Turn­around could bring more than $200M for GE’s CEO

Stamford Advocate (Sunday) - - Business -

Gen­eral Elec­tric Co.’s new boss could re­ceive $21.3 mil­lion in an­nual com­pen­sa­tion and earn shares worth more than $200 mil­lion — but only if he man­ages to re­verse the com­pany’s deep stock slump.

That al­ready looks like a de­cent bet.

The shares surged Fri­day af­ter GE re­vealed a pay pack­age that de­pends heav­ily on Chief Ex­ec­u­tive Of­fi­cer Larry Culp’s abil­ity to en­gi­neer an epic share re­bound. Aside from a $2.5 mil­lion an­nual salary, the rest of his com­pen­sa­tion — in­clud­ing a $3.75 mil­lion tar­get bonus, an an­nual long-term in­cen­tive of $15 mil­lion and a big grant of shares — will only be paid out if he meets cer­tain goals, GE said in a reg­u­la­tory fil­ing last week.

“Larry is a proven ex­ec­u­tive with a long track record of su­pe­rior ex­e­cu­tion, and the board’s pack­age to at­tract Larry is over­whelm­ingly tied to per­for­mance,” the maker of gas tur­bines and jet en­gines said by email. “Nearly 90 per­cent of his an­nual pay will be at risk.”

The agree­ment high­lights GE’s ef­forts to pull its stock out of a tail­spin that had erased about $180 bil­lion of in­vestor wealth since the end of 2016. Un­der for­mer CEO John Flan­nery, who was ousted in a sur­prise de­ci­sion just 14 months into his ten­ure, GE was un­able to over­come chal­lenges rang­ing from poor cash flow to a sharp down­turn in the mar­ket for power equip­ment.

Culp, 55, the for­mer head of man­u­fac­turer Dana­her Corp., this week be­came the first out­side CEO for GE in the com­pany’s 126-year his­tory. He also took over as chair­man, less than six months af­ter join­ing GE’s board.

As part of his pay pack­age, Culp would col­lect as many as 7.5 mil­lion shares if GE’s share price closes on av­er­age at least 150 per­cent above its cur­rent level for 30 con­sec­u­tive trad­ing days be­fore Sept. 30, 2022. Such a gain would re­turn the shares to their level in late 2016.

That block of stock would be worth $95 mil­lion as of Thurs­day’s close, and would soar to as much as $237 mil­lion if the per­for­mance con­di­tion is met. Culp could earn fewer shares if the stock price in­creases at least 50 per­cent — or none if the price falls short of that thresh­old.

The value of Culp’s pack­age could place him among the top-paid ex­ec­u­tives in the U.S. for 2018, ac­cord­ing to the Bloomberg Pay In­dex of pub­lic com­pa­nies. The big per­for­mance award re­sem­bles those given to KKR & Co. Co-Pres­i­dents Scott Nut­tall and Joe Bae last year, worth about $177 mil­lion each, that were partly tied to stock-price growth.

Culp’s spe­cial award tied to share ap­pre­ci­a­tion will be ad­justed for spinoff trans­ac­tions or spe­cial div­i­dends, GE said in the fil­ing.

The com­pany said it will dis­close Flan­nery’s exit pack­age when it’s fi­nal­ized. The for­mer CEO, who took the job in Au­gust last year, got $9 mil­lion for 2017, ac­cord­ing to a reg­u­la­tory fil­ing ear­lier this year. That in­cluded $1.74 mil­lion in salary, stock op­tions val­ued at $2.08 mil­lion and a $3.26 mil­lion ad­just­ment to the value of his pen­sion and de­ferred com­pen­sa­tion.

As­so­ci­ated Press

The Gen­eral Elec­tric logo at the top of its Global Op­er­a­tions Cen­ter in the Banks de­vel­op­ment in down­town Cincin­nati. In­dus­trial gi­ant Gen­eral Elec­tric has named H. Lawrence Culp Jr. as its chair­man and CEO.

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