Boeing's Secret Weapon Isn't on the Factory Floor -- It's in the Boardroom
Key Points
Boeing's board now has more directors with deep aviation experience.
The board's expertise is positioned as a key asset for Boeing's future.
Leadership changes aim to address Boeing's strategic and financial challenges.
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Boards of directors matter. They are responsible for defending shareholders' interests and helping set the company's strategic direction and capital allocation, electing its management, and lending their experience and expertise to steer the company in the right direction. These are incredibly important aspects for a company like Boeing (NYSE: BA) right now, and the good news is the board looks significantly stronger than it did a few years ago.
Boeing's board changes
One useful way to assess the changes is to consider the board when the previous CEO, David Calhoun, was appointed and compare it with the board when the current CEO, Kelly Ortberg, took over.
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|
Boeing Board That Elected Calhoun |
Current Boeing Board |
|---|---|
|
Lawrence W. Kellner, former CEO of Continental Airlines |
Steven M. Mollenkopf, former chief executive of Qualcomm |
|
David L. Calhoun, a 26-year General Electric veteran, including running GE Aircraft Engines |
Robert K. "Kelly" Ortberg, president and chief executive, former chief executive of Rockwell Collins |
|
Robert A. Bradway, CEO of Amgen |
Robert A. Bradway, CEO of Amgen |
|
Arthur D. Collins Jr., former CEO of Medtronic |
Akhil Johri, former chief financial officer of United Technologies |
|
Edmund P. Giambastiani Jr., former vice chairman of the Joint Chiefs |
David L. Joyce, former chief executive of GE Aviation |
|
John M. Richardson, former chief of naval operations |
John M. Richardson, former chief of naval operations |
|
Lynn J. Good, CEO of Duke Energy |
Lynn J. Good, CEO of Duke Energy |
|
Nikki R. Haley, former U.N. ambassador |
Lynne M. Doughtie, former U.S. chairman and chief executive of KPMG |
|
Caroline B. Kennedy, former ambassador to Japan |
David L. Gitlin, chairman and chief executive of Carrier |
|
Susan C. Schwab, former U.S. trade representative |
Bradley D. Tilden, former chief executive of Alaska Air Group |
|
Edward M. Liddy. Chairman and chief executive of Allstate. |
Stayce D. Harris, retired United Airlines pilot and Air Force lieutenant general |
|
Mike S. Zafirovski. Former chief executive of Nortel and former president and chief operating officer of Motorola. |
Mortimer J. "Tim" Buckley, former chief executive of Vanguard |
|
Dennis A. Muilenburg, outgoing chief executive. |
N/A |
|
Ronald Williams, former chairman and CEO of Aetna |
N/A |
Data source: Boeing filings.
In comparing the boards that elected Calhoun with its current makeup, there's a significant shift in directors with deep aviation experience. In particular, it's not immediately clear what deep aviation expertise Nikki Haley, Caroline Kennedy, Susan Schwab, Ronald Williams, and Arthur Collins possessed at the time. Richardson, Good, and Bradway remain on the board today.
A board with deep aviation expertise
Four standout names on the current board should give investors considerable confidence. David Tilden formerly ran an air carrier. David Joyce is a vastly experienced aviation executive who retired as CEO of GE Aviation (the company that preceded GE Aerospace) in 2020. Akhil Johri is a vastly experienced aerospace executive who was formerly the CFO of United Technologies (the company that gave birth to the aerospace and defense giant RTX). David Gitlin is a former president of two United Technologies' aerospace businesses, Collins Aerospace and UTC Aerospace.
Image source: Boeing.
Why it matters for Boeing
Industry experience is crucial for Boeing because, as Ortberg noted on his first earnings call as CEO in October 2024, "we need to develop a new airplane, but we have a lot of work to do before them," including "restoring the balance sheet so that we do have a path to the next commercial aircraft."
It's no small task as its debt has ballooned and free cash flow has collapsed in recent years. The key point is that the usual cycle of the current generation narrow-body, in this case the 737 MAX, generating the cash flow to fund the development of the next generation narrow-body, has been severely disrupted by the high-profile crashes, groundings, and production ramp issues on the 737 MAX.
BA Financial Debt (Quarterly) data by YCharts
These issues remain apparent, as Ortberg recently told investors that Boeing needs "a couple more years" before it can commit to a new airplane.
It still has a $715 billion backlog and many years' worth of orders to deliver. As such, Boeing's board has a key role in ensuring that the overall strategy, business plan, capital structure, oversight, and capital allocation are on the right track. The good news is the board has plenty of experience to help Ortberg get there, and it's a weapon in the company's arsenal as its executive management engineers a long-term turnaround.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amgen, Boeing, GE Aerospace, Medtronic, and RTX. The Motley Fool recommends Duke Energy. The Motley Fool has a disclosure policy.
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