For companies, as for individuals, integrity is difficult to earn and easy to squander. That lesson has gone down hard this year at Boeing Co., which is moving fast to preserve what remains of the integrity it has built since Detroit native William Boeing incorporated his little aircraft manufacturing business in 1916.
Viewed through that light, the departure of Philip Condit as Boeing’s chairman and chief executive is a parable from an emerging age of more aggressive corporate governance. With two scandals under its belt this year and with two executives already fired for their roles in an alleged ethics breach, Boeing’s board of directors evidently decided Condit–the boss who moved Boeing’s headquarters from Seattle to Chicago in 2001–had to pay for embarrassments that occurred on his watch.
Such are the corner-office risks at a company that does business with governments and airlines–two clusters of customers who view scandalous behavior as sufficiently toxic to poison future business deals. Boeing needs credibility in Washington, in other world capitals and in corporate boardrooms around the globe. With that credibility now on the line, the board reasoned, Condit had to go. His resignation was offered and accepted.
Bad enough that Boeing’s airliner business cratered after terrorists turned planes into guided missiles on Sept. 11, 2001. Bad enough that European competitor Airbus snagged orders Boeing coveted. The scandals made things worse.
In July the Pentagon punished Boeing for having obtained 25,000 pages of documents from archrival Lockheed Martin on a rocket project for which both companies were competing.
Then, last week, Boeing canned two executives–one of them the company’s chief financial officer–for what Boeing called unethical conduct related to a contract under which the Air Force would acquire 100 refueling tankers from Boeing. The company said CFO Michael Sears improperly discussed future employment at Boeing with an Air Force official who was negotiating the tanker deal. The official later did come to work for Boeing, and last week, along with Sears, collected her pink slip.
Sears has denied any wrongdoing. But the damage is done: The Pentagon is investigating the awarding of the tanker contract to Boeing and the Senate Armed Services Committee appears set to do the same. All of which translates to two outcomes for Boeing: the possibility that the lucrative tanker deal will unravel–and still more bad publicity.
There’s no evidence Condit knew about, let alone condoned, ethical breaches. But for companies that don’t want their names mentioned in the same breath as Enron, WorldCom or Tyco, even that fig leaf isn’t as protective as it once was–a point Boeing’s board evidently grasped.
At a time when Wall Street, government regulators and ordinary citizens are demanding more attention to corporate governance than ever before, Boeing’s board appears determined to address the mounting questions about Boeing’s integrity head-on. Three execs are gone, new leadership is in place, and a senior vice president has been installed in the role of ethics cop.
In short, Boeing’s board is doing what it can to make sure the company will survive and flourish. Even if Phil Condit, long the public face of Boeing, no longer could.
