The Affair That Grounded Stonecipher

Boeing insiders say the CEO became romantically involved with fast-rising VP Debra Peabody. And that led quickly to his ouster

By Stanley Holmes

Four senior execs inside Boeing (BA ) have identified Debra Peabody, a Washington-based vice-president, as the company executive with whom Boeing CEO Harry Stonecipher was having an affair. Boeing said Stonecipher's role in the affair violated the company's ethics rules.

Peabody, 48, is a Boeing vice-president for operations and commercial activities assigned to the company's Washington government-relations office, located in Arlington, Va. She first met Stonecipher in January at Boeing's annual executive retreat at the Mission Hills Country Club in Palm Desert, Calif., say insiders who attended the retreat. Peabody, who is divorced, did not return repeated phone calls.

Stonecipher, who is married, was dismissed as CEO by Boeing's board on Mar. 7, after he admitted to the affair. On its internal Web site, Boeing has posted a statement saying "the investigation of the female executive's actions surrounding the matter is still in process." Peabody remains employed by Boeing, and she cooperated with the board in its investigation, insiders tell BusinessWeek Online.


  After graduating from Ohio University with a degree in electrical engineering, Peabody joined Boeing as a specialist engineer in 1980, according to biographical information about her posted on the Web as well as from Boeing insiders. In 1998 she became London-based sales director for Boeing's Commercial Airplane unit. Later, she earned an executive MBA degree at the University of Washington and in 2001 became international sales director for Boeing's Connexion, a broadband Internet service for commercial and business jets.

Peabody was later named director of company administration responsible for supporting Boeing's executive council and board of directors in Chicago. In her current post, she manages office operations for Boeing's chief Washington lobbyist, Vice-President Rudy deLeon.

Boeing declined to comment or confirm that Peabody was romantically involved with Stonecipher, although her identity was divulged to the board and is widely known inside the company, according to insiders. Boeing said Stonecipher was unavailable for comment for this story. And efforts to reach him for comment were unsuccessful.


  Peabody cooperated with the board during its investigation of the affair, according to insiders with knowledge of the probe. In a conference call with reporters on Mar. 7, Boeing Chairman Lewis Platt said allegations that Stonecipher had influenced the career or salary of the person with whom he had the affair had been investigated but proved to be unfounded.

The relationship came to light after a company whistle-blower tipped off the board about 11 days ago, Boeing officials said. Platt said the board and Boeing's ethics officials received a letter from an anonymous Boeing employee. The employee, described by sources as female, had intercepted "correspondences" between Stonecipher and Peabody that were of a romantic nature, Platt said.

"(A)s we explored the circumstances surrounding the relationship, we just found some things that we thought reflected poorly on Harry's judgment and would impair his ability to lead the company going forward," Platt said, declining to be more specific.

Platt said Stonecipher had violated Boeing's code of conduct, although he added the relationship alone wasn't the sole reason the company dismissed the CEO. The ethics code decrees that Boeing employees won't engage in any conduct or activity that might raise questions as to the company's honesty, impartiality, or integrity. It was the same code that Stonecipher had insisted that all Boeing employees follow. Now the company may have to decide how -- and if -- it applies to Peabody as well.

Holmes is a correspondent in BusinessWeek's Seattle bureau

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