of the effect of this year’s slide in the company’s share price on the value of the stock options Calhoun was granted and a separate reduction in the value of certain awards that granted him less stock than targeted based on the company’s financial performance.

Friday’s filing also revealed that a month after the Alaska Airlines accident, Calhoun informed the board that he would forgo his 2024 annual bonus.

The target payout for that bonus, assuming good performance, would have been $2.8 million, though given the crisis that’s engulfed Boeing since the blowout, it would certainly have paid out much less.

In addition, when the board in February handed out this year’s long-term incentive stock awards for Calhoun and the other top executives, it set a lower target payout than in 2023 and then reduced that by a further 22%, which was the amount the stock price had fallen between the Alaska Airlines blowout and the date of the stock awards.

That left Calhoun’s reduced 2024 long-term bonus target set at $13.25 million.

Those long-term incentive bonuses are designed to pay out after three years. Though Calhoun, 66, is retiring this year, because he is past retirement age he’ll get the full value of those shares when the three-year vesting period ends, even though he’ll no longer be at Boeing.

The proxy filing provides only a rough idea of what compensation Calhoun will be eligible for when he leaves, with the precise amount depending upon the date of his departure and the stock price at the time.

The filing shows he’ll be eligible for about 116,000 Boeing shares that at today’s stock price are worth $21 million.

He’ll be eligible for further performance-based shares that at today’s price are worth about $10 million, though that award could be reduced for underperformance.

The filing also shows that because executive pay has until now been tightly tied to financial metrics such as revenue and cash flow, the total actual payout to Calhoun since he became CEO in 2020 through the end of last year was $12.8 million, 86% less than the target compensation set by the board.

The filing says that, based on the share price at the end of last year, he’s eligible for a further $50 million payout for those four years in not-yet-vested stock awards.

Again, however, at least a portion of those stock awards are performance-based, and the stock price could shift before the awards vest.

Calhoun won’t have a Boeing pension, which is available only to executives and salaried employees hired before 2009 and which was frozen for eligible employees in 2015.

Safety, quality to factor into executive bonuses

Friday’s filing reveals a significant change to the bonus incentives for executives as a result of the safety and quality concerns raised by the Alaska Airlines MAX blowout.

While previously the metrics used to determine the size of executive and salaried employee bonuses were almost exclusively financial, from this year on, safety and quality have become a central focus.

Operational performance metrics, representing 60% of the bonus, will be focused entirely on airplane safety, quality and employee safety goals.

For Commercial Airplanes, these metrics will include reduction in rework and traveled work in the factories, as well as completion of the rework needed on the parked inventory of 787 and 737 MAX aircraft.

In addition, 55% of the three-year incentive bonuses for top executives — which typically provide a large portion of their total compensation — will be dramatically cut unless two new safety goals are met.

One goal is to set up an employee culture survey aimed at assessing the efficacy of Boeing’s Safety Management System.

The second is to set control limits for several jet programs, including the MAX, to reduce traveled work, which means letting unfinished jobs move down the assembly line. A safety risk assessment will be required before an airplane can move past a specified point in production.

If both goals aren’t achieved this year, that performance portion of the executive bonus will be slashed by 75%. If the goals aren’t implemented by the end of 2025, that part of the bonus is zero.

In a letter to shareholders included in the filing, Steve Mollenkopf, the new chair of Boeing’s board, offered his assurance that change is coming in response to the current crisis.

“I promise that I personally, and we as a Board, will leave no stone unturned in our efforts to get this company to where it needs to be,” Mollenkopf wrote. “The work of renewal has already begun.”

Stan Deal leaves with a pension

According to data in the filing — again adjusted downward by Boeing to give the current value due to the lower stock price and the reduced performance award — Stan Deal, who was ousted last month as CEO of Boeing Commercial Airplanes, got compensation last year valued currently at $9.2 million. 

Unlike Calhoun, Deal did take his 2024 annual bonus of $756,000 last month.

According to the filing, that payout was based partly on Deal’s individual performance score of 70%, which “reflected the recent challenges faced by the commercial airplanes business.”

“These include quality issues in our supply chain and our factories that have impacted our customers and our performance, and reflects our recognition of Boeing’s accountability for the accident on Alaska Airlines Flight 1282,” the filing states.

For compensation purposes, Deal was allowed to retire rather than being fired, which would have meant losing all his unvested stock awards.

But unlike Calhoun, Deal, 57, left at the end of last month before reaching full retirement age. According to the rules governing executive compensation, he therefore won’t get the full value of his unvested stock awards.

Instead, the awards will be prorated “based on months of employment during the three-year vesting period.”

The proxy filing shows Deal at the end of last year was eligible to receive about 17,900 Boeing shares upon leaving that at today’s stock price are worth $1.4 million.

He was eligible for further shares that are performance-based worth currently about $1.1 million, though that award could be reduced by underperformance.

Separately, according to the filing, the 36-year veteran will have an annual pension of about $3.8 million.

Pope, Colbert and West

Boeing is required to disclose the compensation of its five most highly paid executives the previous year in its annual proxy filing.

The other named executives got the following compensation in 2023, each figure adjusted downward from the amount cited in the filing to give the current value by Boeing’s calculation:

• Stephanie Pope, Boeing chief operating officer who last month was additionally appointed to replace Deal as CEO of the Commercial Airplanes unit, got compensation currently valued at $7.5 million last year. In February, Pope received an annual bonus of $1.4 million.
• Ted Colbert, CEO of Boeing’s Defense and Space division, got compensation currently valued at $6.6 million last year. In February, Colbert received an annual bonus of $600,000.
• Boeing Chief Financial Officer Brian West got compensation currently valued at $8.7 million last year. In February, West received an annual bonus of $1.1 million.

Boeing’s annual general meeting for investors will be held virtually May 17.