GE Ties CEO Options to Performance as Investor Meeting Nears
GE's Immelt
Joshua Roberts/Bloomberg
Jeffrey Immelt, chief executive officer of General Electric Co., speaks to the Economic Club of Washington in Washington on March 31, 2011.
Jeffrey Immelt, chief executive officer of General Electric Co., speaks to the Economic Club of Washington in Washington on March 31, 2011. Photographer: Joshua Roberts/Bloomberg
General Electric Co. (GE) said it amended terms of the 2 million options awarded to Chief Executive Officer Jeffrey Immelt in 2010, linking them to cash flow and stock performance.
The change comes prior to next week’s annual shareholder meeting, where investors will be asked to consider compensation for executives and related proposals.
The options will now vest in four years rather than three- and five-year periods, according to a filing with the U.S. Securities and Exchange Commission. Immelt gets half if cash from operating activities in the industrial divisions is no less than $55 billion in the four years through December 2014, and the remainder if GE’s stock outperforms the Standard & Poor’s 500 Index in the same period.
“We have had a number of constructive conversations with our shareowners on stock options that were awarded to Mr. Immelt in March 2010,” the Fairfield, Connecticut-based company said in the filing. “Some shareowners have expressed the view that additional performance conditions should be applied to Mr. Immelt’s 2010 stock option award.”
The options, the first awarded to Immelt since 2003, were intended to underscore the board’s confidence in his leadership and boost the equity-based portion of his compensation, GE said.
Immelt’s Support
The changes were made with Immelt’s “full support” and are consistent with conditions for other equity-based awards including the performance-linked units typically awarded instead of options, Anne Eisele, a spokeswoman, said by telephone. The decision was made in the past few days, she said.
The board’s compensation committee will resume awarding Immelt’s equity-based compensation in the form of performance- based stock units rather than options this year, according to the filing.
GE, which holds its annual investor meeting April 27 in Salt Lake City, didn’t name the shareholders with whom the changes were discussed. Its proxy statement contains two investor proposals related to executive compensation.
On April 7, GE wrote to shareholders that the company disagreed with an International Shareholder Services Inc. recommendation to oppose proposed executive compensation in an advisory vote, saying GE believed ISS’s recommendations were based on an “incomplete and inaccurate analysis.”
ISS changed its recommendation in light of GE’s announced changes today, said Patrick McGurn, executive vice president of ISS.
“In light of this new information, indicating the company’s long-term commitment to pay-for-performance, ISS believes that support for the advisory vote on executive compensation is now warranted,” the service said in an alert to investors after today’s filing from GE.
GE has forecast cash from operating activities of $12 billion to $13 billion this year, according to a presentation on the company’s website. GE has gained 9.2 percent this year in New York trading, compared with a 3.8 increase in the Standard & Poor’s 500 Index.
To contact the reporter on this story: Rachel Layne in Boston at rlayne@bloomberg.net
To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net
Rate this Page