NEW YORK • General Electric (GE) shareholders rejected top executives' compensation packages, including a payout of as much as US$230 million (S$307 million) to chief executive Larry Culp, at the industrial conglomerate's annual shareholder meeting on Tuesday.
While the shareholder vote was non-binding, the move was a rare rebuke of a major corporation's handling of its executive pay.
It comes after GE laid off 20,000 workers last year. It is set to embolden corporate governance reform advocates who have criticised the shielding of chief executives from the financial fallout of the Covid-19 pandemic and the cost cuts companies often choose to implement.
As part of an extension of Mr Culp's employment contract to 2024, GE last August cancelled old shares given to him and granted him new shares tied to lower financial targets.
Proxy advisory firms Institutional Shareholder Services and Glass Lewis opposed the pay package, arguing that lowering the bar on the performance targets was unjustified and the stock award too generous.
GE countered that the uncertainty of the pandemic made it difficult to incentivise Mr Culp without lowering his performance targets, and that an extension of his contract with a new stock award was needed because the company's turnaround would take longer than expected.
About 57.7 per cent of GE shareholders rejected the executive pay packages, according to preliminary results.
The company said in a statement that it will gather feedback from investors and evaluate its executive compensation programme moving forward.
Its shares, which have gained about 140 per cent since last May, closed down about 2.5 per cent at US$13.12.
Mr Culp, the first company outsider to lead GE, did not comment on the vote outcome.
IUE-CWA, the industrial division of the Communications Workers of America that represents GE's workers, cheered the thumbs-down from shareholders. Ahead of the vote, the union members staged a protest outside the company's headquarters in Boston.
"We need GE to invest in America, not just one top executive," said Mr Carl Kennebrew, national president of IUE-CWA. "We are glad that shareholders are starting to see it the same way."
Last week, AT&T shareholders voted against a measure to approve executive compensation.
At least four other S&P 500 companies that have disclosed shareholder vote tallies with regulators have been defeated over executive pay so far this year, up to the end of last month - IBM, Starbucks, Walgreens Boots Alliance and TransDigm Group, according to compensation consultant Farient Advisors, which looked at companies that have reported this year and last.
Only one company, Qualcomm, had its executive pay rejected by shareholders at this point last year, according to Farient.
GE said in its statement that its board remained confident in Mr Culp and his team. The company, however, did not say whether it would change the executive compensation as a result of the vote.
Losing the shareholder vote can put pressure on corporate boards and executives to negotiate new pay deals.
Two years ago, The Walt Disney Company renegotiated the compensation of then chief executive Bob Iger to toughen his performance targets after shareholders voted down his pay.
REUTERS
