Boeing: What has been done? And will that be enough?

Will changes to Boeing’s board be enough to sharpen focus on product and safety going forward? This article examines Boeing’s corporate governance practices and current board expertise, bringing to light some interesting findings.

This article examines Boeing’s corporate governance practices and current expertise on the board. This raises the question if recent changes will really be enough to sharpen Boeing’s focus on product and safety going forward.

Disaster strikes

Following the horrific plane crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302 in October 2018 and March 2019, a mounting crisis faces Boeing. As a result, Boeing has recently received a fair share of negative publicity, been the subject of investigations and named in lawsuits. Beyond the general public, shareholders and corporate governance experts are infuriated. They collectively question the effectiveness and transparency of the board and leadership—with good reason.

Various recent studies have shown Boeing’s quality of corporate governance.  Findings reveal Beoing ranks near the bottom of all S&P 500 company boards[1]. Even more interesting is the board’s compensation data.

CGLytics data reveals that of all S&P 500 companies, Boeing ranked 91st out of the 500 with the highest paid non-executive directors; receiving an average of $345,000 per director in 2018.

In addition, new developments at congressional hearings held in October 2019 have revealed that many concerns were warranted.  Boeing executives admitted to flaws in the design of its 737 Max. Pilot error was originally thought to be the main cause of the plane crashes, however that sentiment has changed and a “pattern of deliberate concealment”[2] is now suspected. Instead of pilot error, it is now alleged that insufficient information provided to the pilots regarding the new changes to the plane caused these unfortunate results. The Boeing CEO stated at the congressional hearings that, until recently, he was unaware of the apparent issues. It seems greater oversight and communication was, and is, needed within Boeing, its executives, and the Board.

Board takes steps to increase safety

We note that Boeing has taken various actions to ensure the future safety of its aircrafts. In August 2019, the board established a permanent Aerospace Safety Committee to assist the board in “the oversight of the safe design, development, manufacture, production, operations, maintenance, and delivery of the aerospace products and services of the Company.” Along with the establishment of the committee, the company also formed a Product and Services Safety organization, which is responsible for monitoring safety related events within the company’s major businesses.  These additional layers of oversight will hopefully strengthen Boeing’s safety focus and minimize unfortunate future safety issues on the consumer end.

The board also “amended the company’s Governance Principles to include safety-related experience as one of the criteria it will consider in choosing future directors.”[3] Following this amendment, the board appointed former Chief of Naval Operations John Richardson, whose prior positions included significant safety experience, as a director. Admiral Richardson,  along with Admiral Edmund Giambastiani,  appear to be the only director on Boeing’s 14-member board that has safety experience in aviation.  It also does not appear that the board currently contains directors with technical experience in aviation, except for CEO Dennis Muilenburg who was an engineer for Boeing. This could raise the question whether the board has enough expertise to address, both technical and safety issues, to challenge Muilenburg, who previously held a dual role as Chairman and CEO of Boeing for over three years.

Skills and expertise on Boeing's board

Changes for CEO Muilenburg

In October 2019, Boeing’s board decided to remove CEO Muilenburg from his role as Chairman. This action was taken to “enable Muilenburg to focus full time on running the company as it works to return the 737 Max safely to service, ensure full support to Boeing’s customers around the world, and implement changes to sharpen Boeing’s focus on product and services safety” and to “strengthen the company’s governance and safety management processes.”[4] It is still unclear, however, whether Muilenburg will receive any pay cut or even resign following his failure to address the 737 Max issues. When asked at the Congressional hearings about whether he would take any pay cut following this mistake, the CEO said: “Our Board will make those determinations.”

How Boeing could increase board oversight

Board oversight and transparency is a significant issue in corporate governance. It is important to be aware of board composition, executives, and the information that entails when viewing any company. CGLytics provides necessary data analytics that could lend a useful hand in analyzing boards, their efficacy, and transparency. In this case, a quick look at the board expertise, committee overview and individual profile of each director on the Boeing’s board on CGLytics would have drawn attention into the Board’s lack of safety committees and technical and safety experience and expertise.

Would you like to learn more about how, you too, can have instant insights into more than 5,500 globally listed companies’ board composition, diversity, expertise and skills? Click here to find out about CGLytics’ boardroom intelligence capabilities and obtain the same insights used by institutional investors and advisors.

 

About the Author

Thao Nguyen: U.S. Research Analyst

Thao completed her Bachelor of Science in International Business Management at Erasmus University in Rotterdam and spent a semester abroad at the University of Washington, Foster School of Business. She gained work experience as a Research Analyst in previous internships.

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How can innovations in information technologies support the role of the board of directors?

How far should we go in terms of sophisticated algorithms in order to complement the usual dashboards? What type of data processing tools boards need while avoiding a big data overload? How can a board leverage data and AI for effective oversight and to make better governance decisions?

6 November 2019  14.00 – 15.00 Brussels time     

Companies have to monitor their environment according to defined objectives and integrate the collected data into real strategic and operational information. Business intelligence is there to support not only the management but also board members in making better decisions. In a more demanding environment, board members have to understand the drivers of value creation and develop the right metrics to articulate value. Actionable and real-time insights are therefore becoming even more critical for board members. How far should we go in terms of sophisticated algorithms in order to complement the usual dashboards? What type of data processing tools boards need while avoiding a big data overload? How can a board leverage data and AI for effective oversight and to make better governance decisions?

Our speakers will provide their input to the debate:

  • Aniel Mahabier, CEO at CGLytics;
  • Deepak Krishnamurthy,  Executive Vice President and Chief Strategy and Transformation Officer at SAP;
  • Michael Hilb, Entrepreneur, Board Member and Professor;
  • Rytis Ambrazevičius, Baltic Institute of Corporate Governance, President;

 

The webinar will be moderated by Suzanne Liljegren, ecoDa Communication Adviser.

Download the invitation here

ecoDa and CGLytics webinar

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Equity Compensation Model: Press Release

CGLytics and Glass Lewis set a new standard for transparency in equity-based compensation

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Newly released technology tests 11 key criteria that leading proxy advisor uses to assess plans

[Amsterdam, London, San Francisco – September 19, 2019] – CGLytics, a leading global provider of governance data and analytics, and Glass Lewis, the world’s leading independent provider of governance and engagement support services, today announced the launch of Glass Lewis’ Equity Compensation Model (ECM) – a powerful new application for assessing U.S. equity-based compensation plans, available exclusively via CGLytics.

This new application provides invaluable intelligence with year-round, on-demand access to Glass Lewis’ methodology which is used to evaluate the overall favorability of current and future equity plans, including tests against 11 key criteria. Companies and investors can now instantly test, review and adjust the same individual inputs as Glass Lewis’ analysts to ensure the best compensation, engagement and voting outcomes for their respective sides.

The ECM provides companies with immediate and proactive insight into the concerns regarding current and future equity plans, which Glass Lewis highlights to more than 1,300 investors representing more than $35 trillion in assets under management. In addition, with coverage of more than 4,300 publicly traded U.S. companies, investors can assess investment risks across their portfolio with regard to current equity plans or those being proposed.

Aaron Bertinetti, SVP of Research & Engagement at Glass Lewis explains: “Our analysts research and openly engage with thousands of companies and their investors every year, building invaluable insight and governance expertise as a result. We strongly believe that good governance is good for everybody, which means we must empower the capital markets by democratizing access to our deep governance expertise in a transparent, intuitive and unconflicted manner. The ECM gives companies and investors the same governance tools we use internally and have developed over many years. It will bring greater transparency, improved governance and market confidence by fostering alignment of corporate and investor interests in compensation plans.”

The ECM is available as a stand-alone service and is only available via CGLytics and its market-leading software. Corporate issuers can test and refine their equity plans, understand the level of concern from shareholders and ultimately be successful in seeking the shareholder support required to legally grant equity compensation. On the other hand, investors can test the equity plans for companies in their portfolio, perform comprehensive benchmarking of plan costs and evaluate the risk of any potential dilution to enhance their engagement and voting decisions.

Getting equity compensation right is a pivotal part of modernizing corporate governance. Issuers and institutional investors must be satisfied that proposed plans meet the long-term needs for the business and its shareholders. ECM will completely change the way both sides approach these challenges, setting a new benchmark for transparency in the decision-making process and driving good governance practices.” said Aniel Mahabier, CEO of CGLytics.

The offering, initially launched for the U.S. market, covers 4,300+ publicly traded U.S. firms including the Russell 3000, S&P 1500, S&P MidCap 400 and SmallCap 600.

About CGLytics

CGLytics is transforming the way corporate governance decisions are made. Combining the broadest corporate governance dataset, with the most comprehensive analytics tools, CGLytics empowers corporations, investors and professional services to instantly perform a governance health check and make better informed decisions. From unique Pay for Performance analytics and peer comparison tools, to board effectiveness insights, companies and investors have access to the most comprehensive source of governance information at their fingertips – powering the insights required for good modern governance.

About Glass Lewis

Glass Lewis, the leading independent provider of global governance and engagement support services, helps institutional investors understand and connect with companies they invest in. Glass Lewis is a trusted ally of more than 1,300 investors globally who use its high-quality, unbiased Proxy Paper research and industry-leading Viewpoint proxy vote management solution to drive value across all their governance activities.

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Interlocking Directorates: Looking for signs of collusion, conflict of interest and overboarding

Conflicts of interest, collusion and the overboarding of directors have been known to grab the attention of the biggest media outlets. As many companies are unfortunately aware. How can this be avoided right from the start?

Conflicts of interest, collusion and the overboarding of directors on publicly listed companies have been known to grab the attention of the biggest media outlets. As many companies are unfortunately aware, this unwanted attention raises questions, creates risk to a company’s reputation, gains attention from activist investors, and can ultimately affect the value of company shares. However, there is a way that all of this can be avoided right from the start.

Interlocking directorates are nothing new. It occurs when two firms share a common director, and the tie or connections that he/she creates is also referred to as a board interlock.

Although lawful and not illegal, it does raise questions about the independence of decisions made in the boardroom and can be seen by the U.S. Federal Trade Commission (FTC) as an anti-competitive practice prompting an investigation.

As stated by the FTC it is their responsibility to, “take(s) action to stop and prevent unfair business practices that are likely to reduce competition and lead to higher prices, reduced quality or levels of service, or less innovation”.

WHEN INTERLOCKS BECOME A CONCERN

An example of where interlocks became a concern for the FTC was during 2009. During this year Apple’s director Arthur Levinson abruptly resigned his seat on Google board following pressure from regulators. Following the announcement FTC’s chairman praised Google and Levinson “for their willingness to resolve our concerns without the need for litigation”.

That same year also saw Google’s Eric Schmidt resign from Apple’s board, three years after accepting a seat.

Eric Schmidt
Eric Schmidt resigns from Apple’s board in 2009

It’s important to mention that prior to these resignations, the FTC had been looking into whether interlocking directorates between Google and Apple raised competitive issues. These competitive issues may have violated U.S. antitrust laws.

The only safe way for companies to avoid situations of interlocking directorates that prompt investigation is by having oversight of every board members’ seats on other companies. By gaining this oversight companies can instantly see any risks or red flags, which are likely already on the radar of investors with governance issues coming under greater scrutiny of late.

This is also hugely important when a company makes new appointments to their board, or an existing director takes on additional responsibilities. Without oversight, companies might be opening themselves up to governance risk and wider liability.

 

CGLytics online solution provides instant information about a company’s board composition, director skills and expertise, as well as interlocking directorates for corporations, investors and advisors.

 

Interlocking directorates are common. It is not new. Most directors will have other board positions across one or more industry, however with highly confidential information that they are privy to, it is vital to identify potential conflicts of interest.

That being said, interlocking directorates can be indicators of the following:

– Collusion: Two or more members of the board holding appointments on another board and using this connection to influence the decision-making away from the best interests of either company.

– Conflict of interest: Directors with specific industry experience will often sit on boards that could be in competition. This can lead to questions from investors on if these board members are performing their duties in the best interests of the company.

– Overboarding: Directors must have the adequate time to devote to their duties of providing oversight for a company. US Proxy Advisory standards state that a director is considered to be overboarded when he/she is a non-executive director and sits on more than five boards, or he/she is an executive director and sits on more than three boards.

– Chairmen of the board are expected to spend double the amount of time as a NED and are considered overboarded with one chair and three other NED roles.

By identifying whether a board member is also on the board of a potential competitor (sometimes inevitably in niche markets where experience is necessary), or if two or more members of the board sit on the same board of another company, is vital for the nomination and governance committees to be aware and ensure that they have the correct policies and procedures in place, as regulators, investors and activists are constantly monitoring.

THINK LIKE AN ACTIVIST

Activist investor campaigns are continuing to show a year-on-year increase with more focus being placed on the composition of the board and the board members existing commitments. Leading investors are voting against the re-appointment of directors who are perceived to be overboarded. In addition, never before has there been as much scrutiny on the skills that a director brings to the board.

Activist investors are using CGLytics’ data and analytics for assessing the board effectiveness of listed companies worldwide.

 

With deep insights into how boards are composed in the CGLytics platform, and a skills matrix applied consistently across all companies in its universe, activist investors easily benchmark a board and assess if its compliant with regulatory and stewardship codes, hence see if there is any reputational risk.

Companies can access these very same insights in the CGLytics platform.

Corporate issuers, their boards and stakeholders can see exactly how they are perceived by activist investors. CGLytics is helping to promote good governance through transparency to the market. View director interlocks, see how board composition compares to competitors and raise concerns of any red flags. Identify any potential skills gaps and be proactive in succession planning, with access to a database of 125,000+ executive profiles draw from 5,500+ publicly listed companies across 40 indexes and 24 countries.

Curious to see how companies are viewed through the eyes of an activist investors? Click here

 

RESOURCES

https://www.ftc.gov/enforcement/anticompetitive-practices

https://www.reuters.com/article/us-google/arthur-levinson-quits-google-board-appeasing-ftc-idUSTRE59B2R120091012

https://techcrunch.com/2009/08/03/google-ceo-eric-schmidt-resigns-from-apple-board-surprised/

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Manzama and CGLytics announce partnership to change the way law firms develop new business relationships and forward-thinking governance practices

Powerful relationship analytics coupled with governance information are taking law firms to the next level

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Powerful relationship analytics coupled with governance information are taking law firms to the next level

The Manzama and CGLytics partnership is changing the way law firms develop new business relationships and forward-thinking governance practices

Keeping pace with changing market dynamics, clients, their key decisionmakers, corporate networks and competitors, is vital for law firms to continually add value, differentiate and unlock new business development opportunities.

Manzama and CGLytics have joined forces to drive business development and opportunities for world leading law firms. Through this partnership, law firms gain access to intuitive relationship mapping tools, revealing connections between corporate decisionmakers, their peers, as well as finding the easiest and shortest way to connect, which is not an easy feat. Clients can keep track of key executive movements and corporate changes by receiving daily or weekly updates and alerts.

CGLytics’ extensive database provides access to hundreds of thousands of comprehensive profiles of business leaders including their compensation arrangements and corporate networks of more than 5,500 globally listed companies. Its powerful relationship mapping algorithm maps over 1.3 million connections between directors, executives and key business leaders across the globe.

Accessing the broadest and deepest global corporate governance data set available in the market today, law firms are able to perform a deep-dive on corporate governance practices, enabling them to provide top quality services to their clients, by analyzing their peer practices and quickly spotting potential inefficiencies that may put them at risk of shareholder activism.

“We’re delighted to partner with CGLytics to deliver law firms with actionable relationship analytics and first-class corporate governance intelligence,” explained Peter Ozolin, CEO from Manzama. “The joint service offerings will allow our customers to easily perform due diligence on key decisionmakers, uncover new connections and find the most effective way to establish relationships with new targets. At the same time obtaining deeper corporate governance intelligence to take their corporate governance advisory work to the next level.”

Aniel Mahabier, Founder and CEO of CGLytics described the partnership as “one of our most exciting collaborations. Our unique and powerful relationship mapping algorithm combined with actionable corporate governance information in one system will drive law firms to take their business to another level and provide the best possible advice to their clients.”

Law firms that are interested in easily uncovering new relationships and expanding their business network reach for client management and development activities, along with leveraging best of class corporate governance data, get in touch with Manzama today.

About Manzama

Manzama sets the bar when it comes to finding crucial information for organisations. Since 2010, they have been the leading provider of current awareness and market intelligence solutions to professional service organizations around the globe. They provide intuitive search and sharing tools, user-friendly implementation, and integrations into numerous best-in-class third-party platforms. Using sophisticated search algorithms and cutting-edge machine learning techniques, Manzama delivers critical insights that help teams better serve their clients, make informed business decisions, and support knowledge and business development initiatives.

About CGLytics

CGLytics is transforming the way corporate governance decisions are made. Combining the broadest corporate governance dataset, with the most comprehensive analytics tools, CGLytics empowers corporations, investors and professional services to instantly perform a governance health check and make better informed decisions. From unique Pay for Performance analytics and peer comparison tools, to board effectiveness insights, companies and investors have access to the most comprehensive source of governance information at their fingertips – powering the insights required for good modern governance.

With Over 1 Billion Data Points and Powerful Algorithms, CGLytics is Utilised by Leading Investors and Proxy Advisors.

m2

5,500+

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m4

125,000+

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8 MIL+

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and Filings

m3

800 Mil+

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m6

1.3 Mil+

Relationships Connections

noun_metrics_1820608 (2) copy

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Current and historical board composition, skills data and millions of business relations

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Curated governance news in real-time

Glass Lewis and CGLytics Establish Global Partnership to Provide Unmatched Compensation Data and Analytics

Glass Lewis integrates CGLytics data set and analytical tools for its proxy vote recommendations and custom policy offerings

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Glass Lewis and CGLytics Establish Global Partnership to Provide Unmatched Compensation Data and Analytics

Glass Lewis integrates CGLytics data set and analytical tools for its proxy vote recommendations and custom policy offerings

[San Francisco, Amsterdam, London – June 5, 2019] – Glass Lewis, the world’s leading independent provider of governance and engagement support services, and CGLytics, a leading provider of governance data and analytics globally, today announced an expansion of their strategic partnership. CGLytics will serve as the global provider of compensation datasets and analytics to Glass Lewis, with an initial focus on North American, Australian and European markets.

Building on the success of the firms’ existing European partnership, Glass Lewis will now utilize CGLytics’ extensive compensation data in its proxy research and voting recommendations on executive compensation and Say on Pay, and integrate the same data into the proxy voting policies of institutional investors via its vote management solution, Viewpoint.

Glass Lewis’ Say on Pay analysis will now also be available via CGLytics’ proprietary platform, giving investors, issuers, advisors and board members the exact same data, tools and insights Glass Lewis uses to review and model CEO and executive compensation plans, and prepare for engagements with all stakeholders. Combining Glass Lewis’ proprietary policies and methodologies and CGLytics’ extensive data and analytical tools, the two companies will give all market participants unprecedented transparency and access into Glass Lewis’ compensation analysis that was not widely available and is needed for successful governance and stewardship in the modern digital age.

“CGLytics’ software and dataset enables the Glass Lewis global research team to establish a robust and consistent data source for our analysts to use in developing our unparalleled analysis and recommendations on compensation matters,” said Katherine Rabin, CEO of Glass Lewis. “Not only will this benefit our investor clients, who rely on us to provide them in-depth research and accurately implement their custom policies, but also the corporate issuers that directly purchase our Proxy Paper reports as an important part of their preparation to engage with shareholders.”

“We are thrilled to be extending our partnership with Glass Lewis, especially at a critical moment when corporations and investors are facing increasing demands from multiple parties for greater transparency and socially responsible and sustainable pay practices – all of which are essential to upholding good modern governance,” commented Aniel Mahabier, CEO of CGLytics. “By partnering with Glass Lewis, we will be able to provide corporations and their investors with an unmatched solution to evaluate compensation practices. The extensive toolset and enhanced access to Glass Lewis’ proprietary methodology will help companies and investors effectively connect their analysis, engagement and decision-making, resulting in improved stewardship and shareholder engagement.”

About Glass Lewis

Glass Lewis, the leading independent provider of global governance and engagement support services, helps institutional investors understand and connect with companies they invest in. Glass Lewis is a trusted ally of more than 1,300 investors globally who use its high-quality, unbiased Proxy Paper research and industry-leading Viewpoint proxy vote management solution to drive value across all their governance activities.

About CGLytics

CGLytics is transforming the way corporate governance decisions are made. Combining the broadest corporate governance dataset, with the most comprehensive analytics tools, CGLytics empowers corporations, investors and professional services to instantly perform a governance health check and make better informed decisions. From unique Pay for Performance analytics and peer comparison tools, to board effectiveness insights, companies and investors have access to the most comprehensive source of governance information at their fingertips – powering the insights required for good modern governance.

With Over 1 Billion Data Points and Powerful Algorithms, CGLytics is Utilised by Leading Investors and Proxy Advisors.

m2

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m4

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m5

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and Filings

m3

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N-PX proxy voting
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m6

1.3 Mil+

Relationships Connections

noun_metrics_1820608 (2) copy

Key financial metrics from 2008 onwards for predictive analysis and companies top 25 ownership data

1

More than ten years of historical compensation data and array of unique performance indicators

2

Current and historical board composition, skills data and millions of business relations

4

Curated governance news in real-time