A few days after the Defense Department announced that it was once again probing irregularities in contracts with Boeing, the company axed its new CEO, Harry Stonecipher.
The premature exit came only a few months after former CEO Phil Condit resigned in the wake growing scandals involving Boeing’s cheating on Air Force projects that got the company banned from work on a missile launching program and landed two top executives in federal prison.
This time the illicit relationship didn’t involve a backroom assignation with the Pentagon. Instead, Stonecipher was apparently ousted because he had an affair with a female executive at the besieged company. Stonecipher is married; the female executive is divorced.
Stonecipher, who had returned to Boeing in 2003 after a few years of retirement on the golf courses of Florida to rehabilitate the company’s reputation after the resignation of Condit, began his dalliance with an unnamed woman executive “several levels down” the corporate ladder in January of 2005. The affair flourished over a few fervid weeks this winter. But it wasn’t the sexual relationship alone that did him in, according to the head of Boeing’s board. There were no charges of sexual harassment or misappropriation of funds. So the real reason for his ouster remains unclear.
“It wasn’t the affair,” explained Lewis Platt, chair of Boeing’s board of directors. “It was the circumstances surrounding the affair. We thought there were issues of poor judgment that impaired his ability to lead going forward.”
Platt didn’t disclose the lapses of judgement that cost Stonecipher his $1.5 million a year post. “We simply felt that if certain details were disclosed it would embarrass the company,” offered Platt, rather obliquely.
Company rules do not prohibit affairs between co-workers. In fact, inter-office romances are something of a tradition among Boeing executives. Stonecipher’s predecessor, Phil Condit, married his secretary and later launched a torrid affair with a Boeing receptionist in the months before he resigned.
When Stonecipher took the helm at Boeing in 2003, he held a sermonizing press conference where he boasted that his primary job was to convince Wall Street investors, Pentagon procurement officers and congressional appropriators that Boeing wasn’t “run by a bunch of crooks.”
He was referring to the procurement scandal involving the leasing of Boeing-owned tankers to the Air Force that resulted in jailing of two Boeing executives and the resignation of Condit. In January 2005, Michael Sears, the former chief financial officer at the company and long-considered a front-runner for the CEO post, was sentenced to four months in federal prison for his role in illegally brokering a job for Air Force procurement official Darleen Druyun, who had steered numerous contracts to Boeing, including the tanker deal. Druyun is serving a nine-month sentence.
At the same time, Boeing had also been caught cheating in another bid for a Pentagon contract. In that scandal, the Pentagon’s Inspector General discovered that Boeing had used documents stolen from Lockheed-Martin to aid its attempt to win a rocket-launching contract. As punishment, the Air Force barred Boeing from bidding on new rocket-launching contracts for 20 months, although Stonecipher later prevailed upon the Pentagon to reduce the penalty by a period of several months.
Stonecipher, a native of Tennessee who refers to himself as a Hillbilly executive, spoke of himself as a kind of corporate sheriff who would show no tolerance for ethical breaches by subordinates.
“After the ink was dry on my appointment here, I said, OK we are going to have a dedication to a value system,” Stonecipher said. “If you are going to work here, you must comply with the Boeing Code of Conduct.”
That code of conduct was written for Boeing by the pious Warren Rudman. Rudman, the former senator and Iran/contra cover-upper, has been dubbed the “white Andrew Young” for his resumé of providing, for a lofty fee, ethical nostrums for unsavory corporations. Under Stonecipher’s regime, each Boeing employee was forced to sign the Rudman code.
But the Rudman rules are silent on the subject of inter-office affairs. And Stonecipher’s tenure as CEO had been very good for Boeing’s bottom line. Despite losing commercial plane business to Airbus, Boeing’s stock had soared to three-years highs under Stonecipher’s leadership, largely as a result of defense contracts. This has led to speculation inside and out of the company that Stonecipher was shown the door for something more substantial than a mere consensual liaison with a female executive, who was not relieved of her position. It’s not common practice in corporate America for a board to can a CEO who made millions for their company. Especially when the executive didn’t commit a felony or even violate company rules.
This has prompted speculation that Stonecipher may have been forced out in advance of a widening probe into Boeing’s contracts with the Pentagon. In late February, Michael Wynne, the acting chief of Pentagon acquisition programs, announced that a recent review of Boeing defense contracts had found irregularities in four contracts ranging from $62 million to $1.5 billion each. Among the Boeing contracts being reviewed are a $1.5 billion award for depot maintenance of the Air Force’s KC-135 aerial refueling aircraft; an environmental satellite system worth up to $400 million; a C-40 lease and purchase program worth about $244 million; and a C-22 replacement program worth about $62 million.
The value of the suspect tainted totaled more than $2.2 billion. Wynne ordered the Pentagon’s inspector general to begin a more detailed inquiry. A parallel investigation is being conducted by the Defense Science Board. It is slated for release in late March.
We do know that Stonecipher was undone from the inside. On February 28, Platt received a packet of information on the affair from a Boeing whistleblower. The dossier included a memo and included copies of emails between Stonecipher and his lover, as well as other evidence of sexual banter. Similar packets were sent to heads of Boeing’s legal and ethics departments.
The whistleblower alleged in the memo accompanying the documents that Stonecipher had given a boost to the career and salary of his paramour.
Platt immediately confronted Stonecipher with the accusations from the anonymous tipster. Stonecipher admitted the affair, but denied giving his lover any preferential treatment.
The Boeing board was meeting that week in Huntington Beach, California. As the board members sat down to dinner, Platt broke the news of their CEO’s erotic escapades. The board was split on how to handle the situation. Apparently, most board members thought that a mere reprimand would do the trick. After a few hours of heated debate, the board ordered an investigation by an outside law firm from Los Angeles. The inquiry took a week and Stonecipher was fired and removed from his position as board member soon after the lawyer’s report was handed to the board. The findings of that report have not been made available.
Few Boeing workers are shedding tears over the fall of Stonecipher. He was widely considered a pompous and abrasive executive, who had built his career by slashing jobs and moving production overseas. Many Boeing workers were still seething over Stonecipher’s ruthless handling of the strike in 2000 by Boeing’s engineers. At the time, Stonecipher was Boeing’s chief operating officer. His drive to crush the union prompted striking workers to plaster his portrait on portable toilets along the picket lines with a sign reading, “Outsource Harry.”
Their wishes finally came true.
JEFFREY ST. CLAIR is the author of Been Brown So Long It Looked Like Green to Me: the Politics of Nature. This essay is excerpted from his forthcoming book Grand Theft Pentagon, to be published in July by Common Courage Press.