Boeing's Struggle To Find A Pilot

Would-be CEOs see some companies as too risky to run. This one is Exhibit A

What self-respecting exec would turn down a chance to head one of the world's most powerful corporations? Well, there are at least two out there, and maybe more. The company in question: Boeing Co. (BA ). On May 3, GE Aircraft Engine Chief Executive David L. Calhoun said he wasn't interested in the post vacated by Harry Stonecipher in March. That makes Calhoun the second leading contender to drop out of the race. Just a few weeks earlier, W. James McNerney Jr., 3M Co.'s CEO, a Boeing director and perennial favorite for the top spot, issued a statement saying he didn't want it either.

Not long ago any ambitious up-and-comers worth their annual bonus would have killed for the chance to run a struggling icon like Boeing. The more troubled the company, the more potential glory and payoff for the new CEO once the turnaround was in the bag: Think Louis V. Gerstner Jr. at IBM. But those days are over. Boeing isn't the only outfit having difficulty: Merck, Hewlett-Packard, and Walt Disney have found it tough to get marquee outsiders to consider CEO slots.

Struggling companies, once seen as a challenge, are now often deemed too risky to take a chance on. Boards, under intense investor pressure, have little patience for CEOs who don't quickly show results. A new chief who might have had five years to repair a company a decade ago may now be lucky to get two or three before investors start agitating. That, veteran CEOs agree, just isn't enough. Says George David, chairman and CEO of United Technologies Corp. (UTX ): "You need time to execute on an initiative."

If any company needs time, it's Boeing. In recent years the defense and aerospace giant has weathered operational snafus, ethical scandals, criminal convictions, and abrupt executive departures. Its dysfunctional corporate culture needs an overhaul, and execs must restore soured relations with the Pentagon and Congress. Says Richard L. Aboulafia, Teal Group Corp. aerospace analyst: "They've got a toxic political climate...that guarantees an ulcer for anyone who gets the job."

Scandal and internal intrigue aside, the new CEO will face huge operational challenges. Two high-risk aerospace programs on which the company's future rides are in early stages: the 787 Dreamliner and the Future Combat Systems, a vast information network for the U.S. Army. Little wonder Boeing board members are feeling pressure about the choice. Says Lehman Brothers Inc. analyst Joseph F. Campbell: "They need Superman."

There are Boeing execs eager for the spot: Alan R. Mulally, who runs the commercial airplane business, and James F. Albaugh, head of the defense business. Yet many view Mulally as too political, and both lack the broad management experience to tackle Boeing's problems.

With Calhoun out of the picture, few other aerospace execs seem right. Industry insiders expect Rockwell Collins Inc.'s Clayton M. Jones will get a look, but he runs a smaller outfit. And the track record of Honeywell International Inc. (HON ) Chief David M. Cote, a former General Electric (GE ) exec, is mixed. So Boeing is looking beyond the industry for the first time in its 91 years. In late April the board hired executive search firm Spencer Stuart to help cast a wider net.

Sources close to the search hint that a candidate might come from a tech company with a manufacturing background or from an automobile company. Hiring a fresh set of eyes, they say, may be Boeing's best hope to restore its reputation and unlock its potential.

The company is mum about the short list, but top industry execs and headhunters not involved in the search say Mike Zafirovski, a former chief operating officer of Motorola Corp. (MOT ) and a Boeing board member, and David N. Farr, Emerson Electric Co. (EMR ) chairman and CEO, could be contenders. Both led their companies through rough waters. Another possibility: Karl J. Krapek, a highly regarded former United Technologies president.

Will any of them sign on? "It's tough enough running a healthy company, let alone a troubled one, under today's more stringent rules of the game," says Joseph E. Griesedieck, vice-chairman of executive-recruiting firm Korn/Ferry International (KFY ). "It's not as fun as it used to be." Anyone know what Lou Gerstner is up to these days?

By Stanley Holmes in Seattle, with Diane Brady in New York

— With assistance by Diane Brady

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