While we are only proposing that this policy cover new and
renewed executive severance approvals, we note that shareholders
overwhelmingly rejected GE’s Say-on-Pay proposal at the last annual
meeting after the Board, in August 2020, significantly lowered goals
for CEO Larry Culp’s Leadership Performance Share Award that was
awarded when he joined the company. This award was contingent on
at least a 50% increase in the stock price, at which time the award
would be worth $46.5 million.
In less than two years, however, the stock price dropped by nearly
half. The board responded by revising Mr. Culp’s contract to make it
easier for him to earn that $46.5 million payout. Given how GE’s share
price has risen since then, Mr. Culp could receive a windfall despite a
negligible increase in the stock price during his tenure.
We cite this example because it illustrates how GE’s board has been
extremely generous in executive compensation, contrary to basic “pay
for performance” principles. This largesse also exists with respect
to severance packages. According to last year’s proxy statement, a
change in control could have netted Mr. Culp over $100 million worth
of performance shares.
It is in the best interest of GE shareholders to be protected from
potential windfall payments that can arise from, among other things,
lowering goals and subsequently receiving unduly large payouts
upon a “without cause” termination, which is a very real possibility
at GE particularly considering the recently announced spinoff of its
Healthcare and Renewable Energy & Power businesses. Such spinoffs
can be accompanied by executive terminations.