Two years after taking the reins of General Electric, adrift following bad bets in energy, Larry Culp sees his risk heavily rewarded: the boss of GE is guaranteed to receive a bonus of nearly $ 47 million while the industrial group is laying off thousands of employees, especially in France, to respond to the crisis caused by the Covid-19 pandemic.
Mr. Culp’s bonus, at the helm 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.
The big boss had received nearly $ 25 million for his 2019 compensation.
But 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 Mr. Culp.
On August 18, GE amended Mr. Culp’s compensation plan, adopting new terms that were very favorable to the manager compared to the initial employment contract signed in October 2018.
The company extended his contract until 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.
– “Scandalous” –
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 receive in 2024. This has been the case for several days.
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 get a total bonus of $ 230 million if GE stock rose to at least $ 17, down from $ 31 in the previous compensation plan.
A goal that he should not have difficulty achieving 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 GE employees. “How can GE justify this kind of big bonus for its CEO when workers, their families and communities suffer from job cuts and offshoring?”
The unionist believes that this money should be “invested in the American factories of GE, our jobs”.
Sources inside the company tell AFP that they recognize the bonuses are extraordinary given the company’s decline, but point out that all 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 position and strengthen the business,” a spokesperson told AFP.
– Abolition of 13,000 jobs –
Larry Culp’s bonus has been previously reported by Bloomberg, the Financial Times and other media.
Mr. Culp’s strategy 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.
Over the past two years, GE has increased social plans across the world, 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.
While GE managed to drastically cut losses last year, it still posted a net loss of $ 1.2 billion in the third quarter.
The group is still heavily in debt. Its turbine business is in overcapacity, while the plunge in demand for aircraft will significantly impact the production of engines, spare parts and maintenance services.