1.

Executive Summary:

This report aims to provide a brief insight into the Corporate Governance of Boeing .
Boeing is the world’s leading aerospace company and the largest manufacturer of commercial
jetliners and military aircraft, with capabilities in rotorcraft, electronic and defence systems,
missiles, satellites, launch vehicles and advanced information and communication systems. Their
reach extends to customers in 90 countries around the world, and are the number one U.S.
exporter in terms of sales. “Headquartered in Chicago, Boeing employs more than 150,000 people
across the United States and in 70 countries, with major operations in the Puget Sound area of
Washington State, Southern California and St. Louis making it one of the most diverse and
innovative workforces anywhere” (Boeing, 2010, p. 27). Acc to the its media release, the company’s
total revenue in Q12010 was at $15.2 billion.
Boeing finds itself under strict regulations in multiple areas including marketing, political,
environmental, legal and financial. It has a companywide ethical policy that applies to all of its
company and subsidiary employees, contract labour, consultants, and others acting for the
company. This policy states that Boeing will conduct its business fairly, impartially, and in an ethical
and proper manner, and in full compliance with all laws and regulations. (Boeing,2010) Boeing has
an extensive list of ethical responsibilities that all of its employees must adhere to.

The report is made up of 3 parts:

- The Compliance Report will examine Boeing’s current situation internal controls,
opportunities and issues with those controls.
- Issues at Boeing which compromised the Ethical Principle laid out by it
- Reflection on a range of ethical concepts, frameworks and theories

2. Boeing’s Corporate Governance structure and Principles

In light of the limitation in word count, this paper will specifically concentrate on Corporate
Governance in the organization, risk management, and effective internal controls in managing
enterprise risk.
The Boeing Company's business is conducted by its employees, managers and corporate
officers led by the chief executive officer, with oversight from the Board of Directors. The Board's
Governance, Organization and Nominating Committee periodically reviews the Company's
corporate governance principles and current practices.
The Board and the corporate officers recognize that the long-term interests of the
company are advanced when they are responsive to the concerns of communities, customers,
employees, public officials, shareholders and suppliers.
Additionally, the Board has adopted a Code of Ethical Business Conduct to focus the
Board and each Director on areas of ethical risk, provide guidance to help them continue to
effectively recognize and deal with ethical issues, enhance existing mechanisms to continue the
reporting of unethical conduct, and help to continue to foster and sustain a culture of honesty
and accountability.

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 One ethical responsibility that has a huge impact on management planning is promoting
compliance with the standards of conduct established by Boeing and applicable laws, and
ensuring that employees are aware of these standards and the legal requirements relevant to
their work. It is not always easy to determine the ethical or “right” thing to do in a particular
business or work situation. Sometimes, because of the highly complex rules and regulations that
govern the way we do business, a decision is not clear-cut.

A decision or situation could be difficult when the ethical issue includes.

- A close call: These situations involve the careful balancing of different yet valid interests.
Sometimes the correct decision is just not clear.
- A new problem: These situations usually involve facts that have not been specifically
addressed by the policies or procedures of the company.
- Multiple considerations: The decision in these situations requires the input of so many
different people that the decision process becomes very inefficient.
- Personal cost: The right and fair thing to do is clear, but the decision maker bears so much cost
in lost time or personal sacrifice that the decision is difficult.

a. Situation Analysis
i. Issue and Opportunity Identification
In response to federal mandates, as well the desire to self-police, Boeing introduced its
Corporate Governance Principles.
“The Board and the corporate officers recognize that the long-term interests of the company are
advanced when they are responsive to the concerns of communities, customers, employees, public
officials, shareholders and suppliers” (Boeing, 2010, p. 1).
The Board expects all employees to act with the highest ethical standards. The company
will disclose any breach of the company’s ethical code.
“Boeing’s Board of Directors has adopted a Code of Ethical Business conduct to focus the Board
and each director on areas of ethical risk, provide guidance to help them continue to effectively
recognize and deal with ethical issues, enhance existing mechanisms to continue the reporting of
unethical conduct, and to help continue to foster a culture of honesty and accountability” (Boeing,
2008, p. 1).
The Board, which consists of at least 75% of its members meeting the NYSE criteria for
independence, relies on corporate officers, outside advisors, and auditors to ensure all business is
being conducted ethically. The Board expects all employees to behave in an ethical manner. Any
waiver from the Company’s Code of Ethical Business Conduct will result in Board disclosure.
In order to ensure these ethical standards are met, the Board has five committees.
- The Audit Committee meets with independent auditors to assess the how well the company is
implements the program and its effectiveness.
- The Compensation Committee is established by the Board of Directors for the primary purpose
of establishing and overseeing the Company's executive and equity compensation programs.
- The responsibilities of the Special Programs Committee are to review on those programs which
for purposes of national security have been designated as classified by the Government.
- The responsibility of the Finance Committee includes, but is not limited to, mergers,
acquisitions, capital, employee benefits, and investor profiles.
- The Governance, Organization and Nominating Committee have been given the task of
reviewing and recommending to the Board. This committee is also responsible for Officer
Review and development and reporting any conflict of interest that comes to light.
To maintain effectiveness, there will be self-evaluating of the Board as well as a third-part
continuing education program and training.

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ii. Resolution Implementation
In addition, the Board of Directors of The Boeing Company has adopted a Code of Ethical
Business Conduct that complies with the standards set forth in the New York Stock Exchange’s
corporate governance rules. The Ethics and Business Conduct Committee, consisting of members of
the Executive Council and the Vice President of Ethics and Business Conduct, is responsible for
ensuring that appropriate policies and procedures exist to help employees comply with Boeing
expectations of ethical business conduct. The Boeing Company administers ethics and compliance
programs to promote its commitment to integrity and values as set forth in the Boeing values and
Code of Conduct and to ensure compliance with laws, rules, and regulations. These programs
inform employees of company policies and procedures regarding ethical business conduct and help
them to resolve questions and to report suspected violations. Managers are responsible for
supporting implementation of ethics and business conduct programs, and monitoring compliance
to the company’s values and ethical business conduct guidelines through such programs. Managers
are responsible for creating an open and honest environment in which employees feel comfortable
in bringing issues forward. Retaliation against employees who raise genuine concerns will not be
tolerated.

iii. Stakeholder Perspectives/Ethical Dilemmas

“Maximizing shareholder value has become the premier business mantra,” (Chew & Gillan,
2005, p. 105). Managers manage companies to increase the value of the companies stocks.
Stockholders invest in the company to gain a return on their investment. The Board of Directors
has the “legal responsibility to make decisions and adopt performance measures and
compensation plans” (Chew & Gillan, 2005, p. 105) that will maximize the investments of those
shareholders. “Managers must continue to seek new ways to create and capture value if their
companies are to remain successful,” (Chew & Gillan, 2005, p. 105).
The CEO and other corporate officers are responsible for establishing effective
communications with the Company's stakeholders, including shareholders, customers,
communities, employees, suppliers, creditors, governments and corporate partners. It is the policy
of the Board that management speaks for the Company. This policy, however, does not preclude
independent directors from meeting with stakeholders, but it is the norm that, where appropriate,
directors notify and consult with management before any such meetings. The Board of Directors
has established a process whereby shareholders and other interested parties can send
communications to the Lead Director or to the non-management directors as a group.
The Boeing Company deals with its suppliers and customers in a fair and impartial manner;
business should be won or lost on the merits of Boeing products and services. Any employee
offering a business courtesy must ensure that it is ethical, legal and complies with all applicable
Boeing policies and procedures. If their job places them in a position to offer or approve the offer
of business courtesies, they should be familiar with the procedure laid out in the ethical guideline
booklet and with any rules that may determine whether the intended recipient can accept them.
Rules for business courtesies are complex, and each situation must be evaluated carefully. Primary
approval authority is vested in business management. Ethics Advisors and the Law Department are
available to assist in properly resolving issues concerning business courtesies

iv. Problem Statement

“Company management and external auditors are required to report on the state of
internal controls over financial reporting (ICoFR) per Section 404 of the Sarbanes-Oxley Act of 2002
(SOX)” (Gupta, 2006, p. 27). This information must be disclosed in the financial reports filed with
the Securities and Exchange Commission (SEC). The SEC also requires the company to disclose any
issues or deficiencies in the control process and any apparent weaknesses. “The SEC requires
management and external auditors to use an internal control framework that meets its criteria
specified in Section II.B.3a of the Section 404 Final Rules” (Gupta, 2006, p. 28). Boeing does follow

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and implement these rules and have an enterprise risk management program that incorporates
both corporate governance and risk mitigation.

v. Alternative Solutions
Recent issues with companies like Enron, WorldCom and Adelphia have led to increased
governance and governmental regulations. Boeing has adapted to these new regulations and
challenges by implementing the requirements of the Sarbanes-Oxley Act of 2002 (SOX). Regulatory
compliance and human capital development is no different from any other business need and can
be just as financially sensitive.
“As Governance, Risk and Compliance (GRC) programs mature, organizations seeking to
improve their GRC strategies must first consider the complexity their organizations face and the
sophistication required by their processes” (Childers, 2007, p. 10). The newest regulatory issue is
Sarbanes-Oxley. The Sarbanes-Oxley Act of 2002 (SOX) enforces corporate responsibility and
accountability in the areas of SEC filers (Public Companies), auditors, analyst conflicts of interest
and tax returns. “Although the Sarbanes-Oxley Act of 2002 has swiftly become a part of Corporate
America's lexicon, even the most experienced attorneys may not realize that this legislation was
first applied to the health care industry” (Turcotte, 2004, p. 1).
“SOX mandated changes that will affect executive compensation, shareholder monitoring,
and particularly board monitoring,” (Chew & Gillan, 2005, p. 79). One provision requires CEOs and
CFOs to disclose any profits from bonuses or stock options. By revealing these, government can
restrict insider trading by deterring misreporting of financials. Another provision increase board
monitoring by increasing the power to the audit committee. Boeing has set up such an audit
committee to help with regulation. The SOX requires that the audit committee hire an outside
auditor and that the committee be made up of directors that have no financial interest in the
company. Lastly, SOX increases the responsibility of the Board and the management team for the
financial reporting of the company. The Board and management can be held responsible and can
be subject to criminal penalties for misrepresentation (Chew & Gillan, 2005, p. 80). Company fraud
also yields a harsher consequence with the new compliance and enforcement actions. (Chew &
Gillan, 2005, p. 71)
Boeing not only has SOX compliance but also must take action across the board and be in
compliance with SEC, EPA, and OSHA. The previous not only protect the rights of stakeholders but
also employees and the general population. Boeing has put into place many guidelines from
accounting to safety standards. By successfully complying with all federally mandated regulations
Boeing found that even though the new processes required an initial investment, they ultimately
did get a return on this investment owing to more transparent accounting standards thereby
gaining the trust of their suppliers and customers alike. Boeing has increased the integrity of the
company and is more attractive to investors, employees, and customers. Boeing has also hired an
outside accounting firm and developed committees to overlook the formation of the new GRC
programs.
By acquiring the services of an outside auditing firm that specializes in SOX regulations and
by designing a financial disclosure protocol designed to guide them through annual audits and
other disclosure requirements Boeing has been able to set up a GRC program that will continue to
grow and change with the company.

vi. Analysis of Alternative Solutions

“The very purpose of the internal control mechanism is to provide an early warning system
to put the organization back on track before difficulties reach a crisis stage” (Chew & Gillan, 2005,
p. 35). “In 1992, the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
issued Internal Control – Integrated Framework,” (Recent Trends, 2007, p. 18). This report
established a basis for developing an internal control system and evaluating that systems
effectiveness.

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“The framework contained five components: control environment, risk assessment, control
activities, information and communications, and monitoring” (Recent Trends, 2007, p. 18).
“In 2004, COSO developed guidelines on the framework that would be readily usable by managers
and other personnel within the organization- not just accountants,” (Recent Trends, 2007, p. 18).
Control, of which risk assessment is a vital component, is the responsibility of the accountants as
well as the board of directors, management, and other company personnel.
“A new top-down, risk-based approach to assessing and certifying the effectiveness of a company’s
internal controls is the new focus of external auditors” (Gupta, 2006, p. 28). “Jack Shaw states that
the management of risks has been handled in a ‘silo’ approach that misses two critical aspects of
risk management from an ERM perspective – the risk appetite of the company and the
management of those risks” (Recent Trends, 2007, p. 18). He has determined a seven step process
that will help implement a successful ERM program. “They are: 1) assemble and educate a cross-
functional team representing each significant area of business, 2) identify risks and opportunities,
3) determine risk tolerance, 4) indentify correlations among risks and opportunities, 5) prioritize
those risks and opportunities, 6) determine the appropriate actions for mitigating risks and 7) put
and ERM system in place to monitor and respond to events and trends on a continual basis”
(Recent Trends, 2007, p. 19).
Even though an ERM program is one of the best tools to have, most companies are finding
it hard to implement such a program. Most elements of a risk program are not in place and most
top executives admit they are more able to handle financial risk because of SOX regulations.
“Many CFO’s are looking at ERM as a way to leverage their significant investment in compliance
and convert it into a shareholder value strategy,” (Recent Trends, 2007, p. 19).
Boeing adopted the COSO principles as the basis for its internal control procedures. The
company’s internal audit departments rate the effectiveness of the controls in each audit and
found initially that incorporating the COSO standards into the audit practice was a challenge. “To
achieve a higher quality result, Boeing reengineered the existing audit methodology—from
inception, through fieldwork, to final reporting—to fit the COSO framework (Applegate & Willis,
1999, p. 1).
Boeing has built a new approach that incorporated these standards into the various stages of the
audit. “According to COSO, the three primary objectives of an internal control system are to ensure
(1) efficient and effective operations, (2) accurate financial reporting, and (3) compliance with laws
and regulations,” (Applegate & Willis, 1999, p. 2). “The report also outlines five essential
components of an effective internal control system: 1)The Control Environment, which establishes
the foundation for the internal control system by providing fundamental discipline and structure, 2)
Risk Assessment, which involves the identification and analysis by management—not the internal
auditor—of relevant risks to achieving predetermined objectives, 3) Control Activities, or the
policies, procedures, and practices that ensure management objectives are achieved and risk
mitigation strategies are carried out, 4) Information and Communication, which support all other
control components by communicating control responsibilities to employees and by providing
information in a form and time frame that allows people to carry out their duties, and 5)
Monitoring, which covers the external oversight of internal controls by management or other
parties outside the process; or the application of independent methodologies, like customized
procedures or standard checklists, by employees within a process” (Applegate & Willis, 1999, p. 5).
Boeing uses the five elements and defined objectives within the auditing process and has
developed a procedure to report issues to management. “By integrating COSO in this manner,
Boeing is able to structure the audit process, ensure appropriate criteria are considered in key
phases of each audit, and provide a trail to support the conclusions reached” (Applegate & Willis,
1999, p. 6).

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b. Conclusion
Adapting the COSO framework to Boeing’s audit process has been beneficial. Limiting the audit to
one objective per audit will improve the competence and efficiency the procedures. Boeing’s policy
states that the five COSO components must be in all audits and mandating this has improved those
audits. Boeing also realizes that the reliability and comparability of future audits depends on
continuing to follow the guidelines of the new programs, and by continuing to monitor any changes
or unforeseen need will help to mitigate any risk. “While the COSO framework provides an
integrated framework that identifies components and objectives of internal control, it does not set
forth detailed guidance as to the steps that management must follow in assessing the effectiveness
of a company’s ICoFR” (Gupta, 2006, p. 33).

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 3. Boeing and the case of Harry Stonecipher

On 7 March, 2005, the Boeing corporation (BA) released this statement on its website:
Boeing announced today that its Board of Directors asked for and received the resignation of
President and CEO Harry Stonecipher on Sunday, March 6. Concurrently, the Board has appointed
CFO James A. Bell, 56, as president and CEO on an interim basis, with Board Chairman Lew Platt
assuming an expanded role in his capacity as non-executive chairman.
Stonecipher will also leave the company’s Board; all changes are effective immediately.
The Board actions were taken following an investigation by internal and external legal counsel of
the facts and circumstances surrounding a personal relationship between Stonecipher and a female
executive of the company who did not report directly to him. The Board determined that his
actions were inconsistent with Boeing’s Code of Conduct.
“The Board concluded that the facts reflected poorly on Harry’s judgment and would impair his
ability to lead the company,” said Platt.
“The resignation was in no way related to the company’s operational performance or financial
condition, both of which remain strong. However, the CEO must set the standard for
unimpeachable professional and personal behaviour, and the Board determined that this was the
right and necessary decision under the circumstances,” he said. (Boeing News Release, 2005)
(Full Details of the Report in Appendix)
The author of this report would like to mention that even though this is considerably an old issue, it
still holds relevance in the current corporate scenario where “corporate dating” is rampant in most
companies and needs to be discussed in the context of “ethical” decision making capabilities.

Stonecipher had been the corporation’s chief operating officer until 2001, when he had
retired. Philip Finnegan, director of corporate analysis at the Teal Group, was reported by the
Washington Post (8 March, 2005) as saying of Stonecipher: “He did a good job of working to
restore Boeing’s reputation and refurbishing ethical standards at the company, and that’s what
Boeing needed.” The Post also quoted Charles M. Elson, director of the corporate governance
program at the University of Delaware, as stating, “It’s not the relationship, it’s the judgment that
got you into the relationship that can get you into trouble”.

This part of the report will analyse the ethical value in making a decision, right or wrong. The report
illustrates the author’s opinion in why Harry Stonecipher should have been forced to resign - to
save the company reputation. It will take into consideration the utilitarian and deontological
theories for both parties involved and explain why this decision could/would have been made.

Should Stonecipher have been forced to resign?

The broad basis of this decision of Boeing to force Stonecipher to resign can be seen in the context
of the following ethical theories
- Ethics of Duties (Deontological Ethics)
- Utilitarianism

a. Ethics of duties
Kant believes that we can only have morality based on reason because morality based on
experience is inconsistent and on desires. Kant's version of duty-based ethics was based on
something that he called 'the categorical imperative' which he intended to be the basis of all other
rules

7
Kant's three significant formulations of the categorical imperative are:

- Act only according to that maxim by which you can also will that it would become a universal
law.

To put this more simply:

Always act in such a way that you would be willing for it to become a general law that
everyone else should do the same in the same situation.

Harry Stonecipher in all reality should be forced to resign. The fact that he was in a
position of this magnitude which affects, perhaps most people who fly commercially on airplanes,
can be ethically challenged and would build an integrity problem. With leadership integrity issues,
this can create dissension in the ranks, as this can be a contagious problem, monkey see monkey do
attitude. Now, being that Stonecipher was forced to resign because of an affair will set precedence
in the work environment, quick and decisive punishment that is infused within the workforce that
in the long run will likely encourage ethical decisions. When people are forced to see the light, in
this case, this forces deeper thinking on what is right and wrong for each individual. This domino
effect then catches on and therefore promotes people to think more ethically and make decisions
that would better the company in the long run.
Here is an example of what could happen.
John, a maintenance worker, is out fixing one of Boeing’s airplanes, he decides that an inspection
that is due is too hard to get to, so he signs off the inspection anyway knowing it’s probably good
given the trend of the inspection but he doesn’t know 100% that it is good, but given the recent
scandal that the President can get away with his affair, John should be able to do so also. The
plane eventually crashes because this part was not replaced when John should have inspected it.
Now given, that the real action Stonecipher received I believe that John would have thought
through his actions, being that his job would be on the line, and would have physically inspected
and replaced the part that caused the jet to crash. This is only a hypothetical situation that could
occur if people think they can get away with issues involving ethics.

- Act in such a way that you always treat humanity, whether in your own person or in the
person of any other, never simply as a means, but always at the same time as an end.

Kant thought that all human beings should be treated as free and equal members of a shared
moral community, and the second version of the categorical imperative reflects this by
emphasising the importance of treating people properly. It also acknowledges the relevance of
intention in morality.
Kant is saying that people should always be treated as valuable - as an end in themselves - and
should not just be used in order to achieve something else. They should not be tricked,
manipulated or bullied into doing things.
The author of this report does not find this Maxim to hold in this current argument and hence this
will not be discussed here

- Act as though you were, through your maxims, a law-making member of a kingdom of ends.

Kant thought that the only good reason for doing the right thing was because of duty - if you
had some other reason (perhaps you didn't commit murder because you were too scared, not
because it was your duty not to) then that you would not have acted in a morally good way.
But having another reason as well as duty doesn't stop an action from being right, so long as duty
was the ‘operational reason’ for our action.

8
According to Platt, what brought Stonecipher down was his own insistence on zero tolerance in
ethics issues.
"Harry was really the staunchest supporter of the code of conduct. He drew a very bright line
for all employees, let everyone know that even minor violations would not be tolerated. And
when one does that, you have to live by that standard."

Mr. Stonecipher was hired to clean up Boeing, and to keep the company out of the ethical
spotlight. It was therefore his duty to live by the standards he enforced. If he was unable to do that,
then he should have stepped down as CEO before this extra-marital affair was brought to light.
Hypocrisy is no way to lead a company. It will only cause dissension among peers and employees.
Senior leaders of a company are the moral rocks that the company bases its values on. If a leader
demonstrates strong moral values and a desire to do what is considered right by the majority of his
employees his attitude will, after a time become infectious. The majority of his employees will
begin to emulate his actions, and begin to modify their values to meet his. This would result in
increased productivity and a more pleasant work environment. At the same time, if that same
leader were to demonstrate questionable values and a “do as I say not as I do” attitude the same
thing would occur. The majority of his employees would begin to lower their moral values and the
overall productivity of the company would suffer.
Although Mr. Stonecipher was unable to live up to his duties of keeping Boeing out of the
ethical spotlight and setting the standard for his employees to follow, the Boeing board of directors
did just that. By requiring Mr. Stonecipher to tender his resignation they showed the rest of the
company that actions such as this would not be tolerated, even at the highest level. The board of
directors did the right thing for the greater good of the company, and set the example for the
employees to follow.

b. Deontological Consideration
Deontological moral systems are characterized primarily by a focus upon adherence to
independent moral rules or duties. Thus, in order to make the correct moral choices, we simply
have to understand what our moral duties are and what correct rules exist which regulate those
duties. When we follow our duty, we are behaving morally. When we fail to follow our duty, we are
behaving immorally. (Cline A. (2010))
Looking at this in a deontological point of view, Stonecipher has a right to personal fulfilment in the
work environment. Boeing had a duty to provide an environment that allows that right. That does
not mean he has the right to fulfilment that results in infidelity with an element of that
environment, nor is it Boeings duty to provide an environment that fosters infidelity. Boeing was
recovering from scandals that questioned its ethics. Part of that recovery was providing policies
and conduct codes that promote a healthy and gratifying environment for all its employees. Surely,
another scandal would influence that process negatively. As the CEO, Stonecipher had a duty to
provide Boeing’s employees with standards that would reduce or eliminate heartrending
possibilities. The entire Boeing Corporation was to adhere to the standards. Stonecipher failed to
abide by such standards and was knocked off the corporate latter because of his breach of ethics

c. Utilitarian considerations :

According to utilitarianism, an action is morally right if it results in the greatest

amount of good for the greatest amount of people. (Crane & Matten, 2006)

To analyze an issue using the utilitarian approach, we first identify the various courses of action
available to us. Second, we ask who will be affected by each action and what benefits or harms will
be derived from each. And third, we choose the action that will produce the greatest benefits and

9
the least harm. The ethical action is the one that provides the greatest good for the greatest
number.

In a consequentialist point of view, the author could believe that Stonecipher possibly could have
had problems at home and subsequentially had an affair to cope with the emotional stress he was
experiencing and thus in his mind, help with his work ethic and make the decisions a president
should make. In his mind, the right thing was to have an affair with someone he could have loved
which took his mind off from things at home, therefore making unimpaired decisions for Boeing
and ultimately making everyone happy. It’s possible he weighed his options and more positive
results ensued if he had this affair than not. This is speculation but the author is trying to
emphasize that because he had an affair, it doesn’t always suggest this person can’t be trusted,
there can be underlying circumstances to everything, and not to pass judgment until the facts are
out.
As an outsider looking in, if one read what’s in the news and believed it all, it could lead to the
thought that it’s another scandal, but we all need to look at the facts and without the judge, jury,
and executioner instant thought. Now if we looked at the big picture, and in the company’s best
interest with the previous negative trends, one would have to believe that the media will look for
the negative part of his affair and exploit it resulting in consumer negativity which in the long run,
make the company suffer financially if they don’t severely punish him, as would be the forced
resignation.

One would have to believe that the propaganda would get the best of him and if the board didn’t
react in the way they did, again the company would suffer. In order for the board to make a
decision on Stonecipher’s fate, they would invariably have to resolve that no matter what
happened with his affair, they would have to come up with a decision for the company’s best
interest whether or not Stonecipher’s affair was acceptable or not. This is a double edged sword of
sorts, that the board could be forcing the best president they ever had to resign, yet take the
chance of the company to suffer and keep him aboard. Now the decision for the board was: Do
you fire the best president you ever had to keep the company’s name in check or do you take
action to remove him and take the chance of having a worse successor. The author is of the belief
that forcing him to resign was the company’s best choice to keep their name so to say, and if they
chose to keep him would gamble the company’s ethical future, thus following the Basic principle of
Utilitarianism which states “An action is morally right if it results in the greatest amount of good for
the greatest amount of people affected by the action” There are two sides here, the choice was
not easy, but undoubtedly had to be made with the previous negative trends the company was
having.

d. Conclusion
In conclusion, the concept of firing someone to uphold a company’s name could be unethical
because Stonecipher might have had an affair that under certain circumstances could have been
acceptable, yet holding on to him and gambling Boeing’s company name could have detrimental
value to business. This can be a hard decision, but all in all, Boeing could not allow any more bad
news to affect their company so forcing him to retire shows that superficially Boeing did the right
thing to the common eye.

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6. Appendix

The Affair That Grounded Stonecipher

By Stanley Holmes

MARCH 8, 2005
http://www.businessweek.com/bwdaily/dnflash/mar2005/nf2005038_5360_db035.htm

Boeing insiders say the CEO became romantically involved with fast-rising VP Debra Peabody. And
that led quickly to his ouster

Four senior execs inside Boeing (BA ) have identified Debra Peabody, a Washington-based vice-
president, as the company executive with whom Boeing CEO Harry Stonecipher was having an
affair. Boeing said Stonecipher's role in the affair violated the company's ethics rules.

Peabody, 48, is a Boeing vice-president for operations and commercial activities assigned to the
company's Washington government-relations office, located in Arlington, Va. She first met
Stonecipher in January at Boeing's annual executive retreat at the Mission Hills Country Club in
Palm Desert, Calif., say insiders who attended the retreat. Peabody, who is divorced, did not return
repeated phone calls.

Stonecipher, who is married, was dismissed as CEO by Boeing's board on Mar. 7, after he admitted
to the affair. On its internal Web site, Boeing has posted a statement saying "the investigation of
the female executive's actions surrounding the matter is still in process." Peabody remains
employed by Boeing, and she cooperated with the board in its investigation, insiders tell
BusinessWeek Online.

THE ROUTE TO WASHINGTON. After graduating from Ohio University with a degree in electrical
engineering, Peabody joined Boeing as a specialist engineer in 1980, according to biographical
information about her posted on the Web as well as from Boeing insiders. In 1998 she became
London-based sales director for Boeing's Commercial Airplane unit. Later, she earned an executive
MBA degree at the University of Washington and in 2001 became international sales director for
Boeing's Connexion, a broadband Internet service for commercial and business jets.

Peabody was later named director of company administration responsible for supporting Boeing's
executive council and board of directors in Chicago. In her current post, she manages office
operations for Boeing's chief Washington lobbyist, Vice-President Rudy deLeon.

Boeing declined to comment or confirm that Peabody was romantically involved with Stonecipher,
although her identity was divulged to the board and is widely known inside the company, according
to insiders. Boeing said Stonecipher was unavailable for comment for this story. And efforts to
reach him for comment were unsuccessful.

"REFLECTED POORLY." Peabody cooperated with the board during its investigation of the affair,
according to insiders with knowledge of the probe. In a conference call with reporters on Mar. 7,
Boeing Chairman Lewis Platt said allegations that Stonecipher had influenced the career or salary of
the person with whom he had the affair had been investigated but proved to be unfounded.

The relationship came to light after a company whistle-blower tipped off the board about 11 days
ago, Boeing officials said. Platt said the board and Boeing's ethics officials received a letter from an

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anonymous Boeing employee. The employee, described by sources as female, had intercepted
"correspondences" between Stonecipher and Peabody that were of a romantic nature, Platt said.

"(A)s we explored the circumstances surrounding the relationship, we just found some things that
we thought reflected poorly on Harry's judgment and would impair his ability to lead the company
going forward," Platt said, declining to be more specific.

Platt said Stonecipher had violated Boeing's code of conduct, although he added the relationship
alone wasn't the sole reason the company dismissed the CEO. The ethics code decrees that Boeing
employees won't engage in any conduct or activity that might raise questions as to the company's
honesty, impartiality, or integrity. It was the same code that Stonecipher had insisted that all
Boeing employees follow. Now the company may have to decide how -- and if -- it applies to
Peabody as well.

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