General Electric’s just-filed annual proxy shows that CEO Jeff Immelt declined the$11.7 million bonus the compensation committee of the board of directors decided he deserved for 2008. Immelt noted that earnings came in below expectations and the company’s stock price “declined significantly.”
According to the GE proxy, “Mr. Immelt proposed, and the MDCC [compensation committee] agreed, that he would receive no bonus for 2008 and that he would decline the entire $11.7 million earned under his long-term performance award. The MDCC accepted Mr. Immelt’s proposal as appropriate recognizing that, although the company delivered a strong operational performance in 2008, this performance was not reflected in GE’s stock price. The aggregate effect of these actions reduced the amount of cash compensation paid to Mr. Immelt 64% versus 2007.” Immelt had received a bonus of $5.8 million for 2007.
Five other top executives at GE received 2008 cash bonuses ranging from $1.31 to $2.9 million.
As the proxy was filed with the SEC, Immelt posted a statement on the company website explaining his position on 2008 compensation for top GE executives.
“In a tough environment in 2008, we set a record for revenue and had our third-highest earnings year ever. Our earnings declined 19% versus a decline in S&P 500 earnings of 30%. That’s not the kind of outperformance we like, but it was still better than the broader market. During the year, we continued to execute in areas that give GE solid competitive advantage over the long-term: generating strong cash flow, leading in environmentally sound products and services, expanding in global markets, and investing in innovation, technology and leaders even in tough times.
However, earnings came in below where we expected. The broad equity markets, and GE’s stock price, declined significantly in 2008.
In these circumstances, I recommended to GE’s Board of Directors that I would not receive a bonus for 2008. In addition, I participated in a 2006-08 Long-Term Incentive Plan, along with 500 other GE executives. This results in a payout every three years based on the company’s performance against specific targets in earnings, growth, cash flow, and returns. GE met or exceeded three of the four operating goals set by the Board for this three-year period. But given the circumstances, I recommended to the Board that I not receive this payout. The Board agreed with my recommendations.
At the same time, it is important that the Board and I have the freedom to compensate our senior executives in a fair and reasonable way, consistent with performance against specific goals in 2008 and over the last three years. We believe that our senior executives’ compensation in 2008 reflects their contribution to GE.
These compensation decisions, which are addressed in our 2009 proxy statement, are consistent with GE’s performance culture as well as our commitment to developing strong global business leaders.”
RBR/TVBR observation: OK, the Immelt family isn’t going to go hungry on his $3.3 million base salary – not to mention the eventual value of the $2 million stock grant when GE’s stock price moves back up. But it is good leadership to pass on big perks in times of economic crisis. Also, it adds to Immelt’s credibility as part of President Obama’s blue ribbon Economic Recovery Advisory Board which is supposed to come up with ideas to help the nation’s economy get back on track.