It's rather amazing how much time we have spent in recent years wondering aloud if one of the most legendary corporations in American business history was even capable of survival.
But what's even more amazing is how much General Electric is proving that it is not capable:
General Electric Co. took another step to cut the debt hampering its turnaround, freezing pension benefits for more than 20,000 U.S. employees.
The company also plans to pre-fund $4 billion to $5 billion of its estimated requirements for 2021 and 2022, according to a statement Monday. The moves will help trim the pension shortfall by as much as $8 billion and reduce GE’s industrial net debt by $4 billion to $6 billion.
That's a nice amount of water to bail off a sinking ship! And just imagine how much better off GE would be if it could save a few million here or there on basic and weighted executive compensation.
We here at Dealbreaker take a pretty centrist stance in the exec comp debate [well, Shazar doesn't] but even we have to admit that Culp making $21 million while freezing pensions to get the stock up and create more comp, invites the socialists to pick up their pitchforks...
Larry Culp, named GE chairman and CEO on Monday, will receive a compensation package of up to $21 million a year in salary, bonuses and stock for the next four years. Beginning next year, GE will annually give Culp a salary of $2.5 million, a bonus of about $3.75 million and equity awards valued at $15 million.
But that’s not the best part for Culp: If the stock rises more than 50 percent, he also gets a payday of about $47 million. And he gets more money if it rises further.
We're all for paying people absurd amounts of money when they return absurd multiples of that amount to shareholders, but that philosophy stretches credulity when the company is 2019 GE and the CEO is punching down to cut costs, pump the value of his company shares and hit his targets.
Undoubtedly, Culp has plans in place to make his comp part of this plan, but he should really get that message out there in tandem with this announcement. The markets love flinty-eyed capitalism if it evinces results, but Culp might be putting himself in the crosshairs of a shifting political-cultural moment.
Difficult management decisions are admirable, but only when they hurt management. Otherwise, those decisions are just cost-cutting, and that's just business.