In a rare move, the embattled heavy machinery production giant General Electric bowed to investor pressure and cut a previously awarded pay package for CEO Larry Culp this month. Still, investors say they are not satisfied with the board’s attempt to address their concerns about what they view as a poorly aligned executive pay regime.
Yet, while GE is often a bellwether for other companies in terms of pay and governance practices, experts say it’s unlikely that such pay cuts will be replicated by other boards, despite increased scrutiny of compensation matters and steady drumbeats for strong pay for performance alignment.
GE said it would cut Culp’s equity incentive grant for this year by 67%, leaving Culp with $5 million, according to its most recent update to investors on March 17.
The decision comes hard on the heels of strong opposition to several changes the compensation committee made to Culp’s executive compensation package in 2020, when the board lowered his performance targets and provided bonuses and an equity award worth several millions to Culp. The former GE board member was named CEO in 2018 to engineer a turnaround of the flagging fortunes of the more-than-a-century-old company.
“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… It also reflects our desire to recognize and meaningfully respond to our shareholders,” reads the company’s most recent public filing.Agenda – Pay Cuts Unlikely to be Popular with Executives