Boeing pays belated price for shareholder primacy

Strike a balance. Boeing keeps losing essential parts. About 33,000 of its unionized workers rejected a proposed 25% general increase in wages, with 96% of m voting to strike. work stoppage ds to a long list of woes at $100 billion jet-maker. After squeezing labor for last half century, bill is coming due.

Machinists at Boeing are highly skilled and hard to replace. y tried to use ir clout to down tools seven times between 1948 and 2008. Despite applying such pressure on management, however, wages have stagnated.

Under recently lapsed contract, workers in highest Gre 11 group earned between $26 and $51.30 hourly. midpoint of range is roughly same inflation-justed $40 as ir peers were making in 1976. Moreover, Boeing, like many or U.S. companies, has replaced employer-provided retirement benefits with 401(k) plans largely funded with tax-deferred employee contributions.

Or capital allocation choices also have short-changed labor. In 1970s, Boeing boss Thornton Wilson generated helines with his $1 million payday. Flash forward to 2023 when former Chief Executive David Calhoun’s package ded up to more than $30 million, a six-fold increase after justing for inflation. Executives in between also were richly rewarded for slashing costs and returning spoils to shareholders. Between 2003 and 2019 alone, Boeing devoted $80 billion to stock buybacks and dividends.

Bigger forces also were at play. Healthcare costs have soared. As a percentage of U.S. GDP , y tripled between 1960 and 2010. As a result, value of insurance provided to employees, and related costs to Boeing, grew rapidly. And development of manufacturing in formerly rural states such as South Carolina and places like China encouraged companies to relocate plants.

All those decisions have come back to haunt Boeing, and new CEO Kelly Ortberg. Airlines angered by persistent delivery delays, government-capped production, market-share losses, and nearly $60 billion of debt will make it hard to withstand any protracted idling at factories. It took a while, but shareholders are now paying a price for ir primacy.