Why did GE change its performance metrics for executive compensation?

GE changed the performance metrics for its Long-Term Performance Awards (LTPAs) because of its strategic decision to sell most of GE Capital and refocus on its industrial businesses. The original metrics, set before this strategic shift, would not accurately reflect performance in the new, more industrially focused company.

What specific performance metric was changed, and what is it now?

The '2015 return on total capital' (ROTC) metric was replaced with '2015 Industrial ROTC'. This change ensures that executive incentives are tied to the performance of GE's industrial operations rather than the overall company, which will be significantly altered by the divestiture of GE Capital.

How does this change affect the overall incentive structure for GE executives?

This change ensures that the incentive structure remains relevant and aligned with the company's strategic direction. By focusing on '2015 Industrial ROTC', the company is emphasizing the importance of profitability and efficiency within its core industrial segments, which is the future focus for GE.

Where can I find more detailed information about these performance awards?

More detailed information, including how Industrial ROTC is calculated and further details on the LTPAs, can be found in General Electric Company's proxy statement for the 2015 annual shareholders meeting and its associated supplemental materials, both filed with the SEC on March 10, 2015, and available on GE's website (www.ge.com/proxy).

GE 8-K: Leadership Changes

Summary

This 8-K filing from General Electric (GE) on June 10, 2015, primarily addresses a modification to performance metrics for outstanding Long-Term Performance Awards (LTPAs) granted in 2013. The change is a direct response to GE's announced plan in April 2015 to significantly divest its financial services arm, GE Capital, and refocus on its industrial businesses. This strategic shift necessitated an adjustment to ensure executive compensation remained aligned with the company's evolving business model and operational focus. The key adjustment involves replacing one of the four equally weighted performance metrics. The "2015 return on total capital" (ROTC) metric has been modified to "2015 Industrial ROTC." This change aims to specifically incentivize and measure performance within GE's core industrial segments, acknowledging that the planned sale of GE Capital assets would alter overall company earnings and capital structure, potentially distorting the original ROTC metric. Investors should note that this adjustment is intended to maintain the integrity of the incentive program and direct executive focus towards the successful execution of GE's industrial strategy.

Key Highlights

1GE modified performance metrics for outstanding Long-Term Performance Awards (LTPAs) granted in 2013.
2The modification is in response to the company's April 2015 announcement to divest most of GE Capital and focus on industrial businesses.
3One of the four equally weighted performance metrics has been adjusted.
4The '2015 return on total capital' (ROTC) metric has been replaced with '2015 Industrial ROTC'.
5This change is intended to focus executive incentives on driving returns within the industrial segments.
6The adjustment accounts for the impact of the GE Capital Exit Plan on overall company earnings and capital structure.
7The threshold and maximum performance levels for 2015 Industrial ROTC are set at 16% and 18%, respectively.

GENERAL ELECTRIC CO 8-K Report, Executive Changes (Jun 10, 2015)

Summary

Key Highlights

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