DEF 14A of General Electric Co
Filed Mar 17, 2022 · FY20210001206774-22-000763
General Electric Company
| 1 | Letter from the Lead Director | | 2 | GE: Delivering Value Now and In the Future | | 4 | Notice of 2022 Annual Meeting | | 5 | Shareholder Engagement | | 6 | Governance | | | MANAGEMENT PROPOSAL NO. 1 Election of Directors | | 7 | Board Nominees | | 7 | Qualifications and Attributes | | 7 | Key Corporate Governance Practices | | 8 | Nominee Biographies | | 13 | Board Leadership Structure | | 14 | Board Composition | | 17 | Board Governance Practices | | 18 | Board Operations | | 19 | Board Committees | | 20 | Key Areas of Board Oversight | | 22 | Other Governance Policies & Practices | | 24 | Stock Ownership Information | | 25 | Compensation | | 25 | Letter from the Management Development & Compensation Committee | | | MANAGEMENT PROPOSAL NO. 2 Advisory Approval of Our Named Executives’ Pay | | 26 | Shareholder Engagement on the 2021 Say-on-Pay Vote | | 28 | Overview of Our Executive Compensation Program | | 29 | Overview of Our Incentive Compensation Plans | | 33 | Compensation Actions for 2021 | | 36 | Summary Compensation | | 38 | Long-Term Incentive Compensation | | 41 | Deferred Compensation | | 43 | Pension Benefits | | 45 | Potential Termination Payments | | 49 | Other Executive Compensation Policies & Practices | | 50 | Management Development & Compensation Committee Report | | 50 | CEO Pay Ratio | | 51 | Director Compensation | | 53 | Auditor | | | MANAGEMENT PROPOSAL NO. 3 Ratification of Deloitte as Independent Auditor for 2022 | | 53 | Audit Committee Report | | 55 | 2022 Long-Term Incentive Plan | | | MANAGEMENT PROPOSAL NO. 4 Approval of the 2022 Long-Term Incentive Plan |
General Electric Company
| 59 | Shareholder Proposals | | 59 | SHAREHOLDER PROPOSAL NO. 1 Cessation of Stock Option and Bonus Programs | | 60 | SHAREHOLDER PROPOSAL NO. 2 Ratification of Termination Pay | | 62 | SHAREHOLDER PROPOSAL NO. 3 Employee Representative Director | | 63 | Submitting 2023 Proposals | | 64 | Voting and Meeting Information | | 64 | Voting Standards and Board Recommendations | | 67 | Appendix A: GE 2022 Long-Term Incentive Plan | | 75 | Explanation of Non-GAAP Financial Measures and Performance Metrics | | 77 | Helpful Resources |
General Electric Company
| Index of Frequently Requested Information | | | 54 | Auditor Fees | | 13 | Board Leadership Structure | | 17 | Board Self-Evaluation | | 50 | CEO Pay Ratio | | 49 | Clawback Policy | | 22 | Director Attendance | | 16 | Director Independence | | 7 | Director Qualifications | | 7 | Director Tenure and Term Limits | | 8 | Nominee Biographies | | 22 | Overboarding Policy | | 29 | Pay-for-Performance | | 29 | Peer Group | | 49 | Policies on Compensation Consultant | | 23 | Related Person Transactions | | 20 | Risk Oversight | | 5 | Shareholder Engagement | | 24 | Stock Ownership for Executives and Directors | | 49 | Stock Ownership Requirements | | 20 | Sustainability Oversight |
IMPROVED BUSINESS AND OPERATING PERFORMANCE
| Non-GAAP Financial Measure. For information on how these metrics are calculated, see “Explanation of Non-GAAP Financial Measures and Performance Metrics” on page 75.* | | Based on prior three-column reporting format and excluding the impact from discontinued factoring programs in current and prior periods. For GE’s full set of reported metrics against its 2021 Outlook and more information on its transition from three- to one-column financial statement reporting, please see GE’s fourth-quarter 2021 earnings materials at ge.com/investor.(1) | | Includes borrowings, after tax pension & principal retiree benefit plan liabilities, operating leases, 50% preferred stock, and factoring.(2) | | Including GE and its joint venture partners.(3) |
IMPROVED BUSINESS AND OPERATING PERFORMANCE
| STRATEGY | See Page 20 ► | BOARD OF DIRECTORS | See Page 6 ► | | ●Conducted a comprehensive Board-led strategy review culminating in the November 2021 announcement of our plan to form three industry-leading public companies, focusing on the growth sectors of aviation, healthcare and energy in order to drive long-term growth and creating value for shareholders | | ●Added three new directors with industry and operating expertise to GE Board aligned with our strategic transformation so that each future company will have a dedicated board with deep domain expertise | | | EXECUTIVE COMPENSATION | See Page 26 ► | SUSTAINABILITY | | | ●Responded to shareholder feedback and last year’s say-on-pay vote: (1) Management Development & Compensation Committee and CEO agreed to reduce his 2022 equity incentive grant, and (2) across GE’s businesses, based annual bonus decisions on performance metrics without applying discretion ●Continued to incorporate tailored performance measures in our compensation programs aligned with growing investor interest in operational and ESG metrics; used safety performance as a modifier for annual bonuses, reflecting GE’s prioritization of safety | | ●Published new Sustainability Report highlighting GE’s sustainability priorities, alignment with our strategy and other ESG information; informed by TCFD and SASB reporting frameworks ●Announced ambition in July 2021 to be a net-zero company by 2050, including greenhouse gas emissions from customers’ use of sold products in response to a shareholder proposal in 2021 that GE supported ●Published Annual Diversity Report, with EEO-1 data in 2022 | |
FOCUS ON STRATEGIC PLAN
FOCUS ON STRATEGIC PLAN Robust, Board-driven process during 2021; over seven full Board meetings and numerous additional sessions leading to plan announced in November to form three independent companies
FOCUS ON STRATEGIC PLAN
| Board Nominees |
FOCUS ON STRATEGIC PLAN
| TENURE 3.4 years average tenure Our Board term limit is 15 years | | | AGE Our Board age limit is 75 years | | | | 3 New | 6 Medium-tenured | 4 Longer-tenured | 4 <60 years | 6 60-65 years | 3 >65 years | | (≤1 years) | (2-4 years) | (≥5 years) | | | | | | | | | | |
FOCUS ON STRATEGIC PLAN
| DIVERSITY 2 of 4 Board leadership positions are held by women Our policy is to build a cognitively diverse board representing a range of backgrounds | | | INDEPENDENCE All independent except for the CEO All director nominees except our CEO are independent and meet heightened independence standards for our audit, compensation and governance committees | | | 5 Female | 2 Ethnically diverse | 5 Born outside U.S. | 12 Independent | 1 Not Independent | | (38%) | (15%) | (38%) | | | | | | | | |
FOCUS ON STRATEGIC PLAN
Qualifications and Attributes The committee memberships indicate the composition of the committees of the Board as of the date of this proxy. Our director nominees’ primary qualifications and attributes are highlighted in the following matrix. The matrix is intended as a high-level summary and not an exhaustive list of each director’s skills or contributions to the Board.
FOCUS ON STRATEGIC PLAN
| | PRIMARY QUALIFICATIONS AND ATTRIBUTES | | | | | | | | | | | | | | | | | | | | | GE COMMITTEES | | | | NAME | | | | | | | | | A | C | G | | Stephen Angel NEW | | | | | | | | | | | | | Sébastien Bazin | | | | | | | | | | | | | Ashton Carter | | | | | | | | | | | | | H. Lawrence Culp, Jr. | | | | | | | | | | | | | Francisco D’Souza | | | | | | | | | | | | | Edward Garden | | | | | | | | | | | | | Isabella Goren NEW | | | | | | | | | | | | | Thomas Horton | | | | | | | | | | | | | Risa Lavizzo-Mourey | | | | | | | | | | | | | Catherine Lesjak | | | | | | | | | | | | | Tomislav Mihaljevic NEW | | | | | | | | | | | | | Paula Rosput Reynolds | | | | | | | | | | | | | Leslie Seidman | | | | | | | | | | | |
FOCUS ON STRATEGIC PLAN
| ATTENDANCE | QUALIFICATIONS AND ATTRIBUTES | | | | COMMITTEES | | | | | All director nominees attended at least 75% of the meetings of the Board and committees on which they served in 2021, and on average we had a 95% attendance rate in 2021. | | Industry & Operations | | Risk Management | A | Audit Committee | | Member | | | | Finance & Accounting | | Government & Regulatory | C | Compensation Committee | | Chair | | | | Investor | | Global | G | Governance Committee | | Financial Expert | | | | Technology | | Gender/Ethnic Diversity | | | | |
FOCUS ON STRATEGIC PLAN
Key Corporate Governance Practices
FOCUS ON STRATEGIC PLAN
| ● | 12 out of 13 director nominees are independent | | ● | Annual election of all directors by majority voting | | ● | No supermajority provisions in governing documents | | ● | Annual review of Board leadership structure | | ● | Annual Board and committee self-evaluations | | ● | Board-level oversight of ESG matters | | ● | Strong lead director with clearly delineated duties | | ● | Dual-pronged Board refreshment mechanisms (age/term limits) | | ● | Regular executive sessions of independent directors | | ● | Board and committees may hire outside advisors independently of management | | ● | Proactive year-round shareholder engagement program | | ● | Clawback policy that applies to all cash and equity incentive awards | | ● | Anti-hedging and anti-pledging provisions | | ● | Strong stock ownership guidelines and retention provisions | | ● | “Overboarding” limits for directors | | ● | No poison pill or dual-class shares | | ● | Encourage all directors to make at least two business visits per year without senior management present | | ● | Shareholder right to call special meetings (at 10%) | | ● | Proxy access by-law provisions on market terms |
FOCUS ON STRATEGIC PLAN
Nominee Biographies
FOCUS ON STRATEGIC PLAN
| Board Leadership | | | | | CHAIRMAN | | LEAD DIRECTOR | CHAIR: Management Development & Compensation Committee | | | H. Lawrence Culp, Jr. Director Since: 2018 Age: 58 Birthplace: United States | | Thomas Horton Director Since: 2018 Age: 60 Birthplace: United States Independent | | | Chairman and CEO, General Electric, Boston, MA (since September 2018) | | Partner, Global Infrastructure Partners, an infrastructure investment fund, New York, NY (since 2019) | | | Prior Business Experience ●Senior Advisor, Bain Capital Private Equity, a global private equity firm (2017–2018) ●Senior Lecturer, Harvard Business School (2015–2018) ●Former CEO and President, Danaher (2001–2014), a global science and technology company operating in the healthcare, environmental and applied-end markets; joined Danaher subsidiary Veeder-Root in 1990, serving in a number of leadership positions within Danaher, including COO and, following his retirement, Senior Advisor (2014–2016) Current Public Company Boards ●General Electric Past Public Company Boards ●GlaxoSmithKline ●Danaher ●T. Rowe Price Group Other Positions ●Member and former Chairman, Board of Visitors & Governors, Washington College ●Member, Board of Trustees, Wake Forest University Education ●Washington College ●MBA, Harvard Business School | | GE Committee Membership ●Compensation (Chair) ●Governance Prior Business Experience ●Senior Advisor, Warburg Pincus LLC, a private equity firm focused on growth investing (2015–2019) ●Chairman, American Airlines Group, one of the largest global airlines (formed following the merger of AMR Corporation and US Airways) (2013–2014) ●Chairman and CEO, American Airlines (2011–2014) ●Chairman and CEO, AMR (parent company of American Airlines) (2010–2013) ●EVP and CFO, AMR (2006–2010) ●Vice Chairman and CFO, AT&T (2002–2006) ●SVP and CFO, AMR (2000– 2002); joined AMR in 1985, serving in various finance and management roles Current Public Company Boards ●General Electric ●EnLink Midstream ●Walmart (lead director) Past Public Company Boards ●Qualcomm Other Positions ●Executive Board Member, Cox School of Business, Southern Methodist University Education ●Baylor University ●MBA, Southern Methodist University | |
FOCUS ON STRATEGIC PLAN
| Board Leadership | | | | | CHAIR: Audit Committee | | CHAIR: Governance & Public Affairs Committee | | | Leslie Seidman Director Since: 2018 Age: 59 Birthplace: United States Independent | | Risa Lavizzo-Mourey Director Since: 2017 Age: 67 Birthplace: United States Independent | | | Former Chairman, Financial Accounting Standards Board (FASB), independent organization responsible for financial accounting and reporting standards, Norwalk, CT (2010–2013) | | Professor emeritus, University of Pennsylvania, Philadelphia, PA (since 2018) and Former President and CEO, Robert Wood Johnson Foundation, Princeton, NJ (2003–2017) | | | GE Committee Membership ●Audit (Chair) Prior Business Experience ●Board Member, FASB (2003–2013) ●Financial reporting consultant (1999–2003) ●Staff Member, FASB (1994–1999) ●Vice President, Accounting Policy, JP Morgan (1987–1994) ●Auditor, Arthur Young (1984–1987) Current Public Company Boards ●General Electric ●Moody’s, provider of credit ratings, research and analytical tools (Chair, Audit Committee) Other Positions ●Advisor, Idaciti ●Founding Director, Pace University Center for Excellence in Financial Reporting (2014–2018) ●Board of Governors, Financial Industry Regulatory Authority (FINRA) (2014–2019) Education ●Colgate University ●MS (Accounting), New York University Certifications ●Certified Public Accountant (Inactive) ●Cybersecurity Oversight CERT, Carnegie Mellon University and NACD ●ESG Oversight certification (GCB.D) | | GE Committee Membership ● Governance (Chair) Prior Business Experience ●SVP, Robert Wood Johnson Foundation, largest U.S. philanthropic organization dedicated to healthcare (2001–2003) Prior Academic Experience ●Sylvan Eisman Professor of Medicine and Health Care Systems (1995–2001), Director, Institute on Aging (1994–2002), Chief of Geriatric Medicine (1986–1992), University of Pennsylvania Medical School Prior Government Experience ●Advisory Committee Member, President’s Advisory Commission on Consumer Protection and Quality in the Health Care Industry (1997–1998) ●Deputy Administrator, Agency for Health Care Research and Quality (1992–1994) ●Co-Chair, White House Health Care Reform Task Force, Working Group on Quality of Care (1993–1994) ●Advisory Committee Member, Task Force on Aging Research (1985–1992) ●Advisory Committee Member, National Committee for Vital and Health Statistics (1988–1992) Current Public Company Boards ●General Electric ●Intel ●Merck ●Better Therapeutics, Inc Past Public Company Boards ●Genworth Financial ●Beckman Coulter ●Hess Other Positions ●Trustee, Smithsonian Institution Board of Regents ●Board of Fellows, Harvard Medical School ●Member, National Academy of Medicine Education ●University of Washington & SUNY Stony Brook ●MD, Harvard Medical School ●MBA, University of Pennsylvania | |
FOCUS ON STRATEGIC PLAN
| Stephen Angel Director Since: 2022 Age: 66 Birthplace: United States Independent | | Sébastien Bazin Director Since: 2016 Age: 60 Birthplace: France Independent | | Ashton Carter Director Since: 2020 Age: 67 Birthplace: United States Independent | | | Former CEO of Linde, a global industrial gases and engineering company, Dublin, Ireland (2018-2022) | | Chairman and CEO, AccorHotels, a global hotel company, Paris, France (since 2013) | | Director, Belfer Center for Science and International Affairs, Harvard Kennedy School, Cambridge, MA (since 2017) | | | Prior Business Experience ●CEO, Linde (2018-2022) ●President & CEO, Praxair (subsequently Linde) (2007-2018) ●President & COO, Praxair (2006-2007) ●EVP, North America, Europe and Asia, Praxair (2001-2006) ●Previously held various roles at General Electric (1979-2001) Current Public Company Boards ●General Electric ●Linde (Chair) ●PPG Industries Past Public Company Boards ●Praxair (Chair) Other Positions ●Director, the Hydrogen Council Education ●North Carolina State University ●MBA, Loyola College | | GE Committee Membership ●Compensation ●Governance Prior Business Experience ●CEO, Europe Colony Capital, a private investment firm (1997–2013) ●Group Managing Director, CEO and General Manager, Immobilière Hôtelière (1992–1997) ●Began career in 1985 in U.S. finance sector, becoming Vice President, M&A, PaineWebber Current Public Company Boards ●General Electric ●AccorHotels Past Public Company Boards ●Huazhu Group ●Carrefour ●Banyan Tree Holding Other Positions ●Vice Chairman, Supervisory Board, Gustave Roussy Foundation, cancer research funding ●Chairman, Safar Ventures Education ●Sorbonne University ●MA (Economics), Sorbonne University | | GE Committee Membership ●Audit Prior Government Experience ●Secretary, U.S. Department of Defense (2015-2017) ●Deputy Secretary and Chief Operating Officer, U.S. Department of Defense, responsible for oversight of personnel and management (2011-2013) ●Under Secretary of Defense for Acquisition, Technology and Logistics, U.S. Department of Defense, responsible for global logistics and procurement (2009-2011) ●Assistant Secretary of Defense for International Security Policy U.S. Department of Defense (1993-1996) ●Began career with U.S. Department of Defense in 1981 as a program analyst Prior Academic Experience ●Prior teaching positions: Stanford University (2014-2015); Harvard Kennedy School (1984-1993; 1997-2009); and Massachusetts Institute of Technology (1982-1984) Prior Business Experience ●Senior Partner, Global Technology Partners (1998-2009) Current Public Company Boards ●General Electric ●Delta Air Lines Other Positions ●Fellow, American Academy of Arts & Sciences ●Director, Council on Foreign Relations Education ●Yale University ●PhD (Theoretical physics), Oxford University | |
FOCUS ON STRATEGIC PLAN
| Francisco D’Souza Director Since: 2013 Age: 53 Birthplace: Kenya Independent | | Edward Garden Director Since: 2017 Age: 60 Birthplace: United States Independent | | Isabella Goren Director Since: 2022 Age: 61 Birthplace: Ukraine Independent | | | Former CEO Cognizant Technology Solutions Corporation, a multinational IT company, Teaneck, NJ (2007-2019) | | Chief Investment Officer and Founding Partner, Trian Fund Management, L.P., an investment management firm, New York, NY (since 2005) | | Former Chief Financial Officer of American Airlines and AMR Corporation, a global airline, Forth Worth, TX (2010-2013) | | | GE Committee Membership ●Audit ●Compensation Prior Business Experience ●CEO, Cognizant (2007–2019) ●President, Cognizant (2007–2012) ●COO, Cognizant (2003–2006) ●Co-founded Cognizant (1994) ●Previously held various roles at Dun & Bradstreet Current Public Company Boards ●General Electric ●MongoDB Past Public Company Boards ●Cognizant Other Positions ●Board Co-Chair, New York Hall of Science ●Trustee, Carnegie Mellon University ●International Advisory Panel Member and Special Advisor to the Board, Banco Santander Education ●University of Macau ●MBA, Carnegie Mellon University | | GE Committee Membership ●Compensation Prior Business Experience ●Vice Chairman and Director, Triarc Companies (subsequently The Wendy’s Company and previously Wendy’s/Arby’s Group) (2004–2007) and Executive Vice President (2003–2004) ●Managing Director, Credit Suisse First Boston (1999–2003) ●Managing Director, BT Alex Brown (1994–1999) Current Public Company Boards ●General Electric ●Janus Henderson Group Past Public Company Boards ●Invesco ●Legg Mason ●The Bank of New York Mellon ●The Wendy’s Company ●Family Dollar Stores ●Pentair Education ●Harvard College | | Prior Business Experience ●CFO, American Airlines and AMR Corporation (2010-2013) ●Senior Vice President, Customer Relationship Marketing, American Airlines and AMR Corporation (2006-2010) ●Vice President, American Airlines (1998-2006) ●President, AMR Services (1996-1998) ●Previously served in various management positions at American Airlines (1986-1996) ●Chemical Engineer, Dupont (1983-1985) Current Public Company Boards ●General Electric ●Marriott International Past Public Company Boards ●Gap ●LyondellBasell Industries Other Positions ●Director, MassMutual ●Director, National Association of Corporate Directors, North Texas ●Member of the Advisory Board, The University of Texas at Austin, Cockrell School of Engineering ●Member of the Executive Board, Lyle School of Engineering, Southern Methodist University Education ●University of Texas at Austin ●MBA, Southern Methodist University | |
FOCUS ON STRATEGIC PLAN
| Catherine Lesjak Director Since: 2019 Age: 63 Birthplace: Canada Independent | | Tomislav Mihaljevic Director Since: 2022 Age: 58 Birthplace: Croatia Independent | | Paula Rosput Reynolds Director Since: 2018 Age: 65 Birthplace: United States Independent | | | Former Chief Financial Officer, HP, a global technology company, and its predecessor, Hewlett-Packard, Palo Alto, CA (2007-2018) | | CEO & President, Cleveland Clinic, a global integrated healthcare system, Cleveland, OH (since 2018) | | President and CEO, PreferWest LLC, a business advisory firm, Seattle, WA (since 2009) | | | GE Committee Membership ●Audit ●Governance Prior Business Experience ●Interim Chief Operating Officer, HP (2018–2019) ●Interim CEO, Hewlett Packard (2010) ●Senior Vice President and Treasurer, HP (2003-2007) ●Previously served in various leadership positions within the financial organization at HP and Hewlett Packard, including as Global Controller, Software Solutions; Controller and Credit Manager for Commercial Customers; and as Manager, Financial Operations, Enterprise Marketing and Solutions (joined Hewlett Packard in 1986) Current Public Company Boards ●General Electric ●Pros Holdings ●SunPower (Chair, Audit Committee) Other Positions ●Board, Haas School of Business, University of California, Berkeley Education ●Stanford University ●MBA, University of California, Berkeley | | Prior Business Experience ●CEO of Cleveland Clinic Abu Dhabi (CCAD) (2015-2017) and Chief of Staff and Chairman of the Heart & Vascular Institute CCAD (2011-2015) ●Surgeon, Department of Thoracic and Cardiovascular Surgery, Cleveland Clinic (2004-2011) ●Associate surgeon, Division of Cardiac Surgery, Brigham & Women’s Hospital (2002-2004) ●Assistant Professor of Surgery, Harvard Medical School (2002-2004) Current Public Company Boards ●General Electric Other Positions ●Board co-chair, US-UAE Business Council ●Director, Greater Cleveland Partnership ●Director, United Way of Greater Cleveland ●Member of the Advisory Board, OneTen ●Member of the Board of Trustees, Musical Arts Association Education ●University of Zagreb ●Residency: Brigham & Women’s Hospital | | GE Committee Membership ●Audit ●Compensation Prior Business Experience ●Vice Chairman and Chief Restructuring Officer, American International Group (2008–2009) ●Chairman, President and CEO, Safeco Insurance Company of America (2005–2008) ●Chairman and CEO, AGL Resources (1998–2005) ●CEO, Duke Energy Power Services, Duke Energy (1995–1998) ●Previously served in various leadership positions at Associated Power Services, Pacific Gas Transmission Co. and Pacific Gas and Electric Company Current Public Company Boards ●General Electric ●BP ●National Grid UK (Chair) Past Public Company Boards ●Air Products & Chemicals ●Anadarko Petroleum ●BAE Systems ●CBRE Group ●Circuit City Stores ●Coca-Cola Enterprises ●Delta Air Lines ●TransCanada Other Positions ●Chair, Seattle Cancer Care Alliance Education ●Wellesley College | |
FOCUS ON STRATEGIC PLAN
Board Leadership Structure GE believes that independent board oversight is an essential component of strong corporate performance. We also believe that the decision as to whether the positions of Chairman and CEO should be combined or separated, and whether an executive or an independent director should serve as the Chairman should be based upon the circumstances facing the company. Maintaining flexibility on this policy allows the Board to choose the leadership structure that will best serve the interests of the company and its shareholders at any particular time. WHY OUR BOARD LEADERSHIP STRUCTURE IS APPROPRIATE FOR GE AT THIS TIME. The Board continues to believe that its current leadership structure, which has a combined role of Chairman and CEO, counterbalanced by a strong independent Board led by a lead director and independent directors chairing each of the Board committees, is in the best interests of GE and its shareholders. In the Board’s view, this structure allows Mr. Culp, as Chairman and CEO, to drive strategy and agenda setting at the Board level, while maintaining responsibility for executing on that strategy as CEO. At the same time, our lead director, Thomas Horton, works with Mr. Culp to set the agenda for the Board and also exercises additional oversight on behalf of the independent directors. The Board will continue to review the appropriateness of this structure and consider shareholder feedback from our ongoing engagements. HOW WE SELECT THE LEAD DIRECTOR. The Governance & Public Affairs Committee (the Governance Committee) considers feedback from the current lead director, our other Board members and the Chairman, and then makes a recommendation to the Board’s independent directors. The independent directors elect the lead director, taking into account the recommendation of the Governance Committee. Thomas Horton, former Chairman and CEO of American Airlines, was first elected as the lead director in September 2018. Under the Board’s Governance Principles, Mr. Horton also serves as chair of the Management Development & Compensation Committee. In the event of Mr. Horton’s incapacity, the chair of the Governance Committee would serve as the lead director until the independent directors selected a new lead director. The Lead Director’s Role The lead director has the following responsibilities (and may also perform other functions at the Board’s request), as detailed in the Board’s Governance Principles:
FOCUS ON STRATEGIC PLAN
| ● | Board leadership – provides leadership to the Board in any situation where the Chairman’s role may be perceived to be in conflict, and chairs Board meetings in the absence of the Chairman | | ● | Board agenda, schedule & information – approves the agenda (with the ability to add agenda items), schedule and information sent to directors and calls additional meetings as needed | | ● | Leadership of independent director meetings – calls and leads independent director meetings, which are regularly scheduled (in addition to the numerous informal sessions that occur throughout the year) without any management directors or GE employees present | | ● | Chairman-independent director liaison – regularly meets with the Chairman and serves as liaison between the Chairman and the independent directors (although every director has direct access to the Chairman) | | ● | Shareholder communications – makes himself/herself available as the primary Board contact for direct communication with our significant shareholders | | ● | Board governance processes – works with the Governance Committee to guide the Board’s governance processes, including the annual Board self-evaluation and the annual Chairman’s evaluation | | ● | Board leadership structure review – oversees the Board’s periodic review and evaluation of its leadership structure | | ● | Committee chair selection – advises the Governance Committee in choosing committee chairs |
FOCUS ON STRATEGIC PLAN
| | | | CHAIRMAN OF THE BOARD & CEO | | | LEAD DIRECTOR elected solely by independent directors | | | | | | LEAD DIRECTOR also serves as: Management Development & Compensation Committee Chair | CHAIRS The chairs of our Audit and Governance Committees are independent | | CONSIDERATIONS IN SELECTING CURRENT LEAD DIRECTOR | | | Thomas Horton | | | Mr. Horton was first elected to our Board at the 2018 Annual Meeting. During his tenure on our Board, he has established strong working relationships with his fellow directors and garnered their trust and respect. Furthermore, he has demonstrated strong leadership skills, independent thinking and a deep understanding of our businesses and their industries. | | | The Board’s decision to select Mr. Horton as lead director took into account the tenures and capabilities of each independent director, along with a potential candidate’s willingness and ability to serve as lead director, understanding that the position entails significant responsibility and time commitment. The Board considered that Mr. Horton also serves as lead independent director for Walmart. However, the fact that Walmart also has a separate board chairman mitigated concerns about Mr. Horton’s ability to dedicate sufficient time to the role as GE’s lead director. | |
FOCUS ON STRATEGIC PLAN
Board Composition How We Are Changing the Board The Governance Committee is charged with reviewing the composition of the Board and refreshing it as appropriate. With this in mind, the Governance Committee continuously reviews potential candidates and recommends nominees to the Board for approval. The Board takes a thoughtful approach to its composition to maintain alignment with the company’s evolving corporate strategy. We believe our board composition strikes a balanced approach to director tenure and allows the Board to benefit from a mix of newer directors who bring fresh perspectives and seasoned directors who bring continuity and a deep understanding of our complex business. Looking forward, we have announced our plan to form three industry-leading, global, public companies. Consistent with that plan, we expect to continue to seek director candidates whose experiences support the company’s future strategy and industry focus. In March 2022, the Board elected three new directors: Stephen Angel, Isabella Goren and Tomislav Mihaljevic. These new directors bring decades of experience across the energy, aviation and healthcare industries. Ms. Goren was originally recommended for the Board by an independent director, and Mr. Angel and Dr. Mihaljevic were each recommended by management. Director Selection Process Our Governance Committee, together with the full Board, is responsible for establishing criteria, screening candidates and evaluating the qualifications of persons who may be considered for service on our Board. The Governance Committee considers all shareholder recommendations for director candidates. We evaluate them in the same manner as candidates suggested by other sources. The following describes the Board’s selection process:
FOCUS ON STRATEGIC PLAN
| 1 | SUCCESSION PLANNING | | | The Governance Committee prioritizes experiences and attributes to support the current and long-term needs of the company, within the context of the current Board structure, diversity, and mix of skills and experience. |
2021 AREAS OF FOCUS
| ●Long-term strategy and business portfolio review, leading to our plan to form three independent companies ●Strategy for the energy transition and climate change ●Health and safety of employees and communities, including COVID-19 ●Capital structure and liquidity, particularly reducing leverage and de-risking the balance sheet | ●Business operating and performance reviews ●Sustainability, including external reporting ●Management succession planning ●Aviation sector recovery ●Enterprise risk management ●GE Capital and Insurance |
A TYPICAL GE BOARD MEETING
| COMMITTEE COMPOSITION Independence. All committee members satisfy the NYSE’s and GE’s definitions of independence. | Audit | | Governance & Public Affairs | | Management Development & Compensation | | | | 13 meetings in 2021 | | 6 meetings in 2021 | | 8 meetings in 2021 | | | | | Chair Leslie Seidman Other Members Carter, D’Souza, Lesjak & Reynolds | | Chair Risa Lavizzo-Mourey Other Members Bazin, Horton, Lesjak & Tisch | | Chair Thomas Horton Other Members Bazin, D’Souza, Garden & Reynolds | | COMMITTEE OPERATIONS Each committee meets periodically throughout the year, reports its actions to the Board, receives reports from senior management, annually evaluates its performance and can retain outside advisors. Formal meetings are typically supplemented with additional calls and sessions. | Recent Activities and Key Focus Areas | | | | | | | | ●Overseeing the simplification of the company’s financial reporting, including the transition from 3 to 1 column reporting ●Overseeing transition of the independent auditor, including the detailed audit plan and independent audit budget ●Conducting cross-functional reviews with internal audit staff, tax, cyber/IT ●Overseeing changes to leadership and structure of the internal audit function ●Overseeing material litigation strategy and changes to the compliance and cybersecurity programs | | ●Overseeing the company’s environmental, social and governance (ESG) commitments and strategies and enhancements to ESG disclosure. ●Overseeing changes to the leadership and structure of the company’s safety program ●Reviewing the Board’s leadership structure and committee composition ●Overseeing management of environmental remediation efforts ●Identifying and recruiting new directors | | ●Reviewing critical talent to support the needs of GE with focus on human capital management, succession planning, diversity and talent development and retention ●Focusing on increased alignment of pay and performance through effective short- and long-term incentive compensation design ●Engaging with shareholders and reviewing feedback and external benchmarking of compensation practices ●Overseeing cultural transformation for GE, prioritizing leadership behaviors | | | COMMITTEE RESPONSIBILITIES The key responsibilities of each committee are listed to the right. For more detail, see the Governance Principles and committee charters (see “Helpful Resources” on page 77). | Key Responsibilities and Areas of Risk Oversight | | | | | | | | ●Oversees GE’s independent auditor, including the audit plan and budget, and monitors independence and performance ●Oversees the effectiveness of GE’s financial reporting processes and systems ●Discusses with auditor and management key reporting practices (including non-GAAP), critical audit matters and new accounting standards ●Monitors the effectiveness of GE’s internal controls ●Reviews and evaluates the scope and performance of the internal audit staff and compliance program ●Oversees the company’s enterprise risk management and cybersecurity programs ●Monitors GE’s significant litigation and investigations ●Oversees external reporting on sustainability matters in coordination with the Governance Committee | | ●Oversees the Board’s governance processes, including all significant governance policies and procedures ●Oversees company policies and strategies related to climate change management, political spending & lobbying, human rights, and environment, health & safety ●Oversees external reporting on sustainability matters in coordination with the Audit Committee ●Reviews Board composition and compensation in connection with long-term strategy and identifies new directors for GE ●Oversees Board and committee self-evaluations ●Reviews conflicts of interest, as applicable | | ●Oversees GE’s executive compensation policies, practices and programs ●Oversees and approves goals and objectives for performance-based equity awards and evaluates performance against those goals ●Evaluates and approves compensation of the CEO ●Reviews risk assessment of compensation policies and practices ●Oversees development of executive succession plans, including recruitment, development and retention efforts for all employees ●Oversees strategies and policies related to human capital management, including matters such as diversity, equity and inclusion, workplace environment and culture, and talent recruitment, development, engagement and retention | | | | Financial acumen. The Board has determined that each of Mses. Lesjak, Reynolds and Seidman and Messrs. Carter and D’Souza are “audit committee financial experts” (per SEC rules), and each of these directors is “financially literate” (per NYSE rules). | | | | | |
A TYPICAL GE BOARD MEETING
| FULL BOARD | AUDIT COMMITTEE | | ●Long-term strategy ●Most significant risks facing GE ●Reviews with each business ●Financial performance ●Energy transition and climate change | ●Financial statements, systems & reporting ●Regulatory, compliance and litigation risks ●Cybersecurity ●Enterprise risk management framework ●Auditors (internal and external) | | GOVERNANCE & PUBLIC AFFAIRS COMMITTEE | MANAGEMENT DEVELOPMENT & COMPENSATION COMMITTEE | | ●Corporate governance ●Public policy ●Environmental, health and safety matters ●Support of full Board’s oversight on climate change | ●Human capital management, including diversity and pay equity ●Talent development ●Succession planning ●Executive compensation |
A TYPICAL GE BOARD MEETING
| OPERATING REVIEWS | | ORGANIZATION & TALENT REVIEWS | | LONG-TERM STRATEGY REVIEWS | | BUDGET PROCESS | | Quarterly GE CEO reviews with each business on their operating priorities, execution against plan and top risks | | Annual GE CEO review dedicated to organization and critical talent strategy to drive business results, including action plans related to cultural transformation and diversity | | Annual long-range review of business strategy, technology roadmap and competitive position, including investment requirements to deliver sustainable growth | | Annual budget planning process, designed to focus shorter-term financial execution and investments profile to deliver long-term strategic objectives |
A TYPICAL GE BOARD MEETING
COMMON STOCK. This column shows beneficial ownership of our common stock as calculated under SEC rules. Except to the extent noted below, everyone included in the table has sole voting and investment power over the shares reported. None of the shares are pledged as security by the named person, although standard brokerage accounts may include non-negotiable provisions regarding set-offs or similar rights.(1) For the named executives, the Stock sub-column includes non-voting interests that may be converted into shares of GE common stock within 60 days, including RSUs. This column also includes shares that may be acquired under stock options that are currently exercisable or will become exercisable within 60 days (see the Options sub-column). For Mr. Culp, this column also includes 1,742,878 performance shares over which he has sole voting but no investment power. TOTAL. This column shows the individual’s total GE stock-based holdings, including voting securities shown in the Common Stock column (as described above), plus non-voting interests such as PSUs (included at the target payout level) and other interests that cannot be converted into shares of GE common stock within 60 days, including, as appropriate, RSUs, DSUs, deferred compensation accounted for as units of GE stock, and stock options. As described under “Director Compensation” on page 51, directors must hold the DSUs included in this column until one year after leaving the Board. COMMON STOCK & TOTAL. Both columns include the following shares over which the named individual has shared voting and investment power through family trusts or other accounts: Angel (5,927), Cox (13,335), Culp (147,783), Garden (4,016,414)(1), Horton (6,906), Reynolds (537), Strazik (13,520), Timko (1,250) and Tisch (442,500)(2). DIRECTORS, NOMINEES & EXECUTIVES. These columns show ownership by our directors, nominees and executive officers as a group. This row includes: (1) 1,016,723 shares that may be acquired under stock options that are or will become exercisable within 60 days, (2) 5,292 RSUs that vest within 60 days, (3) 4,648,172 shares over which there is shared voting and investment power, and (4) 1,742,878 shares over which there is sole voting power but no investment power. Current directors and executive officers as a group own approximately 1.0% of GE’s total outstanding shares, including those shares owned by Trian SPV X (see note 1). 5% BENEFICIAL OWNERS. This column shows shares beneficially owned by T. Rowe Price Associates, 100 East Pratt Street, Baltimore, MD 21202; The Vanguard Group, 100 Vanguard Blvd., Malvern, PA 19355; BlackRock Inc., 55 East 52nd Street, New York, NY 10055; and FMR LLC (Fidelity), 245 Summer Street, Boston, MA 02210; as follows:
A TYPICAL GE BOARD MEETING
| MANAGEMENT PROPOSAL NO. 2 Advisory Approval of Our Named Executives’ Pay What are you voting on? We are asking shareholders to approve on a non-binding basis the compensation paid to our named executives, as described in this proxy statement. We hold say-on-pay votes annually. Under the Board’s policy of providing for annual say-on-pay votes, the next say-on-pay vote will occur at our 2023 Annual Meeting. Your Board recommends a vote FOR the say-on-pay proposal Why the Board recommends a vote FOR the say-on-pay proposal. The Board believes that our compensation policies and practices are effective in achieving the goals of the compensation program, and that our actions have been responsive to shareholder feedback related to last year’s say-on-pay vote. | Compensation To Our Shareholders, As members of the Management Development & Compensation Committee, we want to thank the many of you that have met with and provided feedback to us over the course of the last year. In 2021 the company met with shareholders representing nearly 80% of institutional share ownership. Members of the committee actively participated in and led meetings with over 60% of institutional shareholders. We were pleased to hear many shareholders favorably acknowledge enhancements we have made to GE’s compensation program during the past few years, including shifting the mix of long-term incentives from cash to equity, increasing external alignment with the use of a compensation peer group and continuing to refine our compensation metrics to help drive company priorities. Shareholders did not signal concerns with any fundamental aspects of our compensation program design. Based on our extensive engagement, the concerns underlying last year’s say-on-pay vote centered on two main areas. First was the grant of performance shares to our CEO Larry Culp in August 2020, as part of the company’s agreement to extend his leadership by two years through at least August 2024. Shareholders have been overwhelmingly supportive of Larry and the action in 2020 to extend the term of his employment. But there was shareholder concern around the timing, size and structure of the 2020 retention grant made as part of the extension. After considering shareholders’ feedback and a range of alternatives, the committee and Larry have agreed to reduce his annual equity incentive grant for 2022 from $15 million as was provided in his employment agreement to $5 million, representing a 67% reduction of annual equity. This action reflects our desire to continue incentivizing Larry to lead GE’s transformation and improve the company’s financial performance alongside the rest of the senior leadership team, his demonstrated strong performance as CEO and our Board’s support for his leadership. It also reflects our desire to recognize and meaningfully respond to our shareholders. Larry has done and continues to do an extraordinary job as the leader of our company, and we believe all shareholders are pleased that he has been retained and committed to remaining in place until 2024 at a minimum as we execute our previously announced spins and renewal of our businesses. The second area of concern was the way that discretion was used in 2020 annual bonuses for our businesses. With that feedback in mind, the proxy this year demonstrates an approach to annual bonuses that is formulaic and based only on the predetermined performance metrics for our businesses. We did not apply discretion in determining bonus pool funding or individual bonuses for named executives. Many shareholders expressed that the exercise of discretion in our bonus program should not be common, and should be well-explained in disclosure when necessary. We agree and saw no basis to use discretion this year, with the result that we had starkly differentiated bonus funding by business. For example, our Aviation business performed well in 2021 and had bonus funding at 113% of target, while our Renewable Energy business had a challenging year and missed each of its performance metrics, resulting in bonus funding of 0%. We are grateful to those of you who provided feedback that informed these actions, and we hope to have your support on this year’s say-on-pay vote. We thank you for your support of GE. | | | | | | | Management Development & Compensation Committee | | | | | | | | | | | | | | THOMAS HORTON | SÉBASTIEN BAZIN | FRANCISCO D’SOUZA | EDWARD GARDEN | PAULA ROSPUT REYNOLDS | | | (Chair) | | | | |
A TYPICAL GE BOARD MEETING
| What we heard | | What we have done to respond | | Shareholders have been overwhelmingly supportive of our CEO and extending his leadership, but the primary area of concern underlying the low say-on-pay vote was about the timing, size and structure of the 2020 retention grant made as part of the extension. Shareholders expressed a range of views about actions that might be appropriate in response, and we heard from shareholders who: ●had no expectation the 2020 grant should be revisited; ●supported the 2020 grant and the strong retention that it provides; ●asked about the possibility of modifying targets in the 2020 grant; and ●asked about the possibility of lowering the value of future grants. | | ●The 2020 grant was driven by unique and extraordinary circumstances; as such, the Board does not intend to enter into a similar modification of the CEO’s employment agreement again in the future. ●After considering a range of alternatives, the committee agreed with the CEO to reduce his annual equity incentive grant for 2022 from a grant date fair value of $15 million to $5 million, representing a 67% reduction of annual equity compared to the amount previously provided in the CEO’s employment agreement. ●We agree with the views expressed by a majority of shareholders we met with that revisiting the 2020 grant was not a necessary action; that grant provides strong retentive value that many shareholders support. | | Some shareholders did not support the way discretion was used to increase bonus funding compared to a more formulaic approach. These shareholders expressed a desire to see better alignment between future bonus payments and GE’s performance, with any future use of discretion well-explained in disclosure. | | Our annual bonuses for 2021 were formulaic and based only on the predetermined performance metrics for our businesses. We did not apply discretion in determining bonus pool funding or individual bonuses for named executives. We will use discretion sparingly in determining bonus pools, and if discretion is warranted in the future will be accompanied by enhanced disclosure to explain the rationale. |
A TYPICAL GE BOARD MEETING
| OBJECTIVE | HOW OUR COMPENSATION PROGRAM SUPPORTS THIS PHILOSOPHY | | Drive Accountability and Performance | ●Our incentive programs are designed to drive accountability for executing our strategy. ●Annual bonuses are tied to business unit results for business unit executives or to total company performance for corporate executives; annual equity awards for all executives are based on overall company performance. ●We set target performance levels that are challenging and aligned to the goals we communicate to investors. ●We set commensurately more challenging goals in association with above-target payout levels. | | Incentivize Short- and Long-Term Performance | ●Our program provides an appropriate mix of compensation elements. ●Cash payments reward achievement of short-term goals while equity awards encourage our named executives to deliver sustained strong results over multi-year performance periods. ●The committee continues to increase the portion of our executive compensation delivered in the form of long-term equity incentive compensation, rather than cash, to further align our executives with investors’ interests. | | Attract and Retain Top Talent | ●Provide competitive compensation programs that attract and retain talented executives with a strong track record of success, assuring a high performing and stable leadership team to lead our businesses. ●Continue to monitor market trends and align compensation programs with market where relevant. | | No Excessive Risk Taking | ●Our equity awards have specific holding and retention requirements for senior executives, which discourage excessive risk taking by keeping long-term compensation aligned with our share price performance even after it is earned. ●The committee retains discretion to adjust compensation for quality of performance and lack of adherence to company values, and in cases of detrimental misconduct pursuant to our clawback policy. |
A TYPICAL GE BOARD MEETING
| | Fixed | Performance-Based / At-Risk | | | | | | Short-Term Incentive | | Long-Term Equity-Based Incentive (generally 3-year vesting) | | | | Component | SALARY | BONUS | PSUs | OPTIONS | RSUs | | Link to Shareholder Value | Provide base pay level aligned with roles, responsibilities and individual performance to attract and retain top talent | Deliver on annual investor framework Serves as key compensation vehicle for differentiating performance each year | Focus executives on the achievement of specific financial performance goals directly aligned with our operating and strategic plans, and with a TSR modifier based on three-year return from stock price appreciation and dividends PSUs provide a significant stake in the long-term financial success of GE that is aligned with shareholder interests and promote employee retention | Reward stock price performance over time | Provide for long-term employee retention |
A TYPICAL GE BOARD MEETING
| Peer Group and Benchmarking | | | | DETERMINING OUR PEER GROUP. Since 2019, the committee has used a peer group for compensation benchmarking purposes. Based on the criteria set forth below, the committee reviews the peer group each year and made no changes to the peer group for 2021. In determining the peer group, the committee considered the following factors: ●Industry – companies operating in similar or comparable industry spaces and with comparable operational scope ●Size – companies that are comparable to GE in terms of revenues, market capitalization and number of employees ●Investment Peers – U.S. public companies whose performance is monitored regularly by the same market analysts who monitor GE HOW WE USE THE PEER GROUP. The committee uses the peer group to assess the pay level of our executives, pay mix, compensation program design and pay practices. The peer group is also used as a reference point when assessing individual pay, though pay decisions are also supplemented by input from the company’s independent compensation consultant and are impacted by internal equity, retention considerations, succession planning and internal GE dynamics. | PEER COMPANIES | | | | 3M Abbott Laboratories Boeing Caterpillar Chevron Cisco Deere DuPont Exxon Mobil Ford General Dynamics General Motors | Honeywell HP IBM Intel Johnson Controls Johnson & Johnson Lockheed Martin Medtronic Northrup Grumman Raytheon Technologies United Parcel Service |
A TYPICAL GE BOARD MEETING
Overview of Our Incentive Compensation Plans This section provides an overview of GE’s incentive compensation plans and how GE performed against the goals established under its 2021 annual bonus program and 2019 PSUs. See “Compensation Actions for 2021” on page 33 for details about 2021 compensation for each of our named executives. Annual Bonuses We provide annual cash incentive opportunities to our named executives under GE’s Annual Executive Incentive Plan (AEIP). The targets for awards under the AEIP are designed to drive company and business unit performance, based on financial and operational priorities. When determining the annual incentive award payable to each executive officer, the committee considers performance achieved relative to these pre-established targets to determine the AEIP pool funding for Corporate and each relevant GE business. While the committee has the ability under the AEIP to apply discretion at the business and individual levels when appropriate, we have engaged with shareholders and have heard the concerns some of them have expressed about the use of this discretion for bonuses in 2020. In the 2021 bonuses for named executives, as described below, no discretion was used. METRICS FOR THE ANNUAL BONUS POOL. The committee sets the performance goals for the Corporate and business unit bonus pools. For 2021, financial metrics for the annual bonus program were free cash flow, organic margin expansion and organic revenue growth. The committee selected these metrics, and weighted them to incentivize strong performance across key drivers of long-term value creation, and these metrics also reflect how the businesses are managed internally. In addition, to further align the AEIP with GE’s overarching operational priority of safety, the committee for the first time in 2021 applied a performance modifier to increase or decrease awards by up to 10% based on achievement of defined safety metrics. The safety performance modifier was determined based on an assessment for each business of the following safety metrics relative to targets set at the beginning of the performance year: injury and illness rates; serious incidents; fatalities; and overall safety culture and progress since the prior year. For 2021, the bonus pool performance metrics continued to be based upon company-wide results for our Corporate named executives, and upon business unit results for named executives who lead an individual business. HOW THE BONUS PROGRAM WORKS. We pay cash bonuses to our named executives each February or March for the prior performance year. All employees at the executive-band level and above within GE are eligible to participate in the annual bonus program. For our named executives, target bonuses are typically set at 100-150% of salary. In February following the performance period, the committee assesses performance against the financial metrics for the prior year to determine the payout level for each bonus pool. The CEO also leads an assessment of each named executive’s performance against relevant business and personal priorities, and makes recommendations to the committee related to compensation for each executive. In doing so, he receives input and data from our Chief Human Resources Officer. The Chief Human Resources Officer also provides input and information as to the CEO’s compensation directly to the committee for their consideration. The CEO has no role in the committee’s determination of his bonus. These assessments inform the committee’s compensation decisions for named executives each year, and provide a basis for the committee to consider whether factors such as the quality of financial or operating results or the impact of extraordinary or usual events should be considered in those compensation decisions. For 2021, the committee sought to eliminate all use of discretion, and individual performance factors were not considered for bonus determinations of our named executives.
A TYPICAL GE BOARD MEETING
| | | | NAMED EXECUTIVE OFFICER BONUS DETERMINATIONS | | | | | BASE SALARY | | TARGET AWARD PERCENTAGE | | COMPANY/ BUSINESS PERFORMANCE | | SAFETY MODIFIER (+/-10%) |
A TYPICAL GE BOARD MEETING
| | AEIP POOL FINANCIAL PERFORMANCE METRICS | THRESHOLD (50%) | TARGET (100%) | MAXIMUM (150%) | WEIGHT | RESULT | SAFETY PERFORMANCE MODIFIER (+/- 10%) | BONUS POOL PAYOUT | | GE Corporate | Free Cash Flow ($M)* | | | | | 150% | -5% | 112% | | | Organic Margin Expansion (bps)* | | | | | 117% | | | | | Organic Revenue Growth* | | | | | 56% | | |
A TYPICAL GE BOARD MEETING
| | AEIP POOL FINANCIAL PERFORMANCE METRICS | THRESHOLD (50%) | TARGET (100%) | MAXIMUM (150%) | WEIGHT | RESULT | SAFETY PERFORMANCE MODIFIER (+/- 10%) | BONUS POOL PAYOUT | | Aviation | Free Cash Flow ($M)* | | | | | 150% | -5% | 107% | | | Organic Margin Expansion (bps)* | | | | | 150% | | | | | Organic Revenue Growth* | | | | | 0% | | |
A TYPICAL GE BOARD MEETING
| | AEIP POOL FINANCIAL PERFORMANCE METRICS | THRESHOLD (50%) | TARGET (100%) | MAXIMUM (150%) | WEIGHT | RESULT | SAFETY PERFORMANCE MODIFIER (+/- 10%) | BONUS POOL PAYOUT | | Aviation Services | Free Cash Flow ($M)* | | | | | 150% | -5% | 104% | | | Organic Margin Expansion (bps)* | | | | | 51% | | | | | Organic Revenue Growth* | | | | | 87% | | |
A TYPICAL GE BOARD MEETING
| Non-GAAP Financial Measure. For information on how these metrics are calculated, see “Explanation of Non-GAAP Financial Measures and Performance Metrics” on page 75.* | | The company does not report free cash flow, organic margin expansion or organic revenue growth metrics at the sub-segment level for Aviation Services.** |
A TYPICAL GE BOARD MEETING
| | AEIP POOL FINANCIAL PERFORMANCE METRICS | THRESHOLD (50%) | TARGET (100%) | MAXIMUM (150%) | WEIGHT | RESULT | SAFETY PERFORMANCE MODIFIER (+/- 10%) | BONUS POOL PAYOUT | | Healthcare | Free Cash Flow ($M)* | | | | | 131% | | | | | Organic Margin Expansion (bps)* | | | | | 104% | +5% | 100% | | | Organic Revenue Growth* | | | | | 61% | | |
A TYPICAL GE BOARD MEETING
| | AEIP POOL FINANCIAL PERFORMANCE METRICS | THRESHOLD (50%) | TARGET (100%) | MAXIMUM (150%) | WEIGHT | RESULT | SAFETY PERFORMANCE MODIFIER (+/- 10%) | BONUS POOL PAYOUT | | Renewable Energy | Free Cash Flow ($M)* | | | | | 0% | | | | | Organic Margin Expansion (bps)* | | | | | 0% | -10% | No Payout | | | Organic Revenue Growth* | | | | | 0% | | |
A TYPICAL GE BOARD MEETING
| | AEIP POOL FINANCIAL PERFORMANCE METRICS** | THRESHOLD (50%) | TARGET (100%) | MAXIMUM (150%) | WEIGHT | RESULT | SAFETY PERFORMANCE MODIFIER (+/- 10%) | BONUS POOL PAYOUT | | Gas Power | Free Cash Flow ($M)* | | | | | 150% | | | | | Organic Margin Expansion (bps)* | | | | | 60% | -5% | 122% | | | Organic Revenue Growth* | | | | | 150% | | | | Steam, Power Conversion and Nuclear | Free Cash Flow ($M)* | | | | | 136% | | | | | Organic Margin Expansion (bps)* | | | | | 50% | +5% | 107% | | | Organic Revenue Growth* | | | | | 88% | | |
A TYPICAL GE BOARD MEETING
| Non-GAAP Financial Measure. For information on how these metrics are calculated, see “Explanation of Non-GAAP Financial Measures and Performance Metrics” on page 75.* | | The company does not report free cash flow, organic margin expansion or organic revenue growth metrics at the sub-segment level within the Power business.** |
A TYPICAL GE BOARD MEETING
Overview of Long-Term Incentive Compensation As part of our annual compensation program we use a mix of long-term incentive compensation awards: Performance Stock Units (PSUs), Restricted Stock Units (RSUs) and stock options. HOW WE DETERMINE AWARD AMOUNTS. In determining award amounts, the committee evaluates each executive’s overall compensation relative to the market for similar talent, the mix of cash versus equity as a percentage of the executive’s overall compensation, the executive’s expected future contribution to the success of the company and the retentive value of such awards. In 2021, our annual equity incentive awards for senior executives other than Mr. Culp (who only received PSUs) were weighted approximately 50% as PSUs, 30% as stock options and 20% as RSUs. WE USE PSUs TO ALIGN PAY WITH PERFORMANCE. We see PSUs as a means to focus our named executives on particular goals, including long-term operating goals. Consistent with this philosophy, in recent years we have expanded the number of senior leaders receiving PSU awards to drive greater alignment between these executives and shareholders. PSUs have formulaically determined payouts that are earned only if the company achieves specified performance goals. PSUs reward and retain the named executives by offering them the opportunity to receive GE stock if the performance goals are achieved and if they are still employed by us on the date the restrictions lapse. OUR CEO’S LONG-TERM INCENTIVE AWARDS ARE ENTIRELY PERFORMANCE-BASED. Since he was hired in 2018, all of Mr. Culp’s equity awards have been in the form of performance-based equity, as agreed in his employment agreement. By granting Mr. Culp solely performance-based equity, the committee has put more of Mr. Culp’s compensation at risk, providing him with increased incentive to drive longer-term improvements in the business. WHY WE USE STOCK OPTIONS AND RSUs. We believe that stock options and RSUs effectively focus our named executives on delivering long-term value to our shareholders. Options have value only to the extent that the price of GE stock rises between the grant date and the exercise date. RSUs reward and retain the named executives by offering them the opportunity to receive GE stock if they are still employed by the company on the date the restrictions lapse. OUR POLICY ON DIVIDEND EQUIVALENTS. With respect to PSUs, performance shares and RSUs, dividend equivalents or dividends, as applicable, are paid out only on shares actually received. 2019 PSUs HAD NO PAYOUT. The annual PSUs granted to the named executives in 2019 could convert into shares of GE stock at the end of the approximately three-year performance period based on GE’s Total Shareholder Return (TSR) versus the S&P 500 Index, from the beginning of the performance period of March 19, 2019 through December 31, 2021. The company did not meet this performance goal, and accordingly the committee, in February 2022, cancelled all 2019 PSUs with no payout, including for Messrs. Culp, Murphy and Stokes.
A TYPICAL GE BOARD MEETING
| | | | (2019-2021) | | | | | 2019 PSU PERFORMANCE GOAL | HOW MEASURED | WEIGHTING | THRESHOLD EARN 25% | TARGET EARN 100% | MAXIMUM EARN 175% | RESULT | | Relative TSR | Cumulative GE TSR vs. S&P 500 Index | 100% | | | | No Payout |
A TYPICAL GE BOARD MEETING
2020 PSUs. The annual PSUs granted to the named executives in 2020 had similar terms to those that were granted to all executives in 2019, with an approximately three-year performance period based on GE’s TSR versus the S&P 500 Industrial Index. The S&P 500 Industrial Index performance metric represents a more tailored group of industry peers as compared to the S&P 500 Index, which was used in prior years. 2021 PSUs. The annual PSUs granted to the named executives in 2021 could convert into shares of GE stock at the end of the three-year performance period based on performance under GE’s one-year 2021 adjusted Earnings per Share (50% weighting) and Free Cash Flow (50% weighting) targets and modification of +/- 20% based on three-year relative TSR versus the S&P 500 Industrials Index, with proportional adjustment for performance between threshold, target and maximum. Performance below threshold against the one-year adjusted Earnings per Share and Free Cash Flow results in no PSUs being earned. The named executives may receive between 0% and 175% of the target number of PSUs granted. The committee selected the 2021 PSU metrics of Earnings per Share and Free Cash Flow to add operating metrics to the PSU design, rather than using only relative TSR as in prior years. The committee chose these operating metrics to incentivize and focus management on both profitability and cash generation, and these continue to be important financial priorities as we execute on our plan to form three independent companies. The use of a one-year performance period for Earnings per Share and Free Cash Flow reflects variability in these metrics and the challenges of setting long-term financial targets in the face of difficult macroeconomic conditions. 2021 RSUs AND STOCK OPTIONS. The annual RSUs and stock options granted in 2021 will vest in two equal installments on the second and third anniversary of the grant date. Compensation Actions for 2021
A TYPICAL GE BOARD MEETING
| ● | Salary. Upon his appointment as CEO, Mr. Culp’s salary was set at $2,500,000 under his 2018 employment agreement and (other than certain forfeitures of his salary in 2020 in connection with the COVID-19 pandemic), has not changed. | | ● | Bonus. Mr. Culp’s bonus target is set at 150% of salary and has not changed since his appointment as CEO. | | ● | Annual equity awards. Under the terms of his employment agreement, Mr. Culp was granted a PSU award in March 2021 with a grant date fair value of $15 million. For more information on the PSUs awarded in March 2021, see “Overview of Long-Term Incentive Compensation – 2021 PSUs” on page 32. | | ● | Leadership Performance Share Award. On August 18, 2020, the Board approved a one-time equity performance grant to Mr. Culp, which was intended to ensure retention of Mr. Culp for a longer period of time than he had originally agreed to when he became CEO. The grant provides strong retention incentives through 2024. During 2021, the Board conducted a rigorous portfolio and business strategy review, culminating in the announcement of a plan for two spin-offs—creating three new companies from the current GE businesses. In connection with the anticipated spin-offs, Mr. Culp’s Performance Share award is aligned with shareholders, and achievement of the performance goal will also factor in the performance of spun-off securities from the spin date. |
A TYPICAL GE BOARD MEETING
| NAME & PRINCIPAL POSITION | YEAR | SALARY | BONUS | STOCK AWARDS | STOCK OPTIONS | CHANGE IN PENSION VALUE & DEFERRED COMP. | ALL OTHER COMP | SEC TOTAL | | H. Lawrence Culp, Jr. | 2021 | $2,500,000 | $4,200,000 | $14,999,996 | $0 | $943,153 | $20,300 | $22,663,449 | | Chairman & CEO | 2020 | $653,409 | $0 | $72,054,874 | $0 | $463,799 | $19,950 | $73,192,032 | | | 2019 | $2,500,000 | $5,600,000 | $15,465,000 | $0 | $969,188 | $19,600 | $24,553,788 | | Carolina Dybeck Happe* | 2021 | $1,500,000 | $2,100,000 | $3,602,609 | $1,499,998 | $351,465 | $1,415,986 | $10,470,058 | | SVP & CFO | 2020 | $1,250,000 | $1,325,000 | $10,415,106 | $9,500,003 | $246,010 | $1,032,906 | $23,769,025 | | John Slattery* | 2021 | $1,250,000 | $1,337,500 | $4,323,123 | $1,799,998 | $292,217 | $451,616 | $9,454,454 | | SVP, GE & CEO Aviation | 2020 | $588,768 | $1,375,000** | $2,097,221 | $2,399,998 | $87,815 | $4,685,336 | $11,234,138 | | Russell Stokes | 2021 | $1,400,000 | $1,456,000 | $2,521,819 | $1,050,001 | $2,733 | $89,211 | $6,519,764 | | SVP, GE & CEO Aviation Services | 2020 | $1,400,000 | $1,300,000 | $7,267,127 | $1,050,002 | $5,919,977 | $89,573 | $17,026,679 | | | 2019 | $1,400,000 | $2,000,000 | $2,517,550 | $1,050,019 | $3,494,084 | $54,769 | $10,516,422 | | Kieran Murphy*** | 2021 | $1,273,148 | $1,273,148 | $3,602,609 | $1,499,998 | $166,364 | $79,081 | $7,894,348 | | Former SVP, GE & | 2020 | $1,186,657 | $1,699,805 | $8,291,656 | $1,500,002 | $338,157 | $64,175 | $13,080,452 | | CEO Healthcare | 2019 | $1,125,210 | $1,532,201 | $2,517,550 | $1,050,019 | $266,876 | $57,877 | $6,549,733 |
A TYPICAL GE BOARD MEETING
| OUTSTANDING EQUITY AWARDS TABLE | | | | | | | | | | NAME OF EXECUTIVE | GRANT DATE | AWARD TYPE | NUMBER OUTSTANDING | PORTION EXERCISABLE | EXERCISE PRICE | EXPIRATION DATE | MARKET VALUE | VESTING SCHEDULE | | Culp | 3/19/2019 | PSUs | 46,875 | | | | $4,428,281 | 100% in 2022, subject to performance | | | 3/2/2020 | PSUs | 41,392 | | | | $3,910,302 | 100% in 2023, subject to performance | | | 8/18/2020 | Performance Shares | 1,742,878 | | | | $164,649,685 | 100% in 2024, subject to performance | | | 3/1/2021 | PSUs | 256,429 | | | | $24,224,848 | 100% in 2024, subject to performance | | Total | | | 2,087,574 | | | | $197,213,116 | | | Dybeck | 3/2/2020 | Options | 257,732 | 0 | $89.68 | 3/2/2030 | $1,234,536 | 100% in 2024 | | Happe | 3/2/2020 | Options | 51,090 | 0 | $89.68 | 3/2/2030 | $244,721 | 50% in 2022 and 2023 | | | 3/2/2020 | PSUs | 6,899 | | | | $651,749 | 100% in 2023, subject to performance | | | 3/2/2020 | RSUs | 10,205 | | | | $964,066 | 50% in 2022 and 2023 | | | 9/3/2020 | PSUs | 205,110 | | | | $19,376,742 | 50% in 2024 and 2025, | | | | | | | | | | subject to performance | | | 3/1/2021 | Options | 36,266 | 0 | 104.88 | 3/1/2031 | $0 | 50% in 2023 and 2024 | | | 3/1/2021 | PSUs | 42,739 | | | | $4,037,553 | 100% in 2024, subject to performance | | | 3/1/2021 | RSUs | 10,513 | | | | $993,163 | 50% in 2023 and 2024 | | Total | | | 620,554 | 0 | | | $27,502,530 | | | Slattery | 7/13/2020 | Options | 67,446 | 22,482 | $53.60 | 7/13/2030 | $2,756,518 | 50% in 2022 and 2023 | | | 9/2/2020 | Options | 42,938 | 0 | $51.52 | 9/2/2030 | $1,844,187 | 50% in 2022 and 2023 | | | 9/2/2020 | RSUs | 11,592 | | | | $1,095,096 | 50% in 2022 and 2023 | | | 9/2/2020 | PSUs | 20,334 | | | | $1,920,953 | 100% in 2023, subject to performance | | | 3/1/2021 | Options | 43,520 | 0 | $104.88 | 3/1/2031 | $0 | 50% in 2023 and 2024 | | | 3/1/2021 | PSUs | 51,286 | | | | $4,844,988 | 100% in 2024, subject to performance | | | 3/1/2021 | RSUs | 12,616 | | | | $1,191,834 | 50% in 2023 and 2024 | | Total | | | 249,732 | 22,482 | | | $13,653,576 | | | Stokes | 9/7/2012 | Options | 14,306 | 14,306 | $166.08 | 9/7/2022 | $0 | | | | 9/13/2013 | Options | 16,256 | 16,256 | $182.88 | 9/13/2023 | $0 | | | | 9/5/2014 | Options | 32,512 | 32,512 | $200.72 | 9/5/2024 | $0 | | | | 9/11/2015 | Options | 15,216 | 15,216 | $191.92 | 9/11/2025 | $0 | | | | 9/9/2016 | Options | 19,508 | 19,508 | $231.60 | 9/9/2026 | $0 | | | | 2/10/2017 | RSUs | 1,041 | | | | $98,343 | 100% in 2022 | | | 9/6/2017 | Options | 26,010 | 20,808 | $191.68 | 9/6/2027 | $0 | 100% in 2022 | | | 9/6/2017 | RSUs | 729 | | | | $68,869 | 100% in 2022 | | | 1/29/2018 | Options | 65,024 | 65,024 | $125.20 | 1/29/2028 | $0 | | | | 3/19/2019 | Options | 36,972 | 18,486 | $81.52 | 3/19/2029 | $478,787 | 100% in 2022 | | | 3/19/2019 | RSUs | 4,375 | | | | $413,306 | 100% in 2022 | | | 3/19/2019 | PSUs | 5,469 | | | | $516,656 | 100% in 2022, subject to performance | | | 3/2/2020 | Options | 35,763 | 0 | $89.68 | 3/2/2030 | $171,305 | 50% in 2022 and 2023 | | | 3/2/2020 | PSUs | 4,829 | | | | $456,196 | 100% in 2023, subject to performance | | | 3/2/2020 | RSUs | 7,143 | | | | $674,799 | 50% in 2022 and 2023 | | | 9/3/2020 | RSUs | 96,451 | | | | $9,111,726 | 50% in 2023 and 2024 | | | 3/1/2021 | Options | 25,386 | 0 | $104.88 | 3/1/2031 | $0 | 50% in 2023 and 2024 | | | 3/1/2021 | PSUs | 29,918 | | | | $2,826,353 | 100% in 2024, subject to performance | | | 3/1/2021 | RSUs | 7,360 | | | | $695,299 | 50% in 2023 and 2024 | | Total | | | 444,268 | 202,116 | | | $15,511,639 | |
A TYPICAL GE BOARD MEETING
| NAME OF EXECUTIVE | GRANT DATE | AWARD TYPE | NUMBER OUTSTANDING | PORTION EXERCISABLE | EXERCISE PRICE | EXPIRATION DATE | MARKET VALUE | VESTING SCHEDULE | | Murphy | 9/7/2012 | Options | 13,005 | 13,005 | $166.08 | 9/7/2022 | $0 | | | | 9/13/2013 | Options | 10,404 | 10,404 | $182.88 | 9/13/2023 | $0 | | | | 9/5/2014 | Options | 243 | 243 | $200.72 | 9/5/2024 | $0 | | | | 9/5/2014 | Options | 12,762 | 12,762 | $200.72 | 9/5/2024 | $0 | | | | 9/11/2015 | Options | 16,256 | 16,256 | $191.92 | 9/11/2025 | $0 | | | | 9/30/2016 | Options | 19,508 | 19,508 | $227.76 | 9/30/2026 | $0 | | | | 2/10/2017 | RSUs | 651 | | | | $61,500 | 100% in 2022 | | | 6/9/2017 | RSUs | 6,503 | | | | $614,338 | 100% in 2022 | | | 9/6/2017 | Options | 19,508 | 15,607 | $191.68 | 9/6/2027 | $0 | 100% in 2022 | | | 9/6/2017 | RSUs | 547 | | | | $51,675 | 100% in 2022 | | | 1/29/2018 | Options | 65,024 | 65,024 | $125.20 | 1/29/2028 | $0 | 100% in 2021 | | | 3/19/2019 | Options | 36,972 | 18,486 | $81.52 | 3/19/2029 | $478,787 | 100% in 2022 | | | 3/19/2019 | RSUs | 4,375 | | | | $413,306 | 100% in 2022 | | | 3/19/2019 | PSUs | 5,469 | | | | $516,656 | 100% in 2022, subject to performance | | | 3/2/2020 | Options | 51,090 | 0 | $89.68 | 3/2/2030 | $244,721 | 50% in 2022 and 2023 | | | 3/2/2020 | PSUs | 6,899 | | | | $651,749 | 100% in 2023, subject to performance | | | 3/2/2020 | RSUs | 10,205 | | | | $964,066 | 50% in 2022 and 2023 | | | 9/3/2020 | RSUs | 96,451 | | | | $9,111,726 | 50% in 2023 and 2024 | | | 3/1/2021 | Options | 36,266 | 0 | $104.88 | 3/1/2031 | $0 | 50% in 2023 and 2024 | | | 3/1/2021 | PSUs | 42,739 | | | | $4,037,553 | 100% in 2024, subject to performance | | | 3/1/2021 | RSUs | 10,513 | | | | $993,163 | 50% in 2023 and 2024 | | Total | | | 465,390 | 171,295 | | | $18,139,240 | |
A TYPICAL GE BOARD MEETING
MARKET VALUE. The market value of RSUs, Performance Shares and PSUs is calculated by multiplying the closing price of GE stock as of December 31, 2021 ($94.47) (the last trading day for the year) by the number of shares underlying each award. With respect to the Leadership Performance Shares granted to Mr. Culp on August 18, 2020 and the Leadership PSUs granted to Ms. Dybeck Happe on September 3, 2020, this value assumes satisfaction of the maximum-level payout for the awards, representing the achievement of goals delivering significant shareholder returns. With respect to the 2019 PSUs (which were cancelled without any payouts) and the other 2020 PSUs granted, this value assumes satisfaction of the threshold-level payout for the awards, and with respect to the 2021 PSUs, this value assumes satisfaction of the maximum-level payout for the awards. For options, the market value is calculated by multiplying the number of shares underlying each award by the spread between the award’s exercise price and the closing price of GE stock as of December 31, 2021. Vesting Schedule Options vest on the anniversary of the grant date in the years shown in the table. See “Potential Termination Payments” on page 45 regarding other vesting events. RSUs vest on the anniversary of the grant date in the years shown in the table. See “Potential Termination Payments” on page 45 regarding other vesting events. Leadership Performance Shares and Leadership PSUs vest on the anniversary of the grant date in the years shown in the table, solely to the extent that the performance conditions have been achieved. The Leadership Performance Shares and Leadership PSUs are also subject to accelerated vesting upon a change of control, termination other than for cause, or good leaver termination. See “Potential Termination Payments” on page 45 for additional details regarding this acceleration. Other PSUs vest at the beginning of the year indicated when the committee certifies that the performance conditions have been achieved, unless otherwise stated. The 2019 PSU grants, the 2020 PSU grants (other than the Leadership PSUs granted to Ms. Dybeck Happe) and the 2021 PSU grants are also subject to a one-year holding requirement, regardless of whether the executive has met his or her stock ownership requirements. For further detail on the terms and conditions of the PSU awards, see “Overview of Long-Term Incentive Compensation” on page 32. Option Exercises and Stock Vested Table The following table shows the number of shares the named executives acquired and the values they realized upon the vesting of RSUs during 2021. During the year, none of the named executives exercised stock options and none of them had PSU or performance share awards that were earned, and only Messrs. Stokes and Murphy had RSUs that vested. Values are shown before payment of any applicable withholding taxes or brokerage commissions. Executives that remain employed by GE are required to hold the stock that they receive following the exercise of stock options (less those shares that are withheld to satisfy the exercise price and pay taxes) for a year following exercise. Similarly, continuing executives cannot sell stock they receive as the result of the vesting of RSUs or PSUs until they have satisfied their stock ownership requirement. See “Stock Ownership and Equity Grant Policies” on page 49. The 2020 PSU grants (other than the Leadership PSUs granted to Ms. Dybeck Happe) and the 2021 PSU grants are also subject to a one-year holding requirement, regardless of whether the executive has met his or her stock ownership requirements.
A TYPICAL GE BOARD MEETING
| | OPTION AWARDS | | PSUs & RSUs* | | | NAME | NUMBER OF SHARES ACQUIRED ON EXERCISE | VALUE REALIZED ON EXERCISE | NUMBER OF SHARES ACQUIRED ON VESTING | VALUE REALIZED ON VESTING | | Culp | 0 | $0 | 0 | $0 | | Dybeck Happe | 0 | $0 | 0 | $0 | | Slattery | 0 | $0 | 0 | $0 | | Stokes | 0 | $0 | 11,723 | $1,198,294 | | Murphy | 0 | $0 | 10,774 | $1,110,410 |
A TYPICAL GE BOARD MEETING
| Subject to stock ownership requirement for continuing executives; dollar amount represents pre-tax value on vesting.* |
A TYPICAL GE BOARD MEETING
Equity Compensation Plan Information The following table provides information regarding outstanding equity awards and shares available for future issuance under all of GE’s equity plans. The number of shares available for future issuance increased compared to the prior year, primarily due to the expiration of unexercised stock options that had an exercise price above our stock price in recent years, and the forfeiture of unvested equity awards upon employee departures, each of which were returned to the pool. Where applicable, the number of shares and weighted average exercise prices reported in this table have been adjusted to reflect the one-for-eight reverse stock split effective July 30, 2021.
A TYPICAL GE BOARD MEETING
| (IN THOUSANDS EXCEPT PER SHARE $ AMOUNTS, AS OF 12/31/2021) | SHARES TO BE ISSUED UPON EXERCISE OR SETTLEMENT | WEIGHTED AVERAGE EXERCISE PRICE | SHARES AVAILABLE FOR FUTURE ISSUANCE | | Plans approved by shareholders (2007 LTIP) | | | | | Options | 38,407 | $144.97 | (a) | | RSUs | 8,057 | (b) | (a) | | PSUs | 2,053 | (b) | (a) | | Performance Shares | 1,162 | | | | Plans not approved by shareholders (Consultants’ Plan) | | | | | Options | 7 | $182.16 | (c) | | RSUs | - | (b) | (c) | | Total | 49,686 | $144.97 | 43,412 |
A TYPICAL GE BOARD MEETING
| Total shares available for future issuance under the 2007 Long-Term Incentive Plan (the 2007 LTIP) amounted to 43 million shares as of December 31, 2021. Of the 134 million shares approved under the 2007 LTIP, no more than 28.75 million may be available for awards granted in any form other than options or stock appreciation rights.(a) | | Not applicable.(b) | | Total shares available for future issuance under the GE Stock-Based Compensation and Incentive Plan for Consultants, Advisors and Independent Contractors (the Consultants’ Plan) amounted to 0.5 million shares at December 31, 2021.(c) |
A TYPICAL GE BOARD MEETING
Deferred Compensation We offer certain deferred compensation programs and arrangements for executives. Bonus Deferrals ELIGIBILITY AND DEFERRAL OPTIONS. U.S. employees in our executive band and above, including the named executives, can elect to defer all or a portion of their annual bonus payment and be credited with earnings on those deferrals under the options shown below. Participants may change their earnings option up to four times per year. The company makes all decisions regarding the earnings options that are offered and the measures for calculating earnings under those options. TIME AND FORM OF PAYMENT. Participants can elect to receive their deferred amounts upon separation from service either in a lump sum or in 10 to 20 annual installments. Participants may not withdraw any deferred amounts prior to separating from service.
A TYPICAL GE BOARD MEETING
| EARNINGS OPTION | TYPE OF EARNINGS | ACCOUNT BALANCE FOR EARNINGS CALCULATION | EARNINGS AMOUNT* | WHEN EARNINGS CREDITED | | GE Stock Units (based on GE stock value) S&P 500 Index Units (based on S&P 500) | Dividend- equivalent income | Units in account on NYSE ex-dividend date | Quarterly dividend declared for GE stock or the S&P 500, as applicable | Quarterly | | Deferred Cash Units (cash units) | Interest income | Daily outstanding account balance | Prior calendar month’s average yield for U.S. Treasury Notes and Bonds issued with maturities of 10 years and 20 years | Monthly |
A TYPICAL GE BOARD MEETING
| None of the bonus deferral options provide for “above-market interest” as defined by the SEC.* |
A TYPICAL GE BOARD MEETING
Salary Deferrals ELIGIBILITY. In prior years, we periodically offered eligible employees in our executive band and above the opportunity to defer their salary payments (the last such plan was offered in 2010 for 2011 salary). Individuals who were named executives at the time a deferred salary program was offered were not eligible to participate. Among our named executives, only Mr. Stokes has participated in salary deferral program. INTEREST INCOME. These programs provide accrued interest on deferred amounts (including an above-market interest rate as defined by the SEC) ranging from 6% to 14% compounded annually. TIME AND FORM OF PAYMENT. Our deferred salary programs have required participants to elect, before the salary was deferred, to receive deferred amounts either in a lump sum or in 10 to 20 annual installments. Participants may not withdraw any deferred amount prior to separating from service. GE Restoration Plan ELIGIBILITY. U.S. employees who become U.S. executives on or after January 1, 2021 accrue benefits under the GE Restoration Plan, instead of any benefits under the GE Supplementary Pension Plan (including the Executive Retirement Benefit) (see “Pension Benefits” on page 43 for information regarding the GE Supplementary Pension Plan). As of December 31, 2021 none of our named executives received benefits under the Restoration Plan. BENEFIT FORMULA. GE Restoration Plan participants are credited with 7% of their annual earnings, which include base salary and up to one-half of eligible bonus payments, that exceed the IRS-prescribed limit applicable to tax-qualified plans ($290,000 for 2021). EARNINGS OPTIONS AND VESTING. The annual credits are notionally invested as elected by the participant in earnings options that mirror the investment options available under the broad-based tax qualified GE RSP. Participants may change their election up to 12 times per quarter. The company makes all decisions regarding the earnings options that are offered and the measures for calculating earnings under those options. Earnings are currently credited daily. Participants generally vest in their Restoration Plan accounts after 3 years of service. TIME AND FORM OF PAYMENT. Vested amounts under the Restoration Plan are paid in a lump sum, generally in July of the year following the year of the participant’s separation from service. Nonqualified Deferred Compensation Table The table below shows amounts credited to the named executives’ accounts under nonqualified deferred compensation plans and plan balances as of December 31, 2021. No withdrawals or distributions from these plans were made in 2021.
A TYPICAL GE BOARD MEETING
| | EXECUTIVE CONTRIBUTIONS IN 2021 | AGGREGATE EARNINGS IN LAST FISCAL YEAR | | AGGREGATE EARNINGS AT LAST FISCAL YEAR-END | | | NAME | | DEFERRED BONUS PROGRAM | DEFERRED SALARY PROGRAM | DEFERRED BONUS PROGRAM | DEFERRED SALARY PROGRAM | | Culp | $0 | $460,728 | N/A | $2,069,900 | N/A | | Dybeck Happe | $0 | $0 | N/A | $0 | N/A | | Slattery | $0 | $0 | N/A | $0 | N/A | | Stokes | $0 | $59 | $7,567 | $3,610 | $96,589 | | Murphy | $0 | $0 | N/A | $0 | N/A |
A TYPICAL GE BOARD MEETING
EXECUTIVE CONTRIBUTIONS IN 2021. Amounts represent compensation deferred during 2021. This column does not reflect any 2021 compensation in the Summary Compensation Table on page 36 which was credited to the named executive’s deferred account, if any, in 2022. AGGREGATE EARNINGS IN 2021. Reflects earnings on each type of deferred compensation listed in this section that were credited to the named executive’s deferred compensation account during 2021. The earnings may be positive or negative, depending on the named executive’s investment choice, and are calculated based on: the account balance attributable to each earnings option as of December 31, 2021; minus that amount as of December 31, 2020; minus any contributions during the year. See the Summary Compensation Table on page 36 for the above-market portion of these earnings in 2021. AGGREGATE BALANCE AT DECEMBER 31, 2021. The fiscal year-end balance reported in the table above includes $1.4 million for Mr. Culp that was previously reported in the Summary Compensation Table as 2019 compensation; $2,519 for Mr. Stokes that was not previously reported in the Summary Compensation Table as 2020 compensation; and $2,322 for Mr. Stokes that was previously reported on the Summary Compensation Table as 2019 compensation. Pension Benefits The company provides retirement benefits to certain named executives based in the United States under the same GE Pension Plan and GE Supplementary Pension Plan in which other eligible U.S. employees participate. The GE Pension Plan is a funded, tax-qualified plan. The Supplementary Pension Plan is an unfunded, unsecured obligation of the company and is not qualified for tax purposes. Mr. Murphy participates in the UK Pension Plan on the same terms as other UK-based eligible employees. GE Pension Plan ELIGIBILITY AND VESTING. The GE Pension Plan is a broad-based retirement program for U.S.-based employees that has been closed to new participants since 2012 (2011 for salaried new hires). Employees who began working at GE after the plan was closed, including Messrs. Culp and Slattery and Ms. Dybeck Happe, are not eligible for this plan. Those employees who are eligible generally vest in the plan after five years of qualifying service. The plan also requires employee contributions, which vest immediately. Effective January 1, 2021, participants with salaried benefits stopped accruing benefits (and making contributions) under this plan and became eligible for the automatic contributions available to new hires under the GE RSP equaling 3% of eligible pay (up to the caps imposed under IRS rules), plus two years of transition credits equaling 2% of eligible pay per year. BENEFIT FORMULA. For Mr. Stokes, the plan provides benefits based primarily on a formula that takes into account his earnings for each fiscal year (through 2020). Since 1989, this formula has provided an annual benefit accrual equal to 1.45% of a named executive’s earnings for the year up to covered compensation and 1.9% of his or her earnings for the year in excess of covered compensation. “Covered compensation” was $60,000 for 2020 and has varied over the years based in part on changes in the Social Security taxable wage base. For purposes of the formula, annual earnings include base salary and up to one-half of bonus payments, but may not exceed an IRS-prescribed limit applicable to tax-qualified plans ($285,000 for 2020). As a result, the maximum incremental annual benefit a named executive could have earned for service in 2020 was $5,145, and in 2021 was $0 due to the stoppage of accruals. Over the years, we have made special one-time adjustments to this plan that increased eligible participants’ pensions, but no adjustment was made in 2021. TIME AND FORM OF PAYMENT. The accumulated benefit an employee earns is payable after retirement on a monthly basis for life with a guaranteed minimum benefit of five years. The normal retirement age as defined in this plan is 65; however, employees who began working at GE prior to 2005, including Mr. Stokes, may retire at age 60 without any reduction in benefits. In addition, the plan provides for Social Security supplements and spousal joint and survivor annuity options. TAX CODE LIMITATIONS ON BENEFITS. The tax code limits the benefits payable under the GE Pension Plan. For 2021, the maximum single life annuity a named executive could have received under these limits was $230,000 per year. This ceiling is actuarially adjusted in accordance with IRS rules to reflect employee contributions, actual forms of distribution and actual retirement dates. GE Supplementary Pension Plan ELIGIBILITY AND VESTING. The GE Supplementary Pension Plan is an unfunded and non-tax-qualified retirement program that provides retirement benefits to eligible U.S.-based employees in the executive band and above, including the named executives. Employees generally must remain continuously employed until age 60 in order to vest in a benefit under the plan. For those who became U.S. executives prior to January 1, 2011, including Mr. Stokes, the plan provides an annuity benefit above amounts available under the GE Pension Plan (a “Supplementary Pension benefit”). For those who became U.S. executives on or after January 1, 2011 (and before January 1, 2021), including Messrs. Culp and Slattery and Ms. Dybeck Happe, the plan provides a retirement benefit paid in 10 annual installments (an “Executive Retirement Benefit”). Effective January 1, 2021, participants eligible for the Supplementary Pension benefit, including Mr. Stokes, stopped accruing that benefit and began accruing an Executive Retirement Benefit for their future credited service. The Executive Retirement Benefit was also closed to new participants and, effective January 1, 2021, new and rehired U.S. executives are instead participating in the Restoration Plan (described above). Supplementary Pension Benefit BENEFIT FORMULA. A named executive’s annual Supplementary Pension benefit, when combined with certain amounts payable under the company’s other pension programs and Social Security, will equal 1.75% of his or her “earnings credited for retirement benefits” multiplied by the number of years of credited service (through 2020), up to a maximum of 60% of such earnings credited for retirement benefits. The “earnings credited for retirement benefits” are the named executive’s average annual compensation (base salary and bonus) for the highest 36 consecutive months out of the last 120 months prior to retirement (or December 31, 2020, if earlier). TIME AND FORM OF PAYMENT. The Supplementary Pension benefit would be provided to eligible employees, including Mr. Stokes, after retirement as monthly payments for life (with a guaranteed minimum benefit of five years), and could not be received in a lump sum. The plan also provides for spousal joint and survivor annuity options. The normal retirement age under the plan is 65; however, executives eligible for this benefit who began working at GE prior to 2005, including Mr. Stokes, may retire at age 60 without any reduction in benefits. Executive Retirement Benefit BENEFIT FORMULA. A named executive’s Executive Retirement Benefit will equal 18% of his or her earnings credited for retirement benefits for each year of credited service as a GE Officer, plus 14% of such earnings for each year of credited service as an Executive Director or Senior Executive Director and 10% of such earnings for each year of credited service as an Executive. The “earnings credited for retirement benefits” are the named executive’s average annual compensation (base salary and bonus) for the highest 36 consecutive months out of the last 120 months prior to retirement.
A TYPICAL GE BOARD MEETING
TIME AND FORM OF PAYMENT. The Executive Retirement Benefit would be provided to Messrs. Culp and Slattery and Ms. Dybeck Happe after retirement as 10 equal annual installment payments, and could not be received in a lump sum. Mr. Stokes also began accruing an Executive Retirement Benefit beginning January 1, 2021, when he stopped accruing additional Supplementary Pension benefits. Executives eligible for this benefit may retire at age 60, but are subject to a reduction in benefits of up to 25% for retirement prior to age 65. GE Excess Benefits Plan ELIGIBILITY. The GE Excess Benefits Plan is an unfunded and non-tax-qualified retirement program that is offered to employees whose benefits under the GE Pension Plan are limited by certain tax code provisions. Beginning January 1, 2021, no further benefit accruals are permitted for any participants under this plan. BENEFIT FORMULA. Benefits payable under this plan are equal to the amount that would be payable under the terms of the GE Pension Plan disregarding the limitations imposed by certain tax code provisions minus the amount actually payable under the GE Pension Plan taking those limitations into account. TIME AND FORM OF PAYMENT. Benefits are generally payable at the same time and in the same manner as a participant’s GE Pension Plan benefits. GE UK Pension Plan ELIGIBILITY. The UK GE Pension Plan is a broad-based, tax registered and qualified pension program for U.K.-based employees that has been closed to new participants since 2011. Those employees of GE who are eligible to participate in the plan vest after two years of pensionable service. The plan requires employee contributions (which are refunded if pensionable service does not meet vesting requirements). Effective January 1, 2022, participants stopped accruing benefits and making contributions under this plan (subject to certain statutorily required increases), and became eligible for a core annual employer contribution under the GE Pension Saver defined contribution plan equaling 10-25% of base salary, plus two years of transition credits equaling 2% of base salary (each up to statutory caps). Mr. Murphy is the only named executive who participates in this plan. BENEFIT FORMULA. The UK GE Pension Plan offers two accrual rates (1/60ths and 1/80ths) applied to final pensionable pay, which is defined as the annual average of the highest three complete years’ base salary only, less an initial offset in respect of salary subject to social security retirement benefits, and capped at a plan earnings cap. Both indices are updated and released by Her Majesty’s Revenue and Customs (HMRC) each new tax year. Credit is awarded on this formula for every whole month earned under the plan as pensionable service. The accrual is monitored for tax purposes on an annual basis and an annual allowance is set according to earnings. Tax relief on the pension accrual is provided only up to an individual limit falling between £4,000 and £40,000. Pension contributions in excess of this individual limit result in tax at applicable individual rates. All GE employees who were in the executive band and above and members of the UK GE Pension Plan when it was closed to new entrants, including Mr. Murphy, are entitled to accrue additional benefits on a special defined contribution basis. Under these additional benefit provisions, Mr. Murphy is entitled to an annual GE cash contribution of 25% of eligible earnings each year. TIME AND FORM OF PAYMENT. The UK GE Pension Plan pays out the accumulated benefit after retirement on a monthly basis for life with a guaranteed minimum benefit of five years. The normal retirement age under the plan is 65; however, certain employees with special benefits, may, in accordance with a longstanding discretionary practice, retire at age 60 without any reduction in benefits. Mr. Murphy is not eligible for such unreduced early retirement under this plan. In addition, the plan provides for social security supplements and a spousal annuity. TAX CODE LIMITATIONS ON BENEFITS. Benefits from the UK GE Pension Plan are subject to the Lifetime Allowance which measures individual pension accruals/contributions against an overall limit that is updated and released by HMRC each new tax year. For 2021, this limit was £1,073,100. Pension Benefits Table The table below shows the present value of the accumulated benefit as of December 31, 2021 for the named executives under each plan, as calculated based upon the assumptions described below. Although SEC rules require us to show this present value, the named executives are not entitled to receive these amounts in a lump sum. None of the named executives received a payment under these plans in 2021.
A TYPICAL GE BOARD MEETING
| | | PRESENT VALUE OF ACCUMULATED BENEFIT | | | | | | | | | | | EXECUTIVE | EXCESS | UK | PAYMENT | | | NUMBER OF YEARS | PENSION | SUPPLEMENTARY | RETIREMENT | BENEFITS | PENSION | DURING LAST | | NAME | CREDITED SERVICE | PLAN | PENSION PLAN | BENEFIT | PLAN | PLAN | FISCAL YEAR | | Culp | 3 | N/A | N/A | $2,462,802 | N/A | N/A | $0 | | Dybeck Happe | 2 | N/A | N/A | $597,475 | N/A | N/A | $0 | | Slattery | 1 | N/A | N/A | $380,032 | N/A | N/A | $0 | | Stokes* | 24 | $1,293,536 | $13,239,284 | $309,610 | $0 | N/A | $0 | | Murphy ** | 13 | N/A | N/A | N/A | N/A | $1,869,287 | $0 |
A TYPICAL GE BOARD MEETING
| Mr. Stokes’s credited service is limited to 24 years under the Pension Plan and the Supplementary Pension benefit, as no future accruals of those benefits are permitted effective January 1, 2021. For purposes of the Executive Retirement Benefit, Mr. Stokes’s credited service is limited to his service on and after January 1, 2021 (one year as of December 31, 2021).* | | On December 21, 2021, Mr. Murphy and the company entered into a separation agreement pursuant to which Mr. Murphy will remain employed for a period of garden leave, from January 1, 2022 until September 30, 2023, during which time he will not receive pension contributions. Upon his departure, Mr. Murphy remains vested in his accrued benefit under the UK Pension Plan, with payments to begin in accordance with the terms of the plan.** |
A TYPICAL GE BOARD MEETING
PRESENT VALUE OF ACCUMULATED BENEFIT. The accumulated benefit is based on years of service and earnings (base salary and bonus) considered by the plans for the period through December 31, 2021. It also includes the value of contributions made by the named executives throughout their careers. For purposes of calculating the present value, we assume that the named executives will remain in service until the age at which they may retire without any reduction in benefits. For Messrs. Culp, Murphy and Slattery and Ms. Dybeck Happe this is age 65, and for Mr. Stokes this is age 60 for the Pension Plan and the Supplementary Pension benefit and age 65 for the Executive Retirement Benefit. We also assume that benefits are payable under the available forms of annuity consistent with the assumptions described in the Postretirement Benefit Plans notes in GE’s financial statements in our 2021 Annual Report on Form 10-K, including the statutory discount rate assumption of 2.94% in the United States. The postretirement mortality assumption used for present value calculations for U.S. beneficiaries is the Pri-2012 Healthy Retiree mortality table projected to 2016, adjusted for GE’s experience and factoring in projected generational improvements. The assumptions for U.K. beneficiaries are a discount rate of 1.76% and a postretirement mortality assumption based upon the SAPS S2 Normal tables with future generational improvements in line with the CMI 2017 projection model (with a 1.5% improvement trend) at December 31, 2021. Potential Termination Payments In this section, we describe and quantify certain compensation that would have been payable under existing compensation plans and arrangements had a named executive’s employment terminated on December 31, 2021. For this hypothetical calculation, we have used each executive’s compensation and service levels as of this date (and, where applicable, GE’s closing stock price on December 31, 2021). Since many factors (e.g., the time of year when the event occurs, GE’s stock price and the executive’s age) could affect the nature and amount of benefits a named executive could potentially receive, any amounts paid or distributed upon a future termination may be different from those shown in the tables below. The amounts shown are in addition to benefits generally available to salaried employees, such as distributions under the GE RSP. EMPLOYMENT AGREEMENTS FOR EMPLOYEES. As we have hired new executive talent from outside the company, we have entered into employment agreements with those individuals, generally at their request. Mr. Culp and Ms. Dybeck Happe each entered into employment agreements and Mr. Slattery entered into an offer letter agreement upon joining GE. The agreements for Messrs. Culp and Slattery and Ms. Dybeck Happe entitle them to certain post-termination benefits, in each case as further described below. Prior to January 1, 2022, Mr. Murphy was party to an employment agreement, which is typical of our practice for executives at his seniority in the U.K., but it did not entitle him to any particular benefits upon termination or a change of control. Mr. Murphy entered into a separation agreement and release with the company, dated December 21, 2021, in connection with the previously reported GE Healthcare leadership transition. EMPLOYMENT AGREEMENT WITH MR. CULP. We entered into an employment agreement with Mr. Culp upon his employment with GE, which was amended in August 2020 to extend the term to August 17, 2024, or such later date as mutually agreed by the parties up to and through August 17, 2025 (such date is referred to as the Expiration Date). His agreement provides for an annual base salary of $2.5 million, a bonus target at 150% of his salary, and annual PSU awards with a grant date fair value of $15 million, and was further amended on March 15, 2022, to reduce the 2022 annual grant of PSUs from $15 million to $5 million. His original employment agreement provided for a PSU inducement award with a target award of 5 million shares, which he voluntarily relinquished in August 2020. In connection with the amendment in August 2020, he received a one-time Leadership Performance Share Award, with a target of 1,161,919 shares. Under the employment agreement, Mr. Culp receives other benefits given to senior executives of the company. Mr. Culp is also subject to a non-compete agreement, which terminates 24 months after his termination if his employment is terminated on or before the Expiration Date, and which terminates 12 months after termination of his employment if his employment terminates between the Expiration Date and 12 months thereafter. Mr. Culp is not subject to a non-compete agreement if his employment terminates after the date that is 18 months following the Expiration Date. He is also subject to a non-solicitation clause covering the same periods as his non-compete agreement. Under the terms of this agreement, if Mr. Culp is terminated for any reason other than “cause” or due to a resignation without “good reason,” he would be entitled to the balance of his prior year’s annual bonus (to the extent earned, but not paid). Assuming a termination date of December 31, 2021, Mr. Culp would not have been entitled to any amount with respect to these benefits. Additionally, if Mr. Culp is terminated without “cause” or voluntarily leaves for “good reason,” he would be entitled to cash severance equal to two times his annual salary plus target bonus, payable in bi-weekly installments over a two-year period, subject to any delay required by tax regulations. Assuming a termination date of December 31, 2021, Mr. Culp would have been entitled to a severance payment in the amount of $12,500,000. This severance would be subject to his providing a release to the company and his ongoing compliance with perpetual confidentiality and non-disparagement provisions and 24-month non-compete and non-solicitation provisions under his employment agreement. Under the award agreement for Mr. Culp’s one-time Leadership Performance Share Award, Mr. Culp is entitled to accelerated vesting of the performance shares as described below for such events that occur prior to the end of the performance period:
A TYPICAL GE BOARD MEETING
| ● | Retirement on August 17, 2024 (coinciding with the end of his employment agreement): the performance shares for which performance was actually achieved during the portion of the performance period that has already elapsed as of August 17, 2024. | | ● | Death or “Disability”: Prior to the end of the performance period, the greater of (i) the performance shares for which performance was actually achieved during the portion of the performance period that has already elapsed as of the date of such termination or (ii) the performance shares for which performance was actually achieved during the entire performance period, prorated based on length of service during the performance period. | | ● | Termination without “Cause” or Resignation for “Good Reason”: the greater of (i) the performance shares for which performance was actually achieved during the portion of the performance period that has already elapsed as of the date of such termination or (ii) the threshold number of performance shares, prorated based on length of service during the performance period. | | ● | “Change in Control”: the greatest of (i) the performance shares for which performance was actually achieved during the portion of the performance period that has elapsed prior to the date of such change in control; (ii) the performance shares for which performance was actually achieved during the portion of the performance period that has elapsed prior to the date of such change in control, with the relevant stock price based on the per-share consideration received by shareholders in connection with the change in control; or (iii) for a change in control prior to August 18, 2022, the target number of performance shares and for a change of control on or after August 18, 2022, the threshold number of performance shares. |
A TYPICAL GE BOARD MEETING
See “Equity Awards” on page 47 regarding the value of the equity treatment. Under Mr. Culp’s employment agreement and Leadership Performance Share Award agreement, the following terms have the meanings set forth below:
A TYPICAL GE BOARD MEETING
| ● | “Cause” generally means (i) the willful and continued failure of Mr. Culp to substantially perform his assigned duties for more than 30 days after the company notifies Mr. Culp of such failure, (ii) willfully engaging in conduct that is materially injurious to the company, including violating company policies, or (iii) the commission of a felony or crime involving dishonesty related to the company. | | ● | “Change in control” generally means (i) the acquisition of more than 30% of the company’s stock or voting power by any person, or (ii) the reorganization, merger, consolidation, sale or disposition of all or substantially all of the assets of the company, unless more than 50% of the surviving entity is controlled by the shareholders immediately prior to such event, in substantially the same proportions as their ownership immediately prior to the event. |
A TYPICAL GE BOARD MEETING
| ● | “Disability” generally means that, as a result of Mr. Culp’s incapacity due to physical or mental illness, he is absent from his duties on a full-time basis for six consecutive months and does not return to the performance of his duties within 30 days after written notice is provided. | | ● | “Good reason” generally means (i) a reduction in Mr. Culp’s compensation rights, other than the agreed reduction in base salary, commencing April 2020, (ii) failure to renominate Mr. Culp to the Board or removing him from the position of CEO, (iii) materially reducing Mr. Culp’s duties and responsibilities, (iv) assigning Mr. Culp duties that are materially inconsistent with his position or duties that materially impair his ability to function as CEO, (v) relocation of the company’s headquarters by more than 50 miles, or (vi) a material breach of Mr. Culp’s employment agreement by the company. |
A TYPICAL GE BOARD MEETING
The previously announced plan to separate GE’s businesses into three industry-leading public companies does not constitute a “change in control” for purposes of the agreements. EMPLOYMENT AGREEMENT WITH MS. DYBECK HAPPE. We entered into an employment agreement with Ms. Dybeck Happe upon her employment with GE. The agreement provides for an annual salary of $1.5 million, a bonus target at 125% of her salary, and long-term equity incentive awards with a grant date fair value of $4.9 million for 2020 and with a target grant date fair value of not less than $5.0 million for subsequent years. Upon commencement of her employment, she also received an award of stock options with a grant date fair value of $8.0 million (257,732 options, as adjusted for the reverse stock split) to compensate Ms. Dybeck Happe for value forfeited by her for leaving her prior employer. Ms. Dybeck Happe is subject to a non-compete and non-solicitation agreement, which terminates 12 months after her termination (for whatever reason). Under the terms of her employment agreement, if Ms. Dybeck Happe is terminated without “cause” or voluntarily leaves for “good reason” at any time, subject to her providing a release to the company, she would be entitled to accelerated vesting of her new hire stock options which would remain exercisable through the end of the second calendar year following the year in which termination occurs. In addition, if such termination or departure occurs on or before December 31, 2023, she would be entitled to: (i) accelerated vesting of all then-outstanding long-term incentive awards, with the options remaining exercisable through the end of the second calendar year following the year in which termination or departure occurs, (ii) a lump sum cash payment equal to 12 months of base salary and target bonus and (iii) if she relocates back to Sweden within six months, reimbursement for certain relocation expenses. If such termination or departure occurs after December 31, 2023, Ms. Dybeck Happe will be eligible to receive the standard severance package provided to similarly situated officers of the company (which as of the signing date consisted of 12 months of base salary). Assuming a termination of employment as of December 31, 2021, the cash portion of this severance amount, excluding any relocation reimbursements, would be $3,375,000. See “Equity Awards” on page 47 regarding the value of the equity treatment. Under the award agreement for Ms. Dybeck Happe’s one-time award of Leadership PSUs, Ms. Dybeck Happe is entitled to accelerated vesting of the PSUs on the same terms as described above with respect to Mr. Culp’s Leadership performance shares; provided, that for purposes of a change in control, the final prong is instead conditioned on a change in control occurring relative to September 3, 2022 (rather than August 18, 2022). Under Ms. Dybeck Happe’s employment agreement and Leadership PSU award agreement, the following terms have the meanings set forth below:
A TYPICAL GE BOARD MEETING
| ● | “Cause” generally means (i) the willful failure of Ms. Dybeck Happe to perform her duties or to comply with a valid and legal directive of the company or the Board, (ii) engaging in dishonesty, illegal conduct or misconduct that materially harms or is reasonably likely to materially harm the company, (iii) conviction of, or nolo contendere plea to, a felony or of a misdemeanor involving moral turpitude, (iv) willful or grossly negligent unauthorized disclosure of confidential information, (v) material breach of any material obligation under the employment agreement or other agreement with the company, which harms or is reasonably likely to materially harm the company, or (vi) willful material failure to comply with company policies (and in the case of (i), (iv), (v) and (vi), the failure to cure such circumstances within 30 days of receiving notice). | | ● | “Change in control” generally has the same meaning described above with respect to Mr. Culp’s employment agreement and Leadership Performance Share Award agreement. | | ● | “Good reason” generally means (i) a material reduction in Ms. Dybeck Happe’s compensation, (ii) a material breach by the company of any material provision of the employment agreement or other agreement with the company, or (iii) a material, adverse change in Ms. Dybeck Happe’s title, authority, duties, responsibilities or reporting relationship, provided Ms. Dybeck Happe provides notice to the company and Board of the circumstances giving rise to the “good reason” and the circumstances are not cured within 30 days. |
A TYPICAL GE BOARD MEETING
OFFER LETTER AGREEMENT WITH MR. SLATTERY. We entered into an offer letter agreement with Mr. Slattery upon the commencement of his employment with GE. The agreement provides for an annual salary of $1.25 million, a bonus target at 100% of his salary, long-term equity incentive awards with a grant date fair value of $3.0 million for 2020 and with a target grant date fair value of not less than $6.0 million for subsequent years. Upon commencement of his employment, he also received a new hire cash bonus of $1.0 million, and an award of stock options with a grant date fair value of $1.5 million (67,446 options, as adjusted for the reverse stock split) to compensate Mr. Slattery for value forfeited by him for leaving his prior employer. He is subject to a non-compete and non-solicitation agreement, which terminates 12 months after his termination (for whatever reason). Upon Mr. Slattery’s termination of employment, he will be eligible to receive the standard severance package provided to similarly situated officers of the company (which as of the signing date consisted of 12 months of base salary). SEPARATION AGREEMENT WITH MR. MURPHY. In connection with the previously reported GE Healthcare leadership transition, Mr. Murphy no longer serves as President and Chief Executive Officer of GE Healthcare after December 31, 2021. On December 21, 2021, GE and Mr. Murphy entered into a separation agreement pursuant to which Mr. Murphy will remain employed for a period of garden leave, which is typical for senior UK-based employees. During this period, Mr. Murphy will remain available for advisory services or other work as required, and he will receive his regular salary, an annual bonus for the 2021 plan year based on the performance of GE Healthcare and health and life insurance benefits; he will not receive pension contributions, future bonuses or equity awards. Under the separation agreement, Mr. Murphy also granted a release in favor of GE and agreed to certain cooperation, confidential information, non-competition and non-solicitation covenants. US EXECUTIVE SEVERANCE PLAN. In order to standardize the severance payments available to U.S. executives who are not otherwise subject to an employment agreement providing a different amount, we adopted the GE US Executive Severance Plan effective January 1, 2021. Eligible executives who experience an employer-initiated termination of employment that is not for “cause,” and who are not offered a “suitable position,” receive between 6 to 18 months of base salary (based on their career band), which is paid in a lump sum. Outplacement services are also provided for the same period. To receive a benefit under the plan, the executive must enter into a separation agreement and release in a form acceptable to GE, which may also include cooperation, confidential information, non-disparagement, non-competition, non-solicitation and other covenants. With respect to our named executives, Messrs. Slattery and Stokes are eligible to participate under the plan at the 18-month level. Under the Plan, the following terms have the meanings set forth below:
A TYPICAL GE BOARD MEETING
| ● | “Cause” generally means: (i) breach of any confidentiality, non-solicitation, non-competition or other material provision of an agreement with the company, (ii) conduct that has the potential to cause material harm to the company, (iii) an act of dishonesty, fraud, embezzlement or theft, (iv) conviction of, or plea of guilty or no contest to, a felony or crime involving moral turpitude, or (v) failure to comply with the company’s policies and procedures. | | ● | “Suitable position” generally means a position providing at least 80% of the executive’s base salary and annual incentive award opportunity. If the position is with the company, rather than a successor employer in a business disposition or other third-party in an outsourcing arrangement, the position must also be within 50 miles of the executive’s job location and in the same career band. |
A TYPICAL GE BOARD MEETING
SHAREHOLDER APPROVAL OF SEVERANCE AND DEATH BENEFITS. If the Board were to agree to pay certain severance benefits or unearned death benefits to a named executive, we would seek shareholder approval. For severance benefits, this policy applies only when the executive’s employment had been terminated before retirement for performance reasons and the value of the proposed severance benefits exceeded 2.99 times the sum of his or her base salary and bonus. For this purpose, severance benefits would not include: (1) any payments based on accrued pension benefits; (2) any payments of salary or bonus amounts that had accrued at the time of termination; (3) any RSUs paid to a named executive who was terminated within two years prior to age 60; (4) any stock-based incentive awards that had vested or would otherwise have vested within two years following the named executive’s termination; and (5) any retiree health, life or other welfare benefits. See the Board’s Governance Principles (see “Helpful Resources” on page 77) for the full policies. Equity Awards The following table shows the intrinsic value of equity awards that would have vested or become exercisable if the named executive had died, become disabled, retired or separated from the company as of December 31, 2021. Intrinsic value is based upon the company’s stock price (minus the exercise price in the case of stock options). Amounts shown assume the achievement of all applicable performance objectives at the target level. Our named executives generally are not entitled to benefits if they leave voluntarily or are terminated for cause (other than benefits already accrued), unless they satisfy the conditions for retirement eligibility.
A TYPICAL GE BOARD MEETING
| POTENTIAL TERMINATION PAYMENTS TABLE (EQUITY BENEFITS) | | | | | | | | | | | | | UPON DEATH | | UPON DISABILITY | | UPON RETIREMENT | | UPON INVOLUNTARY TERMINATION* | | UPON CHANGE OF CONTROL** | | | NAME | STOCK OPTIONS | RSUs/PSUs/ PERFORMANCE AWARDS | STOCK OPTIONS | RSUs/PSUs/ PERFORMANCE AWARDS | STOCK OPTIONS | RSUs/PSUs/ PERFORMANCE AWARDS | STOCK OPTIONS | RSUs/PSUs/ PERFORMANCE AWARDS | STOCK OPTIONS | RSUs/PSUs/ PERFORMANCE AWARDS | | Culp | $N/A | $84,788,148 | $N/A | $84,788,148 | N/A | N/A | N/A | $37,591,219 | N/A | $109,766,488 | | Dybeck Happe | $1,479,257 | $10,297,136 | $1,479,257 | $10,297,136 | N/A | N/A | $0 | $3,425,860 | $0 | $12,917,828 | | Slattery | $3,681,866 | $12,739,185 | $3,681,866 | $12,739,185 | N/A | N/A | $0 | $0 | $0 | $0 | | Stokes | $410,698 | $16,568,810 | $410,698 | $16,470,467 | N/A | N/A | $0 | $0 | $0 | $0 | | Murphy | $484,115 | $19,190,352 | $484,115 | $18,514,514 | N/A | N/A | $0 | $0 | $0 | $0 |
A TYPICAL GE BOARD MEETING
| Addresses separation “without cause” or where the executive leaves for “good reason,” as defined under the applicable employment agreement. Benefits are not otherwise payable in the event of voluntary separation.* | | In each case as defined under Mr. Culp’s employment agreement and Ms. Dybeck Happe’s Leadership PSU award agreement, as detailed above.** |
A TYPICAL GE BOARD MEETING
DEATH/DISABILITY. Unvested options, RSUs and PSUs/performance shares would generally vest, depending on the award terms. Vested options would generally remain exercisable until their expiration date, and PSUs and performance shares would remain subject to the achievement of the performance objectives. In the case of disability, the award must generally have been held for at least one year in order to be vested. For these purposes, “disability” generally means the executive being unable to perform his or her job. RETIREMENT. Unvested options, RSUs and PSUs/performance shares held for at least one year would generally vest, depending on the award terms. Vested options would generally remain exercisable until their expiration date, and PSUs and performance shares would remain subject to the achievement of the performance objectives. For these purposes, “retirement” generally means reaching the applicable retirement age, typically age 60, and completing 5 years of service. INVOLUNTARY TERMINATION. Under the terms of the Leadership Performance Share and Leadership PSU Award Agreements with Mr. Culp and Ms. Dybeck Happe, respectively, and Ms. Dybeck Happe’s employment agreement, amounts shown reflect the value of their Leadership Awards if they had been terminated without cause or left for good reason. None of the other named executives were entitled to any potential payments upon separation from the company, except for vesting of certain equity awards in the event that the executive is laid off (and his or her position is not replaced) or the executive transfers to a successor employer in a business disposition. CHANGE OF CONTROL. Under the terms of the Leadership Performance Share and Leadership PSU Award Agreements with each of Mr. Culp and Ms. Dybeck Happe, they would have been eligible for the accelerated vesting of their Leadership Awards in the event of a change of control. For additional detail, see “Employment Agreement with Mr. Culp” on page 45 and “Employment Agreement with Ms. Dybeck Happe” on page 46. None of our other named executives are entitled to the acceleration or payment of benefits in the event of a change of control. Pension Benefits “Pension Benefits” on page 43 describes the general terms of each pension plan in which the named executives participate, the years of credited service and the present value of their accumulated pension benefit (assuming payment begins at age 60 or 65, as noted above). The table below shows the pension benefits that would have become payable if the named executives had died, become disabled, voluntarily terminated or retired as of December 31, 2021. In the event of death before retirement, for Messrs. Culp, Slattery, and Stokes and Ms. Dybeck Happe, each of their respective beneficiaries may receive the following benefit:
A TYPICAL GE BOARD MEETING
| ● | Executive Retirement Benefit. 10 equal annual installments of his or her accrued benefit, reduced by 25% for commencement before attaining age 65. |
A TYPICAL GE BOARD MEETING
For Mr. Stokes, his surviving spouse may receive the following pension benefits:
A TYPICAL GE BOARD MEETING
| ● | GE Pension Plan. Because Mr. Stokes has 15 years of service, either an annuity, as if he had retired and elected the spousal 50% joint and survivor annuity option prior |
A TYPICAL GE BOARD MEETING
| | to death, or an immediate lump-sum payment based on five years of pension distributions, in each case based upon the accrued benefit. | | ● | Supplementary Pension Benefit. Because Mr. Stokes has 15 years of service, a lump-sum payment based on whichever of the following has a higher value: (1) the 50% survivor annuity that the spouse would have received under this plan if Mr. Stokes had retired and elected the spousal 50% joint and survivor annuity option prior to death, or (2) five years of pension distributions under this plan. |
A TYPICAL GE BOARD MEETING
The amounts payable depend on several factors, including employee contributions and the ages of the named executive and surviving spouse. In the event a disability occurs before retirement: For Messrs. Culp and Slattery and Ms. Dybeck Happe, they may receive 10 equal annual installments of their accrued Executive Retirement Benefit, reduced by up to 25% for commencement before attaining age 65, but only once they have attained 15 years of service. Mr. Stokes, having 15 years of service, may receive an annuity payment of accrued GE Pension and Supplementary Pension benefits, and 10 equal annual installments of his Executive Retirement Benefit.
A TYPICAL GE BOARD MEETING
| POTENTIAL TERMINATION PAYMENTS TABLE (PENSION BENEFITS) | | | | | | | NAME | LUMP SUM UPON DEATH | ANNUAL BENEFIT* UPON DEATH | ANNUAL BENEFIT* UPON DISABILITY | ANNUAL BENEFIT* UPON VOLUNTARY TERMINATION | ANNUAL BENEFIT* UPON RETIREMENT | | Culp | N/A | $253,168 | N/A | $0 | N/A | | Dybeck Happe | N/A | $80,498 | N/A | $0 | N/A | | Slattery | N/A | $45,820 | N/A | $0 | N/A | | Stokes | $9,256,707 | $87,626 | $1,082,831 | $85,682 | N/A | | Murphy | $31,554 | $49,121 | $96,546 | N/A | $48,240 |
A TYPICAL GE BOARD MEETING
| Annual amounts shown for Messrs. Culp and Slattery and Ms. Dybeck Happe are payable in 10 installments as the Executive Retirement Benefit. Annual amounts shown upon death or disability for Mr. Stokes are annuity payments applicable to GE Pension Plan and Supplementary Pension participants, except that $40,523 of such amount is payable in 10 installments as the Executive Retirement Benefit. Annual amounts shown upon voluntary termination for Mr. Stokes are annuity payments applicable to GE Pension Plan participants. Annual amounts for Mr. Murphy are annuity payments applicable under the U.K. GE Pension Plan.* |
A TYPICAL GE BOARD MEETING
LUMP SUM UPON DEATH. Lump sum payable to the surviving spouse after death. A lump sum is not available to the surviving spouse of Messrs. Culp and Slattery and Ms. Dybeck Happe under the terms of the Executive Retirement Benefit. For Mr. Stokes, the lump sum represents the Supplementary Pension benefit payable in the event of death. For Mr. Murphy, the lump sum represents the return of contributions and interest under the U.K. GE Pension Plan. ANNUAL BENEFITS UPON DEATH. For Messrs. Culp and Slattery and Ms. Dybeck Happe, 10 annual installment payments as the Executive Retirement Benefit. For Mr. Stokes, the annual amount is payable for the life of the surviving spouse as the GE Pension Plan benefit, except that $40,523 of such amount is payable in 10 annual installments as the Executive Retirement Benefit. For Mr. Murphy, the annual amount is payable for the life of the surviving spouse. In each case, amounts commence after death. ANNUAL BENEFITS UPON DISABILITY. Messrs. Culp and Slattery, and Ms. Dybeck Happe would not be eligible for disability benefits because they do not yet have 15 years of service. For Mr. Stokes, the annual amount includes the 50% joint and survivor annuity as the GE Pension Plan and Supplementary Pension benefits, except that $40,523 of such amount is payable in 10 annual installment payments as the Executive Retirement Benefit, in each case commencing after disability. For Mr. Murphy, the amount is payable as a 50% joint and survivor annuity. ANNUAL BENEFITS UPON VOLUNTARY TERMINATION. For Mr. Stokes, the annual amount includes the 50% joint and survivor annuity payable at age 60 under the GE Pension Plan; this does not include any payments under the GE Supplementary Pension Plan (either the Supplementary Pension benefit or the Executive Retirement Benefit) because they are forfeited upon voluntary termination before age 60. Because he is retirement-eligible, the benefits for Mr. Murphy are shown under Annual Benefit Upon Retirement. ANNUAL BENEFITS UPON RETIREMENT. Represents partial pension eligibility for Mr. Murphy, with the amount payable as a 50% joint and survivor annuity. The other named executives are not eligible to retire. Deferred Compensation The named executives are entitled to receive the amount in their deferred compensation accounts if their employment terminates. Between the termination event and the date that distributions are made, these accounts would continue to increase or decrease in value based on changes in the value of the named executive’s earnings option. Therefore, amounts received by the named executives would differ from those shown in the Deferred Compensation Table on page 42. See “Deferred Compensation” on page 41 for information on the available distribution types under each plan. Life Insurance Benefits For a description of the supplemental life insurance plans that provide coverage to the named executives, see “Life Insurance Premiums” on page 37. Messrs. Culp and Slattery, and Ms. Dybeck Happe do not qualify for these supplemental life insurance plans, as they were discontinued for executives joining the company (or being promoted to the relevant band of seniority) on or after January 1, 2018. If the named executives had died on December 31, 2021, the survivors of the named executives would have received the following under these arrangements.
A TYPICAL GE BOARD MEETING
| NAME | DEATH BENEFIT | | Culp | $0 | | Dybeck Happe | $0 | | Slattery | $0 | | Stokes | $9,410,940 | | Murphy | $3,763,080 |
A TYPICAL GE BOARD MEETING
The company would continue to pay the premiums in the event of a disability for Executive Life, until the later of age 60 or 15 years in the plan, and under Leadership Life, until the later of age 65 or 10 years in the plan. Other Executive Compensation Policies & Practices Roles and Responsibilities in Succession Planning and Compensation MANAGEMENT DEVELOPMENT & COMPENSATION COMMITTEE. The committee has primary responsibility for helping the Board develop and evaluate potential candidates for executive positions and for overseeing the development of executive succession plans. As part of this responsibility, the committee oversees the compensation program for the CEO and the other named executives. MANAGEMENT. Our CEO and our Chief Human Resources Officer help the committee administer our executive compensation program. The Chief Human Resources Officer also advises the committee on matters such as past compensation, total annual compensation, potential accrued benefits, GE compensation practices and guidelines, company performance, industry compensation practices and competitive market information. Our Policies on Compensation Consultants STRATEGIC USE OF COMPENSATION CONSULTANTS. From time to time, the committee and the company’s human resources function have sought the views of Semler Brossy Consulting Group LLC (Semler Brossy) about market intelligence on compensation trends and on particular compensation programs designed by our human resources function. For 2021, the Management Development & Compensation Committee and the company’s human resources function consulted with Semler Brossy on market practices relating to senior executive compensation. In addition, the Governance Committee and the company’s legal function consulted with Semler Brossy on market practices relating to compensation and benefits for non-employee directors. COMPENSATION CONSULTANT INDEPENDENCE POLICY. Any compensation consultant that advises the Board on executive or director compensation will not at the same time advise the company on any other human resources matter, and the committee has determined that Semler Brossy’s work with the committee, the Governance Committee and the company’s human resources and legal functions does not raise any conflict of interest. Clawbacks and Other Remedies for Potential Misconduct CLAWBACKS. The Board may seek reimbursement of any portion of incentive compensation in connection with an executive officer’s fraudulent or illegal misconduct, or if an executive officer’s conduct resulted in a material inaccuracy in the company’s financial statements or in performance metrics affecting the executive officer’s compensation. If the Board determines that an executive officer engaged in fraudulent or illegal misconduct that resulted in a material inaccuracy in the company’s financial statements or in performance metrics affecting the executive officer’s compensation, the Board will seek reimbursement of any portion of incentive compensation paid or awarded to the executive that is greater than would have been paid or awarded if calculated based on the accurate financial statements or performance metric. For more information, see our Governance Principles (see “Helpful Resources” on page 77). OTHER REMEDIES. In cases of detrimental misconduct by an executive officer, the Board may also take a range of other actions to remedy the misconduct, prevent its recurrence, and discipline the individual as appropriate, including terminating the individual’s employment. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities. Stock Ownership and Equity Grant Policies STOCK OWNERSHIP REQUIREMENTS. We require our named executives to own significant amounts of GE stock as shown below. The required amounts are set at multiples of base salary. Executives have five years from the time they are first hired or promoted into a position at the senior vice president level or above to meet the requirement. All named executives are in compliance with our stock ownership requirements. For details on these requirements, see our Governance Principles (see “Helpful Resources” on page 77). The named executives’ ownership is shown in the Common Stock & Total Stock-Based Holdings Table on page 24.
A TYPICAL GE BOARD MEETING
| STOCK OWNERSHIP REQUIREMENTS (MULTIPLES OF BASE SALARY) | | | | 10X | 5X | 4X | | for CEO | for vice chairs | for senior vice presidents |
A TYPICAL GE BOARD MEETING
HOLDING PERIOD REQUIREMENTS. Our executive officers must also hold for at least one year any net shares of GE stock they receive through stock option exercises, in addition to any holding periods that may be assigned to PSUs and RSUs, such as the PSUs and RSUs granted as part of the annual incentive program. Net shares received from the vesting of PSUs or RSUs must be held until the stock ownership requirement is met. NO HEDGING. We believe our executive officers and directors should not speculate or hedge their interests in our stock. We therefore prohibit them from entering into any derivative transactions in GE stock, including any short sale, forward, equity swap, option or collar that is based on GE’s stock price. These restrictions are contained in our Governance Principles (see “Helpful Resources” on page 77). This rule is not applicable to other GE employees. NO PLEDGING. We prohibit executive officers and directors from pledging GE stock. These restrictions are contained in our Governance Principles (see “Helpful Resources” on page 77). NO OPTION BACKDATING OR SPRING-LOADING. The exercise price of each stock option is based on the closing price of GE stock on the grant date. NO OPTION REPRICING. We prohibit the repricing of stock options. This includes amending outstanding options to lower their exercise price, substituting new awards with a lower exercise price or executing a cash buyout. NO UNEARNED DIVIDEND EQUIVALENTS. Performance shares, PSUs and RSUs granted to our named executives do not pay dividends or dividend equivalents on shares that are not yet owned. Instead, dividends and dividend equivalents are accrued during the vesting or performance period and paid out only on shares actually received. For more information, see our Governance Principles (see “Helpful Resources” on page 77). Tax Deductibility of Compensation The Internal Revenue Code generally imposes a $1 million limit on the amount that a public company may deduct for compensation paid to the company’s applicable named executives, subject to an exception for qualifying performance-based compensation provided pursuant to a binding written contract in effect as of November 2, 2017. We generally expect that compensation paid to our applicable named executives in excess of $1 million will not be deductible. Management Development & Compensation Committee Report The Management Development & Compensation Committee has reviewed the compensation discussion and analysis (pages 25 through 50, which, pursuant to SEC rules, does not include the “CEO Pay Ratio” discussion) and discussed that analysis with management. Based on its review and discussions with management, the committee recommended to the Board that the compensation discussion and analysis be included in the company’s annual report on Form 10-K for 2021 and this proxy statement. This report is provided by the following independent directors, who comprise the committee:
A TYPICAL GE BOARD MEETING
| Thomas Horton (Chair) | Edward Garden | | Sébastien Bazin | Paula Rosput Reynolds | | Francisco D’Souza | |
A TYPICAL GE BOARD MEETING
CEO Pay Ratio HOW WE IDENTIFIED THE MEDIAN EMPLOYEE. To identify the median GE employee for 2021, we identified our total employee population as of December 31, 2021, and, in accordance with SEC rules, excluded the CEO and employees from certain countries representing in aggregate less than 5% of our employee base*, to arrive at the initial median employee. We then used annualized salary data converted to U.S. dollars, including target bonus award payments to identify the 20 employees with salaries directly above and below the initial median employee. Once we identified this narrowed pool, we re-ranked the consideration pool of employees to find the median employee. We then calculated the median employee’s total compensation in accordance with SEC rules to use as the basis for the pay ratio. Foreign exchange rates were translated to the U.S. dollar equivalent based on rates as of December 31, 2021. RATIO OF CEO PAY TO MEDIAN EMPLOYEE PAY. Our median employee earned $55,064 in total compensation for 2021. The total 2021 compensation reported for Mr. Culp as reported under “SEC Total” in the Summary Compensation Table on page 36 was $22,663,449. Based upon total compensation for 2021, we calculated that our ratio of CEO to median employee pay was 412 to 1. Our median employee is employed in France in our Power business.
A TYPICAL GE BOARD MEETING
| These 76 countries and their headcounts as of the calculation date were: Algeria (321), Angola (23), Argentina (310), Austria (444), Azerbaijan (4), Bahrain (45), Bangladesh (56), Belgium (215), Benin (8), Bermuda (2), Bulgaria (17), Cambodia (3), Cameroon (7), Chad (1), Chile (190), Colombia (274), Côte d’Ivoire (49), Croatia (515), Czechia (536), Denmark (647), Ecuador (2), Egypt (420), Estonia (12), Ethiopia (9), Georgia (2), Ghana (33), Greece (179), Hong Kong (123), Iraq (101), Jordan (28), Kazakhstan (56), Kenya (96), Kosovo (7), Kuwait (70), Kyrgyzstan (3), Latvia (7), Lebanon (39), Libya (12), Lithuania (10), Luxembourg (4), Mali (1), Mauritius (3), Mongolia (3), Montenegro (5), Morocco (94), Mozambique (3), Myanmar (10), Nepal (5), Netherlands (625), New Zealand (53), Nigeria (159), Oman (16), Pakistan (152), Panama (19), Peru (95), Philippines (105), Portugal (127), Qatar (112), Romania (619), Senegal (4), Serbia (36), Slovakia (38), South Africa (473), Sri Lanka (10), Sweden (583), Tajikistan (8), Tanzania (1), Thailand (275), Trinidad and Tobago (3), Tunisia (77), Turkmenistan (10), Ukraine (41), Uruguay (1), Uzbekistan (3), Venezuela (1), and Zambia (1), for a total of 8,651 employees. As of December 31, 2021, using the methodology required by the rule governing this disclosure, GE had approximately 58,000 U.S. employees and approximately 123,000 employees in other countries, for a total of approximately 181,000 employees globally factored into the sample before the country exclusions listed above.* |
A TYPICAL GE BOARD MEETING
Director Compensation The compensation program for independent directors is designed to achieve the following goals:
A TYPICAL GE BOARD MEETING
| ● | Fairly pay directors for the work required at a company of GE’s size and scope, as benchmarked against our peer group; | | ● | Align directors’ interests with the long-term interests of GE shareholders; and | | ● | Be simple, transparent and easy for shareholders to understand. |
A TYPICAL GE BOARD MEETING
Annual Compensation OVERVIEW. Our independent directors receive annual compensation as shown in the table below. There are no additional meeting fees. The lead director and members of our Board committees receive additional compensation due to the workload and broad responsibilities of these positions.
A TYPICAL GE BOARD MEETING
| All independent directors | $275,000 | | Lead director | $50,000 | | Audit Committee members | $35,000 | | Management Development & Compensation Committee members | $25,000 | | Governance & Public Affairs Committee members | $10,000 |
A TYPICAL GE BOARD MEETING
●Form of payment. 40% in cash & 60% in deferred stock units (DSUs); directors can elect to defer some or all of the cash portion in additional DSUs ●Time of payment. Quarterly installments ●Multiple committees. If a director serves on more than one committee, the additional compensation applies separately for each committee ●Limit on director compensation. $1,500,000 annually, including cash & equity, but excluding amounts awarded under the Charitable Award Program (which has been closed to new directors) HOW DEFERRED STOCK UNITS WORK. Each DSU is equal in value to a share of GE stock and is fully vested upon grant but does not have voting rights. To calculate the number of DSUs to be granted, we divide the target value of the DSUs by the average closing price of GE stock for the 20 days preceding and including the grant date. DSUs accumulate quarterly dividend-equivalent payments, which are reinvested into additional DSUs. The DSUs are paid out in cash beginning one year after the director leaves the Board. Directors may elect to take their DSU payments as a lump sum or in payments spread out for up to 10 years. In the event of a spin-off transaction, the DSUs are credited with a phantom stock unit in the spun-off entity, similar to the distribution paid to GE shareholders, which would be payable in cash upon retirement on the same terms as the DSUs. OTHER COMPENSATION. Our independent directors may also receive the following benefits:
A TYPICAL GE BOARD MEETING
| ● | Matching Gifts Program. Independent directors may participate in the GE Foundation’s Matching Gifts Program on the same terms as GE employees. Under this program, the GE Foundation matches for each participant up to $5,000 for annual contributions to approved charitable organizations. | | ● | Charitable Award Program. Each director who joined the Board before 2016 may, upon leaving the Board, designate up to five charitable organizations to share in a $1 million GE contribution. Directors may not choose a private foundation with which they are affiliated. The Board terminated this program for new directors in 2015. | | ● | Incidental Board Meeting Expenses. The company occasionally provides travel and sponsors activities for spouses or other guests of the directors in connection with Board meetings. No such expenses were incurred during 2021. |
A TYPICAL GE BOARD MEETING
No Additional Director Compensation Independent directors do not receive any cash incentive compensation, hold deferred compensation balances or receive pension benefits. Since 2003, DSUs have been the only equity incentive compensation awarded to the independent directors; we ceased granting stock options to directors in 2002, and no independent director had stock options outstanding as of the most recent fiscal year-end. Directors who are company employees do not receive any compensation for their services as directors. Share Ownership Requirements for Independent Directors All independent directors are required to hold at least $550,000 (5 times the cash portion of their annual retainer) worth of GE stock and/ or DSUs while serving as GE directors. They have five years to meet this ownership threshold. All directors are in compliance with this requirement. Director and Officer (D&O) Insurance GE provides liability insurance for its directors and officers. The annual cost of this coverage is approximately $9.7 million. Director Compensation Table This table shows the compensation that each independent director earned for his or her 2021 Board and committee service. Mr. Garden has advised us that, pursuant to his arrangement with Trian, he transfers to Trian, or holds for the benefit of Trian and/or Trian entities, all director compensation paid to him.
A TYPICAL GE BOARD MEETING
| NAME OF DIRECTOR | CASH FEES | STOCK AWARDS | MATCHING GIFTS | TOTAL | | Sébastien Bazin | $0 | $310,526 | $0 | $310,526 | | Ashton Carter | $124,000 | $186,315 | $0 | $310,315 | | Francisco D’Souza | $0 | $335,568 | $0 | $335,568 | | Edward Garden | $120,000 | $180,305 | $0 | $300,305 | | Thomas Horton | $144,000 | $216,366 | $0 | $360,366 | | Risa Lavizzo-Mourey | $114,000 | $171,290 | $0 | $285,290 | | Catherine Lesjak | $128,000 | $192,326 | $0 | $320,326 | | Paula Rosput Reynolds | $108,875 | $226,552 | $0 | $335,427 | | Leslie Seidman | $124,000 | $186,315 | $5,000 | $315,315 | | James Tisch | $0 | $285,483 | $0 | $285,483 |