General Electric Co. (GE)’s severance accord with retiring executive John Krenicki will keep him from competing with the company for three years. That may say more about his value than the $12.9 million in cash he will receive.
Krenicki, 50, who will step down as chief executive officer of GE’s energy infrastructure unit at the end of 2012, will be restricted for about three times as long as what’s typical in such cases, said Alan Johnson, managing director of executive compensation firm Johnson Associates in New York.
“They see him as a very big potential threat in the marketplace,” Johnson said yesterday in a telephone interview. “Usually, a year is normal, two years is kind of on the long side and three years is a really long time.”
Krenicki pledged in 2011 to more than double annual revenue at GE Energy, the largest industrial unit, to $100 billion. A GE employee since 1984, he will receive $89,000 a month until May 2022 along with a 2012 bonus of at least $2.9 million after leaving, according to a July 23 regulatory filing, even as he joins private-equity firm Clayton Dubilier & Rice LLC in 2013.
The “retirement terms reflect his senior position, long service and significant contribution to GE as well as our interest in receiving strong non-compete and non-solicitation agreement protections,” Deirdre Latour, a spokeswoman for Fairfield, Connecticut-based GE, said in an e-mail.
CEO Jeff Immelt made Krenicki a vice chairman and chose him to run the energy infrastructure business when it was created in July 2008. Krenicki’s departure coincides with the division’s breakup into three units with chiefs reporting directly to Immelt.
GE’s payout is inexpensive compared with the potential risk from Krenicki going to work for a rival, said David Schmidt, a senior consultant at executive-compensation firm James F. Reda & Associates in New York.
“If you were to value a non-compete for someone who could really cause competitive damage, $1 million a year is really not a lot of money,” Schmidt said in a telephone interview. “When you consider what the possible damage to GE could be, that’s not a huge insurance policy.”
The retirement package will also allow Krenicki to take advantage of stock options awarded to him as long as they vest before the end of 2014, according to the filing. The Wall Street Journal and Footnoted.com reported on the pay package earlier.
Krenicki decided “it’s a good time to kind of think about other things he can do” and declined offers to take other roles at GE, Immelt said July 20 on the company’s second-quarter earnings conference call.
GE has said reworking the energy units will help cut structural costs by $2 billion by 2014. Steve Bolze, who leads the GE Power & Water business; Dan Heintzelman, head of GE Oil & Gas; and Dan Janki, in charge of GE Energy Management, will report to Immelt starting next quarter, the company said.
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