Two shareholders have advised the Company that they intend 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: That the stockholders of The Boeing Company, assembled in annual meeting in person and by proxy, hereby request the Board of Directors to take the steps necessary to provide for cumulative voting in the election of directors, which means each stockholder shall be entitled to as many votes as shall equal the number of shares he or she owns multiplied by the number of directors to be elected, and he or she may cast all of such votes for a single candidate, or any two or more of them as he or she may see fit.
Proponents' Supporting Statement
California law still requires that unless stockholders have voted not to have cumulative voting they will have it. Ohio also has the same provision.
The National Bank Act provides for cumulative voting. In many cases companies get around it by forming holding companies without cumulative voting. Banking authorities have the right to question the capability of directors to be on banking boards. In many cases authorities come in after and say the director or directors were not qualified. We were delighted to see the SEC has finally taken action to prevent bad directors from being on boards of public companies. The SEC should have hearings to prevent such persons becoming directors before they harm investors.
Many successful corporations have cumulative voting. Example, Pennzoil defeated Texaco in that famous case. Texaco's recent problems might have also been prevented with cumulative voting, getting directors on the board to prevent such things. Ingersoll-Rand, also having cumulative voting won two awards. Further, Union Pacific is a good example having troubles with their freight shipments, which are backed up for a month. The merger with Southern Pacific is part of the excuse. Just last year, Union Pacific took away cumulative voting.
Lockheed-Martin, as well as VWR Corporation, now have a provision that if anyone has 40% or more of the shares cumulative voting applies: it does apply at the latter company.
In 1995 American Premier adopted cumulative voting. Allegheny Power System tried to take away cumulative voting, as well as put in a stagger system, and stockholders defeated it, showing stockholders are interested in their rights. Also, Hewlett-Packard, a very successful company, has cumulative voting.
If you agree, please mark your proxy for this resolution; otherwise it is automatically cast against it, unless you have marked to abstain.
Board of Directors' Response
The Company believes that cumulative voting would threaten to undermine effective Board of Directors functioning. Cumulative voting introduces the possibility of partisanship among directors that could impair their ability to work together, an essential element in the effective functioning of the Board. Also, it is the Board's duty to represent all shareholders. Each director must therefore bear responsibility toward all Company shareholders, without any special loyalty to any one group. From this perspective, cumulative voting is undesirable since directors so elected might be principally concerned about representing and acting in the interest of special groups of shareholders responsible for their election, rather than in the interests of all shareholders. The Board does not believe that a narrow constituency of shareholders who have pooled their votes should have an advantage over the interests of the Company's shareholders as a whole.
In 1986, 80% of the shareholders who voted at the Company's annual meeting voted in favor of amending the Company's Certificate of Incorporation to eliminate cumulative voting, as permitted under Delaware law. The Company's action was consistent with a general trend away from cumulative voting for public companies. For example, the State of California, considered among the most protective of shareholder interests, amended its state laws to permit the repeal of cumulative voting in 1989. In supporting the change, the Committee on Corporations of the Business Law Section of the State Bar of California argued:
While a healthy diversity of opinion and experience, as represented by independent directors, is desirable, factionalism is not appropriate in the board's essential executive function. The principal objective of a business enterprise should be profit and gain for its shareholders, not political accommodation of competing interests . . . . Practical experience has shown that effective management of a corporation requires candor and consensus in the Boardroom, [not] rancor and contention.
The Company believes that the present method of voting has served the Company well and should continue to work as successfully in the future as it has in the past. Eleven of the Company's 13 directors are independent non-employee directors and are all nominated for the Board of Directors by the Company's Organization and Nominating Committee, which consists entirely of independent directors. This guarantees the continued independence of the Board in representing all 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 establish cumulative voting, as this proposal is only a recommendation. Establishing cumulative voting would require the affirmative vote of at least 75% of the outstanding shares on a proposal to amend the Company's By-Laws, which specifically do not provide for cumulative voting for directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS