BA Boeing Co

By Patrick Thomas 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 17, 2019).

Two proxy advisory firms say that Boeing Co. shareholders would benefit from seeing the chairman and chief executive roles separated following two fatal crashes of its 737 Max plane.

Institutional Shareholder Services Inc. recommended in a note earlier this month that Boeing shareholders vote for a proposal that would split the leadership roles at the Chicago plane maker's annual meeting on April 29.

Dennis Muilenburg has served as Boeing's CEO since 2015 and became chairman of the board in March 2016.

"Concerns raised within the last year about the company's risk oversight and actions related to the development, certification and marketing of the 737 Max aircraft are serious enough to suggest that shareholders would benefit from the most robust form of independent board oversight, in the form of an independent board chair," ISS said in the note.

Fellow proxy advisory firm Glass Lewis & Co. has also recommended shareholders vote for the split. Glass Lewis said in a note that an independent chair would better oversee company executives and set a pro-shareholder agenda.

"Separation of the roles of chair and CEO eliminates the conflict of interest that inevitably occurs when a CEO is responsible for self-oversight," Glass Lewis said in the note.

"Boeing has a strong, actively engaged board, which brings a high level of expertise, dedication and commitment to its oversight function, including with respect to the safety of the 737 MAX and our other airplane programs," a Boeing spokesman said in a statement.

In its latest proxy statement, Boeing said its board should be able to select its leadership structure based on what will best serve shareholders' interests under the circumstances, not pursuant to an inflexible policy established in advance.

"The Board is not aware of clear evidence demonstrating that splitting the CEO and Chairman roles is good for all companies in all circumstances," the company said in the filing.

Glass Lewis also recommended the removal of Boeing's audit committee head Lawrence Kellner, saying the 737 Max crashes indicated a potential lapse in the board's oversight of risk management.

"We believe the audit committee should have taken a more proactive role in identifying the risks associated with the 737 Max 8 aircraft," Glass Lewis said in the note. "As such, we believe shareholders would be best served with rotation at the board level of the Company's risk management function."

Boeing's 737 MAX fleet was grounded globally after an Ethiopian Airlines crash last month, which followed the crash of a 737 MAX jet operated by Lion Air last year. All 346 people on the two flights were killed, and investigators are focusing on the misfiring of a 737 MAX flight-control system known as MCAS. The system was apparently activated by false readings from sensors that measure the angle of the plane's nose, known as the angle of attack, according to investigators.

In his first public comments since the fatal crash last month, Mr. Muilenburg said software changes will make the jet "even safer by preventing erroneous angle-of-attack sensor readings" implicated in that fatal crash and another last year. He said the aerospace giant has conducted nearly 100 test flights of fixed 737 MAX software since the plane's grounding last month.

Corrections & Amplifications Institutional Shareholder Services Inc. issued its recommendation that Boeing shareholders vote to separate the CEO and chairman role on April 2. A previous version of this story misstated that the report was issued Tuesday. (April 16)

Write to Patrick Thomas at Patrick.Thomas@wsj.com

(END) Dow Jones Newswires

April 17, 2019 02:47 ET (06:47 GMT)

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