“Beginning with the strongest companies, CEOs and their boards should simply reach the conclusion that executive pay is excessive and adjust it to more reasonable and justifiable levels.” – William McDonough, President of the New York Federal Reserve Bank speaking at a 9/11 memorial event. Mr. McDonough went on to say that excessive CEO pay was “terribly bad social policy and perhaps even bad morals.”
During the four years ending 2001, General Electric paid its Chief Executive Officers more than $315 million, ranking eighth among US corporations. In 2001, General Electric’s shareholders lost men that served as CEO that year collectively received more than $40 million in total compensation. In 2001 GE’s stock lost more than 15% of its value, underperforming the S&P 500 by more than 2%. General Electric also announced layoffs of 8,304 hard-working employees in 2001, according to Forbes.com.
Last year’s revelations about the retirement perks of GE’s retired CEO Jack Welch embroiled the company in controversy. Mr.Welch wrote in a September 16, 2002 Wall Street Journal op-ed: “The world has changed during the past year. Reports of corporate malfeasance fill the media, as several companies and executives stand accused of betraying their shareowners. In today’s reality, my 1996 employment contract could be misportrayed as an excessive retirement package, rather than what it is — part of a fair employment and post-employment contract made six years ago.” Mr. Welch responded to a changing world and made an important decision by asking that the terms of his retirement package be dramatically altered.
Shareholders request that the Board conduct a comprehensive executive compensation review and publish a report of this review, omitting proprietary information and prepared at a reasonable cost. This report shall be available to all shareholders upon request by August 15, 2003. At a minimum, this review should consider the following:
Would shareholder value be enhanced if General Electric altered its executive compensation policies to:
1) Freeze executive pay during periods of large layoffs?
2) Establish a maximum ratio between the highest-paid executive officer and the lowest-paid employee?
3) Seek shareholder approval for any executive severance payments or executive retirement plans exceeding two times annual salary?
Jack Welch had it right: executive pay packages that seemed appropriate six years ago are today subject to great public scrutiny and question. General Electric has not become a successful company by clinging to convention and refusing to change.
Does it take the promise of a financial payoff of tens of millions of dollars to get a CEO out of bed in the morning and off to work? Of course not. The passion of most successful CEOs is to create a company they and others can be proud of. We believe that a company with a commitment to fairness and equity, and in which all employees are regarded as co-creators of corporate success, would be a company worthy of pride.
Please vote FOR this resolution!