A shareholder has advised the Company that it intends to present the following resolution at the Annual Meeting. In accordance with applicable proxy regulations, the proposed resolution and supporting statement, for which the Board of Directors and the Company accept no responsibility, are set forth below. Approval of this proposal would require the affirmative vote of a majority of the outstanding shares of common stock present in person or by proxy and entitled to vote at the Annual Meeting.
RESOLVED: The Boeing shareholders request the Board of Directors take the necessary steps to change all company governing instruments to require election of the entire Board each year. This includes the requirement that any future change in director frequency-of-election be submitted to shareholder vote as a separate issue.
Proponent's Supporting Statement
Annual election of the entire Board is widely accepted by corporate governance experts to improve corporate performance and avoid surprise reversals. Major corporations went to the brink of disaster due to lame board oversight.
This is an update of the 1997 Boeing shareholder resolution that achieved more than 48% shareholder approval. Institutional Shareholder Services, a proxy advisory firm, recommended this resolution in 1997.
The Business Week Nov. 25, 1996 Cover Story said for the best board: "Place the entire board up for election every year." Business Week said annual election was one of a number of factors for the best board.
This resolution is designed to prevent surprise reversals like Boeing's $2.6 Billion write-off plus the $1.4 Billion MD-80/MD-90 cancellation charge. The $2.6 Billion write-off sent Boeing stock tumbling and resulted in a deluge of costly lawsuits. (A portion of these $-Billions reflect a loss rather than a write-off or potential write-off).
This is a short list of the kinds of issues the entire board should answer for each year:
Mr. Condit, Boeing CEO, said the customer was "a key part of the process" on the new 777. Likewise, shareholders need to be "a key part of the process" at Boeing.
VOTE FOR ANNUAL ELECTION OF ENTIRE BOARD OF DIRECTORS
Board of Directors' Response
This proposal is substantially the same as presented last year. The Board of Directors has not changed its position. In the opinion of the Board, the claims made in the supporting statement are largely irrelevant to the issue.
Under the Company's By-Laws, as approved by Boeing shareholders, the Board of Directors is divided into three classes with directors elected to staggered three-year terms. Approximately one-third of the directors stand for election each year and the entire Board can be replaced in the course of three annual meetings, all held within approximately two years. At the same time, a majority of directors will have prior experience as directors of the Company. This is important for ensuring the Board has solid knowledge of the Company's complex products, its product strategy, its long-range plans and progress, and its evolving role in the global aerospace market.
The Board believes the classified board ensures directors' accountability to shareholders while it also ensures continuity in the composition and long-range planning of the Board. The Board believes this is particularly important for a company like Boeing that has high-technology products and programs that require major investments to be made over long periods of time.
The Board of Directors also believes that a classified board reduces the ability of a third party to effect a sudden, unsolicited change in the Company's direction. The staggered board system would permit the Company time to negotiate with the proponent of the change, permitting the Board to consider alternative proposals and seek the best results for all shareholders.
The Board believes that a classified board is appropriate for Boeing and that it ensures responsible, knowledgeable representation of the long-term interests of Boeing shareholders.
Approval of this proposal would require the affirmative vote of a majority of the outstanding shares of common stock present in person or by proxy and entitled to vote at the Annual Meeting. However, approval of the proposal would not automatically eliminate the classified board, as this proposal is only a recommendation. Eliminating the classified board would require the affirmative vote of at least 75% of the outstanding shares on a proposal to amend Article II, Section 1 of the Company's By-Laws, which provides for a classified board.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS