WASHINGTON – Two years after taking the helm at a slumping General Electric (GE), Larry Culp has secured a huge reward: a bonus of around US$47 million (RM189.7 million) and the potential for much more.
The mammoth pay-off follows thousands of lay-offs at the industrial conglomerate amid the coronavirus pandemic.
Culp took over as chief executive in October 2018 and was paid almost US$25 million last year, but he could reap as much as US$230 million if GE meets additional targets, according to securities filings reviewed by AFP.
The ex-CEO of Danaher has been credited with stabilising GE's finances through a series of austerity measures, including asset sales and lay-offs.
The company justified the bonus, citing the executive’s performance amid a difficult operating environment.
The board launched a charm offensive over the summer to retain Culp as it faced a bruising downturn in aviation that hit orders for its LEAP engine joint venture with France’s Safran.
The firm in August amended its long-term incentive plan, effectively lowering the bar Culp would have to clear to win the pay-off, and extended his contract until 2024 with an option for an additional year.
The head of the GE labour union called the package “absolutely outrageous”, especially after the company announced that some jobs will be shipped overseas.
“How can GE justify this type of enormous bonus for its CEO, while workers, their families, and communities are suffering due to lay-offs and offshoring?” said Carl Kennebrew, president of the Industrial Division of the Communications Workers of America, in a statement.
Lowered bar
Under the revised package, Culp will receive the bonus if GE’s share price reaches US$10 and trade above that level for 30 days – lowering the target price from US$19 previously.
When the package was agreed on, GE shares were trading at US$6.65, but have advanced more recently amid optimism surrounding Covid-19 vaccines.
Its stock price has been above US$10 for more than a month, and was yesterday afternoon trading at US$10.73, up 1.6%.
Culp’s pay-off could reach US$230 million if GE shares hit US$17 – well below the original benchmark of US$31 a share.
People familiar with the situation said GE recognises that the potential sums are staggering, but noted that Culp must stay with the company through August 2024 to receive the full pay-out under the amended plan.
“Under Larry’s leadership, GE has made significant progress against the goals he set on day one as CEO: improving the company’s financial position and strengthening its businesses,” said a spokesman on behalf of the board, noting the difficult operating environment this year.
“We believe having Larry at the helm of the company for a longer period of time is unquestionably to the benefit of all shareholders and stakeholders.”
Culp has presided over significant rounds of lay-offs, including 13,000 aviation jobs globally earlier this year.
Even with the asset sales, GE still has heavy debt, and operations are challenged by turbine overcapacity in its power division and still-weak demand in aviation.
It reported a 2019 loss of US$5.4 billion, compared with US$22.8 billion in 2018. The company reported a US$1.2 billion loss in the most recent quarter. – AFP, December 31, 2020
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