New Boeing CEO Dave Calhoun will have to deliver a substantial list of successes within three years or he’ll miss out on a $7 million performance bonus that came with his appointment to the top job in December.
In January, the Boeing board had laid out Calhoun’s total compensation, which would give him almost $36 million over a three-year period provided he meets yearly financial targets as well as broader milestones.
That total included the supplementary $7 million performance-based incentive award. The only milestone for that award previously set out publicly was getting the 737 MAX safely back into service. In a filing Monday with the Securities and Exchange Commission, that goal was just the first in a lengthy list of stringent terms laid out for Calhoun by the board’s compensation committee. The goals to achieve the supplementary bonus are:
- Worldwide regulatory clearance for the 737 MAX and the aircraft’s safe return to service, including all of the almost 800 MAXs currently grounded.
- Strengthening of Boeing’s engineering culture in line with board recommendations since the two fatal MAX accidents.
- The entry into service of the 777X and a successful ramp-up of production and deliveries.
- A crewed flight of Boeing’s Starliner space vehicle.
- Stabilization of KC-46 Air Force tanker production.
- Achievement of key milestones for the T-7A jet fighter trainer aircraft, the MQ-25 Stingray aerial refueling drone for the Navy, and the Air Force One presidential jet program.
- Successful execution of the long-range business plan for Boeing Global Services.
- Closing of the joint venture with Embraer of Brazil, assuming regulatory approval.
Provided the board judges he’s met all those goals, Calhoun can be paid half of the $7 million at the earliest after two years of service and the other half after three years.
“However, in no event will either installment of the Performance-Based Award vest unless and until all of performance goals … are certified by the Compensation Committee to have been substantially achieved,” the SEC filing says.
And if the performance goals are not substantially achieved by Dec. 31, 2023, then the $7 million “will be forfeited in its entirety.”
The supplementary award is just one piece of Calhoun’s compensation package, which begins with a base salary of $1.4 million per year.
Additionally, the board awarded him $10 million “designed to compensate Mr. Calhoun for amounts forfeited upon his departure from his prior employer,” an amount he can access if he is still CEO in three years.
Calhoun was also granted an annual incentive award with a value of $2.5 million per year if preset financial targets were met, which for 2020 will pay out at no less than that target. In subsequent years, it could vary between zero and $5 million depending on the company’s financial performance.
And he was awarded a long-term, performance-based incentive award with a target value of a further $7 million if preset financial targets are met over the next three years.
Separately on Monday, Boeing announced two personnel changes to its board of directors.
Leaving are Edward Liddy and Mike Zafirovski, both of whom have been on the board for more than 15 years.
Liddy, who had reached the board’s mandatory retirement age, was a senior financial executive for a series of businesses, including Sears, ADT and Allstate, where he was chairman. Following the 2008 global financial crisis, he was appointed interim CEO of insurance giant AIG and led its restructuring. He had no engineering or manufacturing expertise.
Zafirovski, who decided not to stand for reelection, spent 24 years with General Electric under CEO Jack Welch, then was a senior executive at Motorola and then CEO of Nortel Networks through its bankruptcy.
To replace those two, Boeing’s board has nominated Steve Mollenkopf and Akhil Johri to be elected as directors at the company’s upcoming annual meeting of shareholders.
Mollenkopf is CEO of Qualcomm, which makes wireless telecommunications products. He holds a master’s degree in electrical engineering.
Johri is a chartered accountant and finance chief at United Technologies, one of Boeing’s largest suppliers.
In a statement, Boeing CEO Calhoun said he looked forward “to benefiting from Steve’s strong leadership skills and deep experience in developing, testing and deploying technologies at scale, and from Akhil’s world-class financial expertise, particularly in relation to the manufacturing of aerospace systems.”