Monday, January 30, 2023

Unions blow up $ 47million bonus for GE boss after lower stock price target

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Unions took advantage of a $ 47 million bonus guaranteed by General Electric chief executive Larry Culp this month after his salary was rewritten earlier this year to reduce the risk of him missing a job. windfall.

As hopes for the Covid-19 vaccine fueled a stock market rally in November, GE’s actions exceeded $ 10 for the first time since March. Now, after 30 days of trading above $ 10, Mr. Culp has blocked a bonus that will bring in at least $ 46.5 million in 2024 at the earliest.

The bonus is boiling unions and could spark a broader backlash from GE investors. In August, GE rewrote Mr. Culp’s compensation plan for 2018 so that he could earn a bonus when stocks traded above $ 10 rather than the original target of $ 19.

The new plan also preserves Mr. Culp’s chances of scoring a maximum bonus of $ 230 million. But all he has to do is drive GE shares above $ 16.68 to reap the full amount rather than $ 31. as his 2018 plan provided.

The salary comes as GE’s aeronautical unit reduced its workforce by 20% this year to improve its margins.

Mr Culp’s $ 47 million bonus “is absolutely outrageous,” said Carl Kennebrew, who heads a union representing GE workers in the AFL-CIO, America’s largest union federation.

“How can GE justify this kind of huge bonus for its CEO when workers, their families and their communities are suffering?” Mr Kennebrew said in a statement to the Financial Times.

When GE hired the former CEO of Danaher in 2018 to turn around the historic conglomerate’s wide range of struggling businesses, Mr. Culp’s compensation was tied to the improvement in the share price, which had significantly under- performed the market.

“It was a poor compensation plan construct,” said Michael Varner, director of executive compensation research at CtW Investment Group, which represents union-sponsored US pension funds with more than $ 250 billion. of assets under management.

If, with Mr. Culp’s initial goals out of reach, “the company needs to lower those goals, then what good is it?” A lowering of the goalposts is definitely very problematic, ”said Varner. “For an S&P 500 company, this is pretty serious.”

A GE spokesperson declined to comment beyond a statement the company released in August when Mr. Culp’s new compensation plan was released. “Larry’s compensation remains largely tied to delivering results for shareholders with almost 90 percent of his annual compensation at risk,” said Tom Horton, senior director of GE at the time.

Mr. Culp earned $ 24.6 million in 2019, his first full year as CEO of GE.

Courtney Yu, director of research at Equilar, a salary data company, said it is rare for companies to change the parameters of their compensation plan without major extenuating circumstances such as this year’s Covid-19 pandemic.

“It’s a lowering of targets that isn’t going to look very good,” Yu said.

A growing number of companies this year have changed annual or long-term incentive plans to make it easier to pay executives, even if their companies have laid off workers.

Shareholder advisory service ISS said in October it would consider recommending that investors vote against corporate executives or pay lump sums when bonus settings are changed in the midst of multi-year plans. For compensation plans starting in 2020, only modest changes will be viewed favorably, ISS said.


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