Boeing forces
resignation of CEO

updated 6:38 p.m. ET March 7, 2005

CHICAGO - Boeing Co. abruptly forced out its president and chief executive officer, Harry Stonecipher, for what the company said Monday was a violation of the company’s code of business conduct stemming from a relationship the married, 68-year-old Stonecipher had with a female Boeing executive.

The stunning ouster makes Stonecipher the second CEO to depart the Chicago-based airplane maker and defense contractor in disgrace in the past 15 months.

His predecessor, Phil Condit, resigned Dec. 1, 2003, as a result of the defense contracting scandals that ultimately sent two Boeing executives — ex-Air Force procurement official Darleen Druyun and chief financial officer Mike Sears — to jail.

Boeing declined to identify the executive or discuss specifics of Stonecipher’s actions, which it said were linked to a consensual relationship that began in January. Newly named interim president and CEO James A. Bell, 56, insisted on a conference call that the announcement “has and will have no impact on our outlook. ... Boeing’s overall financial condition is very strong.”

“Boeing’s primary customers, the airlines and the Pentagon, are still going to keep on buying Boeing’s airliners and weapon systems based on performance and price, not on palace intrigues,” said Robert Friedman, senior aerospace defense analyst for Standard and Poor’s.

Regardless, the unexplained ouster is a jolt to a company that had been trying to put two years of scandal behind it.

“This raises a lot more questions than it answers,” said analyst Richard Aboulafia of the Fairfax, Va.-based Teal Group.

Boeing said an internal investigation prompted by information sent anonymously to chairman Lew Platt and the company’s legal and ethics leaders 10 days ago revealed a consensual relationship between Stonecipher and the female executive that the board determined was in violation of the company’s code of conduct.

“The board concluded that the facts reflected poorly on Harry’s judgment and would impair his ability to lead the company,” said Platt, who is to assume an expanded role at Boeing.

Platt said on a conference call with analysts and reporters that the relationship came to light after the worker who informed the company saw correspondence between the two. He emphasized that the relationship alone was not the reason the company sought to dismiss Stonecipher, who is married.

“It’s not the fact he was having an affair — that is not a violation of our code of conduct,” the chairman said. As the company explored the circumstances surrounding the relationship, however, it discovered “some issues of poor judgment” that impaired Stonecipher’s ability to lead the company, he said.

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