Aviation chief flung out for workplace fling

Boeing has ousted chief executive Harry Stonecipher for having an affair with an employee, 15 months after he returned from retirement to lead the No 2 US defence contractor's recovery from a purchasing scandal.

Boeing chairman Lewis Platt, who ordered a review after receiving an anonymous tip 11 days ago, said "poor conduct and judgment" by Stonecipher "would impair his ability to lead".

Married with two children and two grandchildren, 68-year-old Stonecipher required employees to sign a code of conduct designed to restore Boeing's reputation after the illegal hiring of a US Air Force weapons chief led to the downfall of his predecessor, Philip Condit.

His efforts helped to lift Boeing's shares 54 per cent and, just last week, the company won reinstatement as a contractor for Air Force space-rocket launches.

"These are unfortunate circumstances given the positive momentum of the past few weeks with resolving issues with the Air Force and good news on the business," said J.B. Groh, an analyst in Portland, Oregon, at D.A. Davidson.

Boeing spokesman John Dern declined to identify the other executive, other than to say she did not report directly to Stonecipher and the affair was consensual. She remains with Boeing.

The employee who informed Platt of the affair, which began in January, learned of it through correspondences.

He said that under the code of conduct, employees must report suspected violations and express concerns regarding compliance with the policy and related procedures.

"The Boeing board should be congratulated," said Richard Koppes, a lawyer at Jones, Day in San Francisco. "They are setting a precedent and demonstrating how good corporate governance works."

Stonecipher will also leave the company's board.

His temporary replacement will be James Bell, 56, who has been with the company for 32 years and will continue as chief financial officer and has been named president.

Stonecipher worked for 27 years at General Electric, rising to lead the aircraft-engine unit. He later headed aircraft parts-maker Sundstrand and, in 1994, became the first non-family member to lead McDonnell Douglas.

He joined Boeing after its 1997 purchase of McDonnell Douglas, where he was president and chief executive.

The acquisition of McDonnell Douglas was Condit's entry into the defence contracting business, making Boeing the second-largest supplier to the military after Lockheed.

Stonecipher retired as vice-chairman of Boeing in June.

Financial misconduct has been a more common reason for the ouster of executives at firms such as WorldCom and Adelphia Communications.

William Agee's relationship with subordinate Mary Cunningham, while he ran Bendix, spurred a media spectacle in 1980. Agee and Cunningham later married.

Bell became chief financial officer after Michael Sears stepped down in November 2003 amid allegations that he sought to hire former Air Force weapons chief Darleen Druyun as they negotiated a US$23 billion contract for up to 100 refuelling aircraft tankers.

Sears was sentenced to four months in prison on February 18 for deceiving the Government. Druyun is serving nine months in jail.

Boeing was suspended in July 2003 from receiving new rocket launch contracts because the Air Force said the company improperly obtained documents from Lockheed Martin that helped Boeing to win a 1998 contract for a booster rocket programme.

- BLOOMBERG