Boeing CEO waived pay but got compensation worth $21 million

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Boeing CEO David Calhoun declined a salary and performance bonus for most of last year but still received stock benefits that pushed the estimated value of his compensation to more than $21million, according to a regulatory filing Friday.

The aerospace giant struggled last year with the continuing fallout from two deadly crashes involving its 737 Max jetliner and a downturn in demand for planes because of the pandemic. 

Boeing lost nearly $12billion and announced plans to cut about 30,000 jobs through layoffs and attrition.

Calhoun, who became CEO in January 2020, received $269,231 in salary for the period before he disavowed his salary in March. 

He also got $289,715 in other compensation, mostly perks such as the use of company planes, retirement benefits and home-security expenses.

The company said Calhoun gave up about $3.6million by declining most of his salary and a $2.5million bonus.

But most of Calhoun’s compensation – valued by Boeing at more than $20million – came in the form of stock benefits that will vest in the next few years, assuming he remains CEO.

Those grants include $7million worth of stock for returning the Max to service after it was grounded in 2019, $10million worth of shares to compensate for pay he left behind at his previous job at The Blackstone Group, and $3.5million in long-term incentive awards. 

All would vest over the next three years.

Calhoun, 63, was a longtime Boeing board member before being named CEO after the firing of Dennis Muilenburg in December 2019.

The Chicago-based company filed its proxy statement ahead of its April 20 annual shareholder meeting, which will be conducted online.

Shareholders will elect 10 directors. 

Pension funds in New York and Colorado are suing current and former board members and executives, including Calhoun and Muilenburg, in a Delaware state court. 

The funds accuse directors of lax safety oversight during the development of the 737 Max and after the first of two crashes that killed 346 people.

In January, the US Justice Department announced that the company will pay over $2.5billion to resolve the investigation into the two crashes.

The settlement includes the establishment of a $500million crash-victim beneficiaries fund to compensate the heirs, relatives, and legal beneficiaries of the passengers killed in the 2018 and 2019 crashes.

The fund will be equal to $1.4million for the family of each of the 346 people killed.

The Justice Department said the settlement also includes a compensation payment of $1.77billion to airlines that were unable to use their Max jets while they were grounded after the crashes and a criminal monetary penalty of $243.6million.

However, the company will not be forced to plead guilty to criminal charges for misleading regulators about the safety of its 737 Max aircraft, which suffered the two deadly crashes shortly after entering airline service. 

Despite the settlement, families of victims in the Ethiopian Airlines crash are moving forward with civil litigation against the plane maker in Chicago, plaintiffs’ lawyers said. 

Lawyers said that the DOJ announcement only strengthens the families’ lawsuits against the plane maker. 

Prosecutors described Boeing’s failings in withering terms, accusing the company of putting ‘profit over candor’ and of engaging in a ‘half-truths’ and a ‘cover up.’

The Seattle-based company began working on the Max in 2011 as answer to a new, more fuel-efficient model from European rival Airbus.

The DOJ charged Boeing with concealing information about the aircraft’s Maneuvering Characteristics Augmentation System (MCAS), an anti-stall system that was a prime factor in crashes of Lion Air and Ethiopian Airlines flights, before it was approved to fly.

Boeing, through two MAX pilots, concealed key information about MCAS to the Federal Aviation Administration, DOJ said. 

This omission meant the FAA did not mention MCAS in its final report certifying the MAX, so there was no reference to the system in manuals and pilot training materials.

The system could point a plane’s nose down if sensors indicated the plane might be in danger of an aerodynamic stall – that it might fall from the sky – yet the omission from manuals meant many pilots weren’t aware of it.  

The first airlines began flying the 737 Max in mid-2017. 

On October 29, 2018, a Max operated by Indonesia’s Lion Air plunged into the Java Sea.

After the Lion Air crash in October 2018, FAA ‘learned for the first time’ key details about the MCAS ‘that Boeing concealed from FAA,’ DOJ said. 

And two pilots at Boeing ‘continued misleading others – including at Boeing and the FAA – about their prior knowledge of the change to MCAS,’ they added.

However, the FAA let the Max keep flying, and on March 10, 2019, another Max operated by Ethiopian Airlines crashed nearly straight down into a field. 

In all, 346 people were killed.

On both flights, MCAS was activated by a faulty reading from a single sensor. 

The system repeatedly pushed the planes’ noses down, and pilots were unable to regain control.

The crashes led to the MAX’s grounding for 20 months in March 2019 that was only lifted in November after Boeing made significant safety upgrades.

Boeing was charged with one count of conspiracy to defraud the United States after the actions of its employees were revealed.

The largest US airplane manufacturer faces a three-year deferred prosecution agreement after which the charge will be dismissed if the company complies with the agreement.

‘The tragic crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302 exposed fraudulent and deceptive conduct by employees of one of the world’s leading commercial airplane manufacturers,’ said Acting Assistant Attorney General David P. Burns.

‘Boeing’s employees chose the path of profit over candor by concealing material information from the FAA concerning the operation of its 737 Max airplane and engaging in an effort to cover up their deception.’

‘The misleading statements, half-truths, and omissions communicated by Boeing employees to the FAA impeded the government’s ability to ensure the safety of the flying public,’ added Erin Nealy Cox, the US Attorney in Dallas.