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General Electric
Co.
has agreed to pay its new chief executive, Larry Culp, up to $ 21 million a year for four years, which could generate hundreds of millions of additional dollars, depending on the performance of GE's shares.
Mr. Culp, a board member who succeeded John Flannery as GE's leading position, signed an agreement with the company that pays him $ 2.5 million a year in salary and an annual bonus. from a target of $ 3.75 million, the company said in a document filed after the market closed Thursday.
He will also receive annual awards in shares worth $ 15 million starting next year, the company said.
These awards will consist of "performance share units", which generally vary depending on the company's financial and operating metrics over time.
However, the deposit shows that the gains will be significant if GE shares increase by at least 50% and remain on average more than 30 trading days by 2022. GE confirmed that the increase would be calculated from an average price over 30 days ending just prior to Mr. Culp's start date on October 1.
A 50% increase would bring GE's stock price to $ 18.60 and bring to Culp 2.5 million shares, which at these prices were worth about $ 46.5 million. If the share price rises by at least 150% for 30 trading days, to about $ 31 per share, Mr. Culp would receive 7.5 million shares, or $ 232.5 million. dollars at this price.
Reaching this threshold would give Mr. Culp 2.5 million shares, which at these prices would be a little over $ 45 million.
If the stock price rises by at least 150% and maintains that level – at around $ 30 – for 30 trading days, Mr. Culp will receive $ 7.5 million. actions, or $ 227 million at this price.
GE closed Thursday at 12.66 dollars, up 18 cents the same day, or 1.4%.
The company did not specify how shares would be allocated between these thresholds or performance measures for Mr. Culp's annual share awards, and did not include Mr. Culp's employment contract in the statement. Thursday.
The filing indicated that Mr. Culp's share awards would be adjusted for spin-offs or reorganization of capital, and that his employment agreement would include unspecified conditions that would apply in the event of a change of control.
The company pointed out that nearly 90% of Culp's annual compensation consists of bonuses and shares, which "strongly binds his earnings to produce results for investors", and that he will not benefit from the sole allocation of shares only if price improvement.
"Larry is a seasoned executive with a long tradition of superior execution, and the board's proposal to attract Larry is extremely performance-related," the company said.
If Mr. Culp is fired for no reason – or leaves with "good reason", which usually includes developments such as demotion, he is likely to receive severance pay of $ 12.5 million.
In its securities filings, the company has suggested that the terms of Mr. Flannery's departure not yet be settled. "The important terms of Mr. Flannery's separation agreement will be disclosed once they have been finalized."
Mr. Flannery, promoted to the position of CEO in mid-2017, made a profit of $ 9 million last year. On promotion, his salary was set at $ 2 million and his bonus target at $ 3 million. GE stated that Mr. Culp's base salary was higher because he was going into the job as a more experienced executive.
At the helm
Danaher
Corp.
From 2001 to 2001, Mr. Culp was known for his significant but not disproportionate salaries, according to compensation analysts. From 2006 to 2013, it earned between $ 17 and $ 22 million a year, except in 2009, at the height of the financial crisis, with $ 11 million.
His compensation tended to be 25% to 35% higher than the norm for executives of peer companies, such as
3M
Co.
,
Baxter International
Inc.
Honeywell International
Inc.
and Medtronic PLC, said John Roe, head of ISS Analytics, the IT data arm of Institutional Shareholder Services. He received significant stock option awards long after many companies turned to more restricted and performance-based stock awards, Roe said.
Write to Theo Francis at [email protected]
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