By Dominic Gates / The Seattle Times
Boeing will not pay annual bonuses to its management, executives or unionized engineers and white-collar workers next February, payouts that for many years have pumped millions of extra dollars into the accounts of employees in the Puget Sound region and beyond.
The internal announcement Thursday followed release of its third-quarter results.
“With only one quarter left in the year, the grounding since March of the 737 Max and the associated financial effects have severely impacted the company’s performance by limiting the ability to deliver planes and collect on customer contracts,” Boeing told employees on its internal website. “The company does not see a path to achieving an incentive payout for 2019.”
Heidi Capozzi, Boeing’s senior vice president of human resources, acknowledged the news would be “disappointing.”
Last February, Boeing employees across Washington state received incentive bonuses totaling nearly $429 million out of a total companywide payout of $886 million. That meant an average bonus of $6,800 per employee here.
The year before, the February payout total for Washington state employees was a record $600 million, for an average of more than $9,000 per employee.
The company incentive plan calculates the bonuses based on three financial metrics: revenue (25%), which for 2019 had a target of $110.5 billion; core earnings per share (25%), which had a target of $20; and free cash flow (50%), which had a target of $15 billion.
The company’s internal notice to employees cited the cost so far of the 737 Max grounding at $9.2 billion. As of the end of September, the company’s nine-month revenue was only $58.6 billion and the other two scores were negative: core earnings per share showed a loss of $1.13 per share and free cash showed an outflow of $1.6 billion.
The internal message makes clear that the Annual Incentive Plan (AIP) that applies to executives will be equally zeroed out. However, for Boeing’s top executives that plan provides just a small part of their overall bonus.
Boeing’s annual proxy filing that details executive compensation for the top leadership states that the AIP makes up only 17% of total compensation. Another 10% is base salary and the remaining 73% comes from a separate Long Term Incentive Plan that pays out based partly on cumulative financial results over a three-year period and also upon the stock price and the return to shareholders.
This incentive plan will be reduced by the financial hit from the Max grounding and by the cut to Boeing’s share price, which has lost a fifth of its value since March. But because of the way the incentive plan is structured, it will take up to three years for the full reduction to work through the system.
For this year, Boeing’s leaders will still receive bonuses under the long-term plan, even as their employees get nothing.
Boeing Machinists earn bonuses under a separate incentive plan that assesses their performance based on measures of quality, productivity and safety. The Machinists have continued to build 737 Maxs even though they cannot be delivered and so it’s unclear how their bonuses will be affected by the financial hit to the company.
Connie Keliher, spokeswoman for the International Association of Machinists union, said Boeing has declined to release numbers on quality, productivity and safety metrics while the Max crisis continues. She said the final figure for the IAM incentive plan is always determined in January based on the full-year performance.
Ray Goforth, executive director of Boeing’s engineering union, the Society of Professional Engineering Employees in Aerospace (SPEEA), declined to comment.
The company’s internal message, acknowledging that the loss of the bonuses “may cause concern among employees about Boeing’s long-term financial health,” offered employees the assurance that management “continues to invest in the business, its people and its future.”
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