New CEO overhauls GE’s upper ranks
General Electric Co.’s new boss is giving the company a management makeover as he seeks to reverse its stock plunge — the biggest of the year on the Dow Jones industrial average.
Chief Financial Officer Jeffrey Bornstein is leaving, adding to an exodus of top executives that began shortly after Chief Executive Officer John Flannery won the top job more than three months ago. Two other longtime company veterans, Vice Chairwoman Beth Comstock and Vice Chairman John Rice, are also exiting.
Flannery is tightening his grip on GE as he seeks to cut $2 billion in costs by the end of next year amid pressure from activist shareholder Trian Fund Management. Next month, he’s expected to outline his plans for a potential overhaul of the company’s portfolio, which includes jet engines, gas turbines, locomotives and ultrasound machines.
“This is part of maybe a transformational move that people are hoping for at GE,” said Todd Lowenstein, a fund manager at Highmark Capital Management, which owns GE shares. “The patience level of investors is obviously waning a little bit, and I think he feels compelled to move and show tangible results.”
Shares of GE fell less than 1 percent Friday to close at $24.28. But the stock price has tumbled 23 percent this year, putting the company on track for its worst market performance in a calendar year since 2008.
Bornstein, who was promoted to vice chairman when Flannery was named CEO, will leave Dec. 31. Comstock, who has led efforts to accelerate growth and helped spearhead digital innovation, will leave at the same time. So will Rice, a 39-year GE veteran whose most recent role was to lead the company’s Global Growth Organization.
“When you get rid of people that are this high profile this early in your CEO tenure, that’s a statement,” said Scott Davis, an analyst at Melius Research. “He’s holding people accountable. Bornstein had a tough time making his cash-flow numbers.”
In addition, “both the vice chairs were in roles that probably didn’t need to exist,” Davis said.
GE named Jamie Miller, who joined the company in 2008 and currently heads GE Transportation, to take over as chief financial officer Nov. 1. Miller, 49, has also served as GE’s chief information officer and chief accounting officer. At GE Transportation, which manufactures locomotives, she has been contending with slowing sales as railroads seek to cut costs.
The management shakeup evokes the last time GE got a new CEO, when the race to succeed Jack Welch prompted the exit of a generation of executives who went on to lead Boeing Co., Home Depot Inc. and Honeywell International Inc. Jeffrey Immelt, who won that contest and took over in 2001, left GE this week after handing the chairman’s role to Flannery, 56.
In naming Flannery in June, Immelt said the transition was being handled “in a different way,” drawing praise from analysts who said the company’s goal was to avoid the disruption of high-profile departures. But executives started leaving days after Flannery was named, with the exit of Steve Bolze, the head of the power division. Bolze went on to join Blackstone Group.
“There probably is some risk associated with just the amount of experience obviously that these individuals have across the board,” said Jeff Windau, an analyst at Edward Jones.
Flannery is already sending signals that he’s serious about paring expenses. GE is unloading its corporate-jet fleet and scaling back on leases of company cars. He is expected to provide additional details on cutting costs next month.
At the end of last year, Bornstein, 51, and Comstock, 57, had accumulated retirement benefits worth $20.1 million and $16.9 million, respectively, under two separate pension plans, according to a regulatory filing.
GE requires executives hired before 2005 to reach age 60 before they can get pension benefits or receive payouts of outstanding equity awards. The company has not disclosed whether the two will be able to collect any payouts following their departures.
Rice, 60, had $60.8 million in pension benefits as of Dec. 31 and was eligible to retire at that point, according to the filing. He holds an additional $7.24 million of restricted stock, some of which is tied to performance goals, and vests immediately upon retirement, as well as $38.8 million in outstanding options.