I suppose I am talking like a socialist but is it even reasonable to be talking pay increases when Boeing is laying off workers left and right due to poor performance of the company and the cancelling of jets by airlines? I hate these socialist thoughts that go through my head at times like these. Don't you? Oh wait......you probably think raising salaries in the face of cutbacks is more than reasonable. AMIRITE?
Boeing execs' pay climbs; 14% increase for CEO
Though Boeing's profits last year were depressed by manufacturing delays and its share price plunged, total pay for the company's top executives mostly rose in 2008.
By Dominic Gates
Seattle Times aerospace reporter
Though Boeing's profits last year were depressed by manufacturing delays and its share price plunged, total pay for Boeing's top executives mostly rose in 2008.
Thanks to a bonus plan spanning the past three years' results, Chief Executive Jim McNerney earned 14 percent more than in 2007.
Adjusting figures reported Friday to reflect true 2008 compensation, McNerney got $14.8 million in salary, bonuses and perks. That compares with $12.9 million in 2007.
Of Boeing's top four executives, only Commercial Airplanes Chief Executive Scott Carson took a real hit. His total compensation fell 19 percent from the previous year, to $3.2 million.
The pay for top company executives was detailed by Boeing in a filing with the Securities and Exchange Commission. The figures were calculated from the Boeing data by Equilar, an independent advisory firm specializing in executive compensation.
Boeing's filing noted "below target" economic performance in 2008 largely due to "product development delays."
The company's 787 Dreamliner program was further delayed, putting it almost two years behind schedule, and the 747-8 was pushed out by nine months. Customer penalties and extra costs to fix the production problems amounted to several billion dollars.
However, the Boeing board's compensation committee did not let another problem — the two-month Machinist (IAM) strike in 2008 — factor into its executive pay awards. It adjusted the metric used to compute the company's economic performance "to eliminate the impact of the IAM strike" to ensure that the compensation awards "reflected underlying growth and performance," the filing said.
Long-term incentives
Executive-pay expert Fred Whittlesey, a principal with Buck Consultants, said the main reason McNerney got vastly more than any of his lieutenants is that when he joined Boeing from 3M in 2005, he was wooed with very large stock grants that continue to vest.
Doug Kilgore, executive director of the Worker Owner Council of Washington, which represents the shareholder interests of union pension funds in the building trades that collectively are among the top 30 owners of Boeing stock, said the impact of the Machinists strike shouldn't be excluded in measuring management performance because it's "a vital labor negotiation that happens every three years."
Having such a lengthy strike "really set back the company in terms of their competitiveness," he said.
Top Boeing executives receive individual performance scores annually that are one factor in calculating their bonuses. McNerney's and Carson's individual scores came in below target.
Boeing's filing says McNerney requested cuts to his annual and long-term incentive-plan bonuses to reflect the company's depressed profits, and the board accordingly shrunk each by 25 percent or about $2.2 million.
His annual cash bonus dropped from $4.3 million to $1.5 million, down 65 percent.
But that shortfall was more than offset by the payout from McNerney's long-term incentive-plan bonus, which is based on performance from 2006 through 2008 and was buoyed by good results in the first two years. That bonus, even though reduced at his request, gave him $4.6 million.
McNerney's perks in 2008 included $287,000 for personal use of Boeing private jets, $67,000 in personal legal services, and $60,000 for personal use of a company car and driver.
Carson saw his annual bonus cut more than $600,000 compared with the previous year. His long-term incentive bonus failed to make up the difference because he only became chief executive late in 2006 and so got much less compensation that year.
The head of the defense unit, James Albaugh, and Chief Financial Officer James Bell both got above-target individual performance scores from Boeing's board.
Like Carson, because of the overall company performance Albaugh and Bell had big hits to their 2008 cash bonuses. But like McNerney they more than made up the difference with payouts from the long-term bonus plan.
Using the adjusted Equilar figures, Albaugh got $5.1 million in 2008 salary, bonuses and perks, compared with $4.1 million in 2007.
Bell's total compensation was nearly $4.6 million, compared to $3.7 million in 2007. Both men were up 23 percent on the previous year.
How to calculate
To reflect Boeing's intentions when it grants a level of compensation to any executive, Equilar assigns a value to stock awards and options grants according to their market value on the date that they were granted.
An alternative way of calculating assigns values to stock and option awards according to the market value on the date when stock awards are vested or options exercised. This method more accurately reflects the actual pretax "take-home" pay of the executives.
Using this latter approach, which Boeing prefers, McNerney got $15.4 million in 2008, compared with $14.7 million in 2007.
By the same method, Carson got $3.1 million in 2008, compared with $4.9 million in 2007.
The different bottom-line figures in Boeing's SEC filing, called a proxy filing, are meant to reflect the total accounting cost to the company rather than the actual pay of the executives. They include adjustments for the value of the pension and projected values of stock options.
By that measure, McNerney's total compensation was $19 million, flat from last year.
Looking to this year — when Boeing is set to lay off 10,000 workers — Kilgore, of the Worker Owner Council, said his group would question the granting of any bonuses to executives who oversee large layoffs.
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