BOSTON — In one of its annual federal regulatory filings, General Electric this month reported that its CEO’s annual compensation will be 345 times greater than the median pay of its quarter-million employees.
The $20,086,327 million annual pay listed for H. Lawrence Culp Jr. compares with $58,204 in total compensation paid to a Louisiana-based employee.
The key distinction was that the median employee got all of that money in 2018. Culp will get most of his millions in the future, and only if General Electric’s stock price surges above its current level.
The specifics of Culp’s compensation package were disclosed when he came aboard as chairman and CEO in autumn 2018. They were spelled out again in the preliminary proxy statement submitted March 8 to the U.S. Securities and Exchange Commission, which provides information shareowners may want to see before GE’s annual meeting in Tarrytown on May 8.
The unnamed employee with the median salary works for Baker Hughes, a GE company. General Electric looked at about 95 percent of its 264,000-strong workforce (excluding workers at recently acquired companies, excluding workers in certain foreign countries and excluding Culp himself) and determined who was between the 48th and 52nd percentile.
Among those, the Louisiana worker fell in the very middle. Half of the GE workforce earns more than he or she does, half earns less.
In 2018, Culp drew a $625,000 salary and a $937,500 bonus (one quarter each of his $2.5 million annual salary and $3.75 million maximum annual bonus, as he worked for GE only a quarter of the year).
Executive bonuses are discretionary on the part of the board of directors, and paid only if the company meets financial goals. Most GE executives did not get a 2018 bonus; Culp did, the proxy statement said, because he was on the job too short a time to be judged by full-year metrics and yet got off to a strong start.
Culp also got performance stock units (PSUs) valued at $13.74 million, which will be paid out only if stock price increases substantially in the four-year period from Oct. 1, 2018, to Sept. 30, 2022. The target for GE’s stock price is $24.80. The minimum threshold for Culp’s PSUs is $18.60 a share, and the maximum is $31.00 per share.
The stock closed at $10.19 per share Tuesday in light trading. It closed at $12.09 on Oct. 1, 2018, the day Culp was announced as the new CEO.
GE shareholders will cast a non-binding advisory vote on executive compensation at the May 8 meeting.
Shareholders also will vote on proposals submitted by their fellow shareholders: requiring an independent chairman of the board of directors and creating cumulative shareholder voting for election of directors.
The board of directors recommended shareholders vote against both proposals.