The CEO of General Electric is guaranteed to pocket a bonus of $ 47 million, despite the precarious health of the American group which resulted in the elimination of 13,000 jobs, in particular on its French site in Belfort.
Two years after taking the reins of General Electric (GE), adrift following bad bets in energy, Larry Culp sees his risk strongly rewarded: the boss of GE is guaranteed to receive a bonus of nearly 47 million dollars while the industrial group is laying off thousands of employees – especially in France – to respond to the crisis caused by the Covid-19 pandemic at the end of December 2020.
The bonus of Larry Culp, at the helm of GE since October 1, 2018, could even reach the staggering amount of $ 230 million if he managed to achieve particularly low financial objectives, according to documents sent to the American policeman of the Stock Exchange , the SEC, and consulted by AFP.
This summer, faced with the difficulties encountered by the aviation division – which manufactures LEAP aircraft engines in partnership with the French group Safran – GE deployed a real charm offensive to prevent the departure of Larry Culp. On August 18, GE amended the compensation plan for its CEO by adopting new terms very favorable to the manager compared to the initial employment contract signed in October 2018.
The company extended his contract to 2024 with an additional one-year option and then lowered the financial targets it set for him, giving him more time to turn the business around.
A “scandalous” bonus for GE employees
Larry Culp’s bonus – who had already received nearly $ 25 million in 2019 compensation – was reported by Bloomberg, the Financial Times among other media.
In detail, if Larry Culp, 57, could allow GE stock to reach the $ 10 threshold and beyond on Wall Street – instead of $ 19 previously – and stay there for 30 days, he would pocket $ 47 million in stock options, which he could touch in 2024. However, the GE share has exceeded $ 10 since November 23.
In August, the stock was trading around $ 6.67, but has since soared in the wake of the markets, excited by the news on the Covid-19 vaccine front.
Larry Culp could receive a total bonus of $ 230 million if GE stock rose to at least $ 17, compared to $ 31 in the previous compensation plan. A goal that the CEO should achieve without too much difficulty, since he has until 2025 to achieve it. By then, the global economy should regain color, which should positively affect General Electric’s activities.
“It’s scandalous,” responded Carl Kennebrew, president of the IUE-CWA, a union of General Electric employees. “How can GE justify this type of big bonus for its CEO when workers, their families and communities suffer from job cuts and relocations?” Asked the unionist, who believes that this money should be “invested in GE’s US factories” and jobs.
Sources inside the company told AFP that they recognize the bonuses are extraordinary given the company’s decline, but point out that all of this money will not be available until early 2024 at the earliest. “Under Larry’s leadership, GE has made significant progress against the goals it set on the first day of taking office as CEO: to improve the company’s financial situation and strengthen the business,” a spokeswoman for the American company told AFP.
13,000 jobs cut
The strategy of the CEO of General Electric has resulted in “an uncertain future for many former employees. Much more uncertain than that of Mr. Culp “, castigates Brooke Sutherland, columnist at Bloomberg Opinion, in the Washington post.
GE has indeed multiplied social plans across the world over the past two years, and in particular at its French site in Belfort. The company announced in the spring a plan to save $ 2 billion, through the elimination of 13,000 jobs. New cuts are coming, the group has already warned.
General Electric was able to drastically reduce its losses last year, but still recorded a net loss of $ 1.2 billion in the third quarter. The group is also still heavily in debt. Its turbine production activity is in overcapacity, while the plunge in demand for aircraft will significantly affect the production of engines and spare parts, as well as maintenance services.