Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Boeing Cancels Pay Raises, Makes Large-Scale Stock Grant to Employees

By Lou Whiteman - Dec 16, 2020 at 1:12PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company is trying to save money now, but hopes to reward workers over time.

Boeing ( BA 1.05% ), ravaged in 2020 due to the coronavirus pandemic and the 737 MAX crisis, is suspending annual merit salary increases heading into 2021. But the company hopes to make up for the lost pay by awarding employees a one-time grant of restricted stock.

The aerospace giant saw its shares fall by nearly 75% in the early months of the pandemic as it became clear airlines would be among the hardest-hit sectors.

Boeing has cut aircraft production and intends to eliminate about 30,000 jobs. And CEO Dave Calhoun, in a letter to employees Wednesday, said the merit increases are suspended as part of an effort to take "proactive action to position our company to be leaner and more agile as the market recovers."

A Boeing 787 Dreamliner in flight.

Image source: Boeing.

The stock grants, which will be awarded to about 82,000 nonexecutive workers not covered by a union contract, will vest three years from the grant date.

"We will continue to position our company for the long term and chart a course to the other side of the recovery by making smart bets and investments," Calhoun said. "That starts with investing in our people, empowering them to make the changes that will transform our company, and sharing in our successes, together."

In April, Boeing put to rest questions about its viability by raising $25 billion in new debt, but the company is now saddled with more than $60 billion in debt. The company earlier this month said it will prioritize paying down that debt in the quarters to come, and could even issue new shares to try to raise money to support that effort.

The decision is unlikely to be popular with employees, but with Boeing's stock still off by 33% year to date, the payoff for employees could potentially be much more significant than a merit increase if the stock recovers in the next three years. The move is also relatively shareholder friendly, as it aligns employees' interests with those of investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Boeing Company Stock Quote
The Boeing Company
BA
$211.03 (1.05%) $2.20

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
652%
 
S&P 500 Returns
145%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/09/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.