General Electric
Annual Meeting: May 4
Total compensation for General Electric Chairman and CEO Larry Culp was $73,192,032 in 2020, the majority ($72 million) coming from two stock awards. In August of last year the compensation committee modified Culp’s 2018 employment agreement. As GE states: “Amidst a significantly worse operating environment in 2020, the board acted to extend Larry’s employment agreement and replace his performance incentive.” As part of that agreement, however,the board lowered the target for share prices that triggered vesting on previously granted performance shares. As the Wall Street Journal notes, “The [employment] extension also reset the baseline stock price for reaching the performance goals to $6.67. The shares were about $12 when he took the CEO role in 2018.” The first modified stock performance goal was met in December. Although Culp must remain at the company until 2024, he is now guaranteed to receive those 4.6 million shares no matter how the stock performs from here on out and could receive another 4.6 million shares if the second target is met.
This changing terms on a long-term performance grant resulted in both Institutional Shareholder Services and Glass Lewis recommending a vote against the 2020 pay plan as well as a vote no campaign on pay and against the compensation committee members by CtW Investment Group, which represents union-sponsored US pension funds.
According to press coverage, the Glass Lewis report (which gave GE an “F” on pay-for-performance) noted that “the revised award provides Mr. Culp with the same amount of compensation in dollars for creating less shareholder value, even as the revised grant allows for greater upside opportunity (and dilution) on account of the higher number of shares covered.” In addition to identifying similar concerns with the grant, ISS highlighted the discretionary nature of executive bonuses at GE. Michael Varner, director of executive compensation research at CtW Investment Group, spoke at a webinar on April 30 on the several issues with GE, including compensation. In the letter filed at the SEC, CtW Investment Group further notes that Culp’s bonus comes as the company’s performance declined and more than 10,000 of its workers were laid off.
GE notes that “in light of the business challenges and economic uncertainty resulting from the COVID-19 pandemic, Mr. Culp voluntarily forfeited his salary for the remainder of 2020.” While he has a high base salary ($2.5 million), it is still less than 5% of what he stands to receive through these modified award grants.
As the annual meeting approaches, several stakeholders such as Carl Kennebrew, who heads a union representing GE workers, have unanswered questions. As he told the Financial Times: “How can GE justify this type of enormous bonus for its CEO, while workers, their families, and communities are suffering?”