Just when it seemed that Boeing Co. (NYSE: BA) had reached an agreement on how to fix the battery problems with its 787 Dreamliner and get off the front pages for a while, the aircraft maker loses out on a contract for 234 new planes for one of its best customers, Indonesia's Lion Air. Last year Lion Air ordered more than 200 of Boeing's 737 single-aisle planes in a deal worth more than $22 billion. The order for 234 planes from Airbus is valued at $24 billion.
The Airbus order was announced today, and it follows on Saturday's announcement from Boeing that the company was so pleased with CEO Jim McNerney's work in 2012 that it raised his compensation for the year by 20% to $27.5 million. McNerney earned $23 million in 2011.
Let's add it up: The 787 Dreamliner, McNerney's signature program, was three years late and billions of dollars over budget. When it finally did fly, the plane was grounded for flaws in its battery systems that caused onboard fires. That is a record that certainly deserves to be rewarded with a pay hike.
Boeing's board apparently believes that McNerney had something to do with the company's 2012 success. Shareholders did not share in that success, however. Boeing's stock price rose only 2.7% in 2012 while the S&P 500 index rose 13%.
When McNerney took over as CEO in 2005, shares traded at an all-time high of more than $100 before falling to below $40 in 2009. The climb back out of that hole was mostly complete by 2010, when shares rose to near $75.
What McNerney did in 2012 was mostly not much. But given his track record, the less he does the better it is for Boeing.
We have long argued that McNerney should go, but maybe the rest of Boeing's board ought to be shown the door as well.
Boeing's shares are down about 1.1% in early trading this morning, at $85.48 in a 52-week range of $66.82 to $86.49.
Filed under: 24/7 Wall St. Wire, Aerospace & Defense, Compensation, Corporate Governance, Shareholder Issues Tagged: BA, featured