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    The Boeing Company Derivative Class Action

    Settled: August 15, 2006

    A landmark settlement establishing unique and far-reaching corporate governance standards on ethics compliance.

    In 2006, plaintiffs in a derivative class action, Cohen v. Grey, against the directors of The Boeing Company (Boeing), led by their counsel Labaton Sucharow, achieved a landmark settlement establishing unique and far-reaching corporate governance standards relating to ethics compliance, provisions that will also obligate Boeing to contribute significant funds over and above base compliance spending to implement the various prescribed initiatives.

    In particular, Boeing's Board of Directors will expressly undertake, through amendment of Boeing's Corporate Governance Principles, reasonable oversight and monitoring responsibility for the implementation of Boeing's ethics and compliance program and the effectiveness of those processes on an annual basis. The Audit Committee Charter also will be amended, including to provide for the Audit Committee to undertake responsibility for reporting no less than annually to the board with respect to the implementation and effectiveness of Boeing's ethics and compliance program. In addition, the settlement provides for the undertaking of substantial additional responsibilities at the managerial level to support the oversight and monitoring function the board will expressly assume.

    The settlement also addresses issues of Board membership and training. Thus, for example, the corporate governance principles will be amended to require that at least 75 percent of the Board be independent under NYSE criteria, and that board members will receive training on at least an annual basis on topics related to corporate governance policies and roles and responsibilities of board members.

    Boeing also agreed to commit to the budget of its Office of Internal Governance (OIG) $29 million of its treasury funds, in excess of the 2004 expenditures of the OIG, in order to implement and support the corporate governance measures summarized above, and to fund further enhancements of compliance, enterprise risk management, and governance functions and processes (including without limitation the ethics and compliance program, global trade controls, and compliance risk management process).

    The terms are well-designed to provide for early detection and prevention of corporate misconduct. They are comprehensive and integrated, enhancing effectiveness by providing for top-down oversight, direction and planning; and buttressed by extensive and coordinated bottom-up and horizontal reporting. They are also designed to enhance board independence and effectiveness and, by creating a direct reporting role to the board, the independence of the management level oversight functions.

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