Shareholder Resolution

RESOLVED: the shareholders request that the Boeing Board of Directors adopt the following policy:

(1) All non-represented employees be given a choice between the old Boeing [Heritage] pension plans used prior to Jan 1, 1999, or the current Pension Value cash-balance plan at time of termination or retirement.

(2) The cash balance plan to provide a monthly annuity at least equal to that expected under the old pension plan, or an actuarially equivalent lump sum.

Boeing announced in 1998, and implemented in 1999, a new pension plan for over 100,000 non represented employees. None were given a choice of old or new plans. The IRS has yet to determine the tax status of the Boeing Pension Value cash-balance plan. Without tax qualified status, participants can be taxed on the value of the benefit they earn under a company-sponsored retirement plan each year. The company also risks significant tax-liabilities.

The legality of cash-balance pension plans has been challenged in courts, are currently under government scrutiny, and have been the subject of extensive press coverage. In many cases, older workers have found out they now must work years longer to get the same benefits promised under the old plans. The EEOC has created a task force to gather information and complaints from employees relating to age-discrimination issues. Congressional hearings have been held, and related legislation has been promoted by corporate lobbyists.

Boeing offered the same plan to the Society of Professional Engineering Employees in Aerospace (SPEEA). The cash-balance plan and the company offered medical insurance takeaways were a factor in the largest white collar strike in history. The company has never offered a reason for no choice of plans for current employees.

Some older employees must now work extra years to reach the same pension previously promised under the Heritage plans. To change the goal-posts for employees nearing retirement by using methods of questionable legality which have been the subject of government investigations for over a year is inappropriate for a company that wants to keep its best employees.

Cash-balance plans have incited huge protest meetings, union organizing, adverse media coverage, and Senate hearings. For example, an IBM shareholder proposal making a similar request last year got a shareholder vote of 28.4%, and support from organizations like CALPERS. (California Public Employees Retirement System)

Please encourage the BOD to keep their previous pension promises by giving an informed choice to loyal employees who have helped make the company famous and profitable. Thank you.

Board of Directors' Response

The Boeing Company designed its new pension plan, the Pension Value Plan or PVP, to provide a single plan for the Company's non-represented salaried employees. Before the PVP was implemented in 1999, these employees earned benefits under more than 20 different plans and formulas that were sponsored by the "premerger" companies: Boeing, McDonnell Douglas and Rockwell. The PVP was designed to provide a level of benefits that would be nearly equivalent to the benefits provided under the prior plans. The Company did not adopt the PVP to reduce pension-related costs. On the contrary, the PVP increased the Company's pension liability substantially, as was disclosed in the 1998 Annual Report.

The PVP is not subject to the same criticisms as other cash-balance plans because it includes important features that are different from most other cash-balance pension plans:

• The PVP preserves all benefits earned under the former plans, and allows these benefits to continue growing in proportion to the employee's salary.

• Employees began earning new benefits under the PVP formula immediately upon the PVP's implementation rather than having a "wear-away" transition period before they could accrue any new benefits under the cash-balance plan.

• The PVP increases the percentage of pay that is credited to the employee's cash-balance "account" as the employee's age increases. Thus, the PVP gives the Company's oldest employees nearly four times more benefit credits each year than their youngest counterparts receive.

The Company believes, based upon its analysis, that for most employees who were near retirement age or who had long service when the PVP took effect, there is little difference in projected retirement benefits. In fact, due to the PVP's unusual features and the extra costs associated with this change, the Company further believes (based again on its analysis) that many employees' projected PVP benefits are slightly higher than the projected benefits from their former plans. Of course, different employees will be impacted differently. Contrary to the Proponent's Supporting Statement, overall, the PVP provides a level of benefits that is very close to, and in some cases better than, the benefits provided by the prior plans.

The Proponent's Supporting Statement alleges that the Company has broken "previous pension promises" made to employees. As just discussed, the Company does not believe that any promise was broken. All benefits that employees had already accrued under their prior plans have been preserved, as required by federal pension law. Both federal pension law and the terms of the prior pension plans gave the Company the right to change its pension plans for the future, as long as it did not reduce the benefits employees had already accrued. Boeing exceeded its legal obligation to merely preserve accrued benefits by not only protecting all of the prior plans' accrued benefits, but providing for the future growth of those benefits in proportion to employees' future salary growth, instead of merely freezing the prior accrued benefits.

The proposal's recommendation to permit employees to choose between the PVP and their former plan upon termination or retirement would undermine a primary purpose of the PVP, to create a single, simplified plan for all salaried non-represented employees. Employers are not required to offer their employees a choice between pension plans, and most employers do not, for good business reasons. Large costs and significant administrative difficulties would be associated with maintaining numerous plans and benefit formulas, meeting the myriad federal regulations that apply to each plan, and offering and implementing employees' choices as they terminate or retire over a period of decades.

In summary, Boeing strives to provide its employees with a total compensation and benefits package that is competitive and that helps the Company attract and retain the best performers. Management believes that the PVP meets these criteria, and that the PVP's generous, carefully thought-out transition measures have protected the transition-date workforce. Boeing will continually review its benefit plans and programs, making changes where appropriate. At this time, the Board is satisfied that the measures recommended by the proposal would be unnecessarily detrimental to the Company's pension and compensation programs.