When W. James McNerney Jr. decided that Boeing Co.'s (BA
) top managers needed a loud wake-up call, the new chief executive chose the obvious place to sound the alarm: the company's annual executive retreat on Jan. 4 and 5. A year earlier, the event had been held at the posh Mission Hills Country Club in Palm Springs, Calif., and nobody apparently had a better time than McNerney's predecessor, Harry Stonecipher. After a day devoted largely to socializing and playing golf, the former CEO, surrounded by Boeing's elite, closed down the bar and then fired up a cigar. It was at the same event that the married Stonecipher began a relationship with a female vice-president at Boeing -- a misjudgment that ultimately paved the way for his humiliating ouster on Mar. 6, and for McNerney's appointment as CEO on July 5. Stonecipher could not be reached for comment.
The "Palm Springs fling," as it became known at Boeing, marked an all-time low for the company. It followed a three-year binge of widely publicized corporate misbehavior highlighted by the jailing of Boeing's former chief financial officer for holding illegal job negotiations with a senior Pentagon official, the indictment of a manager for allegedly stealing some 25,000 pages of proprietary documents from his former employer, Lockheed Martin Corp. (LMT
), and the judicial finding that Boeing had abused attorney-client privilege to help cover up internal studies showing that female employees were paid less than men. Scandals involving multiple forms of misconduct in geographically scattered locations enveloped nearly every division at Boeing, leaving little doubt that the legendary company, even as it began to enjoy a cyclical boom, was plagued by a poisonous culture.