Boeing chief fired over affair with executive

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The US defence giant Boeing was rocked by its second ethics scandal inside 18 months after its chief executive, Harry Stonecipher, was fired yesterday following disclosure that he has been having an affair with a female executive of the company.

Mr Stonecipher, a married man with two children and two grandchildren, was asked to tender his resignation on Sunday after the board decided his actions were "inconsistent" with Boeing's code of conduct.

The 68-year-old was instrumental in drawing up the ethics code and demanding absolute adherence to it after his predecessor, Phil Condit, quit in December 2003 over a previous scandal involving the hiring of a former Pentagon official who had secretly steered military contracts Boeing's way.

Boeing was alerted to the affair with the unnamed woman 10 days ago after a letter was sent by an anonymous employee to three Boeing directors. The affair is understood to have begun in January. An immediate investigation was ordered, carried out by Boeing officials aided by an outside law firm.

"The board concluded that the facts reflected poorly on Harry's judgement and would impair his ability to lead the company," the Chicago-based group said in a statement.

Boeing stressed that the relationship was consensual and had no effect on the conduct of the company's business or its operational performance and financial condition. It said that neither the career of the female executive nor her pay was influenced by the relationship.

"However, the CEO must set the standard for unimpeachable professional and personal behaviour and the board determined that [Mr Stonecipher's] resignation was the right and necessary decision in the circumstances," Lew Platt, Boeing's chairman, said. He later told a conference call: "He let everyone know that even minor violations would not be tolerated and when one does that you have to look at that standard."

Mr Stonecipher was to retire next year. He has been replaced as chief executive on an interim basis by James Bell, the finance director, while a permanent successor is sought. The most likely internal candidates are Alan Mulally, the head of Boeing's commercial airplane division, and Jim Albaugh, who runs its military business.

Boeing's code of conduct states that "employees will not engage in conduct or activity that may raise questions as to the company's honesty, impartiality and reputation or otherwise cause embarrassment to the company". A spokeswoman said Mr Stonecipher's actions had been inconsistent with this but refused to go into details as to precisely why. It appears, however, that Mr Stonecipher was fired mainly because the existence of the affair became known. One company insider said: "The guy was having an affair and he was the chief executive of the company. When the affair was uncovered it obviously raised questions about the reputation of the company and caused it embarrassment."

Mr Platt said the anonymous informant found out about the affair after seeing correspondence between Mr Stonecipher and the female executive, and sent an identical letter to him, Douglas Bain, Boeing's general counsel, and Martha Ries, the vice-president of its ethics committee. The spokeswoman was unable to elaborate on the letter's content or whether the whistleblower was related to the woman.

The earlier scandal not only claimed the job of Mr Condit but also resulted in the jailing of two Boeing employees, including its former finance director Mike Sears.

It emerged that Mr Sears had secret discussions with a Pentagon procurement official, Darleen Druyun, about putting her on the Boeing payroll. At the same time she was involved in awarding a $100bn (£52.2bn) contract for refuelling aircraft. The order went to Boeing and Ms Druyun later joined the company. She was jailed last year.