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GE CEO’s $232 Million Pay Deal Scorned by Glass Lewis, ISS

(Bloomberg) — General Electric Co. is nearing a tussle at its annual meeting next month after two top shareholder advisory firms recommended a vote against Chief Executive Officer Larry Culp’s revised pay package, which lowered the bar for him to eventually collect as much as $232 million.

Glass Lewis said it was “uncomfortable” with the plan that maintained Culp’s maximum potential payout “in exchange for reduced shareholder value creation.” Its recommendation for the non-binding vote echoed the concerns of another proxy adviser, Institutional Shareholder Services, which also urged opposition to the pay plans.

“Mid-cycle adjustments to performance equity grants are generally considered to be problematic, particularly when the changes both increase the value of the award and decrease the performance level needed to earn it,” ISS said in its report.

a man wearing a suit and tie: GE Is Blasted for Revamping Culp’s Pay Package Amid Struggles

© Photographer: Boston Globe/Boston Globe
GE Is Blasted for Revamping Culp’s Pay Package Amid Struggles

Larry Culp

Photographer: John Tlumacki/The Boston Globe/Getty Images

The recommendations highlight growing unease over GE’s decision in August to essentially halve the share-price targets needed for Culp to qualify for an equity-based payout valued at as much as $232 million by the end of his tenure. The revisions were made as part of a two-year contract extension to keep him at the helm through 2024.

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Glass Lewis and ISS also said they support a separate shareholder proposal for GE’s board of directors to be led by an independent chair, rather than the chairman-CEO arrangement in place for decades.


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GE said it disagreed with those recommendations. The Boston-based maker of jet engines, power equipment and medical scanners plans to hold its annual meeting on May 4.

“We value the feedback and views of our shareholders, and we will continue to engage with many of them on a range of topics, including executive compensation,” the company said in a statement.

GE fell 1.2{41490b4d0cf0dbc5ec3f65e11fff509c7d6ed2a53a838ebf7adf43f0908f07f3} to close at $13.39 in regular New York trading.

Culp’s initial compensation plan included a one-time equity award worth a maximum of $232.5 million if GE shares rose above $31. Under his revised contract, Culp would earn the same value if the shares reached $16.68 on average for 30 consecutive trading days during his tenure.

The change came after GE shares plunged last year amid the coronavirus pandemic to the lowest levels since 1991. The shares stormed back in the second half, posting a big-enough gain for Culp to qualify for an initial payout threshold under that plan. The rally has continued this year with about a 24{41490b4d0cf0dbc5ec3f65e11fff509c7d6ed2a53a838ebf7adf43f0908f07f3} gain through Friday.

(Updates with comment from ISS report in third paragraph; Adds closing shares.)

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