Boeing Ousts CEO Stonecipher

The company cites a 'consensual' affair with a company executive.
By Ross Snel ,

Updated from 7:44 a.m. EST

Boeing

(BA) - Get Report

ousted Chief Executive Harry Stonecipher Sunday, saying an affair he had with another company executive "reflected poorly" on his judgment.

This is Stonecipher's second departure from the company. In June 2002, he retired as vice chairman but later returned to help Boeing recover from government procurement scandals that severely tainted its reputation and prompted the ouster of former CEO Phil Condit.

The company's board said Monday it was tipped to "a personal relationship between Stonecipher and a female executive of the company who did not report directly to him." The 68-year-old Stonecipher is married.

Boeing said CFO James Bell was named president and chief executive on an interim basis. Chairman Lew Platt will also assume an expanded role.

"The board concluded that the facts reflected poorly on Harry's judgment and would impair his ability to lead the company," Boeing said in a statement.

According to Boeing, an internal probe found "the relationship was consensual and had no effect on the conduct of the company's business," and that "neither the career nor the compensation of the female executive was influenced by this relationship."

"The resignation was in no way related to the company's operational performance or financial condition, both of which remain strong," Platt said in the statement. "However, the CEO must set the standard for unimpeachable professional and personal behavior, and the Board determined that this was the right and necessary decision under the circumstances."

The board determined Stonecipher's behavior was inconsistent with Boeing's code of conduct, Platt said in a media conference call Monday morning. Platt cited a part of the code that prohibits conduct that might raise questions about the company's honesty or otherwise embarrass it.

During the call, Platt said Stonecipher had been a staunch supporter of the code of conduct. Since returning from retirement, Stonecipher had worked hard to put the company's scandals behind it and institute procedures to prevent further ethical lapses.

Platt declined to identify the woman with whom Stonecipher had the affair. A "longtime" employee, she was still with the company, he said.

Because Stonecipher resigned, he will be able to receive a "normal" retirement package, Platt said.

The company may be hyper-sensitive to any hint of an ethical lapse in the wake of its procurement scandals.

Last month, Boeing's former CFO, Michael Sears, received a four-month prison sentence for negotiating a Boeing job with former Pentagon acquisitions official Darleen Druyun while she oversaw government contracts.

Last April, Druyun pleaded guilty to one count of conspiracy in the case. Then, at her October sentencing, she admitted to authorizing a higher price than she thought appropriate on a controversial tanker aircraft deal, as a "parting gift" to the company. She is serving a nine-month prison sentence. The government has scuttled the $23.5 billion tanker deal and required the Pentagon to take competitive bids for future tanker procurements.

Boeing fired both Druyun and Sears in November 2003 for violating company ethics. Shortly thereafter, CEO Phil Condit resigned.

In a separate incident, the Pentagon suspended the company from bidding on rocket launches after Boeing was found in possession of documents from rival

Lockheed Martin

(LMT) - Get Report

. The Air Force lifted the suspension last Friday.

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