Boeing’s Internal Affairs

Jonas Ferris
Stock up 40% in 15 months — new CEO forced to resign. It’s not the headline you’d expect to see as a shareholder, but Boeing investors are left scratching their heads as to the real reason behind “Dirty” Harry Stonecipher's abrupt resignation.

Boeing, the giant defense and aerospace company, was in danger of becoming the poster child of unethical business dealings. In recent years they had illegal employment talks with government officials who had discretion over Boeing contracts — effectively a bribe.

Next Boeing disclosed Lockheedgate, where they used ill-gotten documents from competitor Lockheed Martin to win government contracts. This scheme that may have cost Boeing shareholders a billion in military contracts because of a resulting Air Force ban.

Then there was the heat brought on by Arizona Republican Senator John McCain over a $23 billion dollar refueling tanker planes Air Force proposal.

Boeing scrambled for a quick fix and dragged respected aerospace executive Harry Stonecipher out of retirement to help patch up Boeing’s reputation. Already wealthy from his previous CEO role at McDonnell Douglas, which Boeing bought in 1997, Harry owns Boeing stock and stock-based incentives worth over $100 million.

By most measures Stonecipher was a success in his short stint as CEO. He appeared to be making progress in the political battle (if not the sales battle) with Boeing’s French competitor Airbus. Boeing is doing well despite the troubles of their large clients in the airline industry. The stock is up more than the stock market since Harry’s start date.

Harry was asked to leave because of ethical lapses that flew (pun intended) in the face of his own initiatives to fix Boeing's sullied reputation. He cheated on his wife with another Boeing executive. They’ve even got the sultry emails to prove it. Such moves may violate Boeing's newly inked Code of Conduct.

How did he get caught? Harry effectively put in place a snitch line at Boeing, one of many plans to catch ethical lapses at the company before they hit the front page and cost Boeing money. It didn’t take long for possibly disgruntled employees (Harry was tough on labor) to report his own obvious moral shortcomings — talk about the pot calling the kettle black!

But is this indiscretion grounds for termination? A CEO is not a politician that ran on a platform of family values and baby kissing. They are hired indirectly by the shareholders to make money.

The sort of ethical lapses that cost Boeing shareholders money in recent years had to do with business ethics, not personal issues. Some of our country’s best CEOs are multiple divorcees or have cheated repeatedly on their spouse(s). Some of them have probably been terrible parents.

We don’t know the full story here yet. Maybe Boeing’s board had reason beyond the affair to push Harry out. They should be able to tell the difference between bribing government officials and sleeping around — only one hurts shareholders.

The only possible rational explanation is Boeing feels a philandering CEO could make it hard for the company to win defense contracts or to get U.S. political and financial help in Boeing’s trade battle with Airbus over unfair government subsidies.

Since some in government are trying to amend the constitution to protect the sanctity of marriage, maybe this fear is not baseless. Can any company that must do business with our government have a CEO who doesn’t appear to care much for the sanctity of marriage?

Boeing’s actions may highlight the brewing battle between small-government-free-market Republicans and moral high road Republicans, a battle we saw in recent FCC actions against indecency, and one that could hurt the Republican Party as well as some publicly traded companies.

This weekend our Business Block has much more on how politics affect YOUR investments. Tune in Saturday 10am — noon ET.

Jonas Ferris is a regular contributor to "Cashin' In" and is co-founder of