Summary
General Electric (GE) filed an 8-K on March 22, 2017, disclosing an investor framework agreed upon with Trian Fund Management. Key to this framework is the setting of a 2017 Industrial operating profit target of $17.2 billion. Additionally, GE announced an accelerated and increased target for reducing Industrial structural costs, aiming for $23.9 billion in 2017 and $22.9 billion in 2018, up from the previously announced $24.9 billion reduction for 2016. In conjunction with these targets, GE has modified its executive compensation structure. The 2017 bonuses for the executive management team will be adjusted by 20% (either an increase or decrease) based on the achievement of both the Industrial operating profit and Industrial structural cost targets. This move signals a clear alignment of executive incentives with operational and cost-reduction goals, reflecting a response to shareholder engagement.
Key Highlights
- 1GE sets a 2017 Industrial operating profit target of $17.2 billion.
- 2Increased and accelerated target for Industrial structural cost reduction to $23.9 billion in 2017 (from $24.9 billion in 2016).
- 3Targeting further reduction in Industrial structural costs to $22.9 billion for 2018.
- 4Executive management bonuses for 2017 will be adjusted by +/- 20% based on achieving both profit and cost targets.
- 5The framework was developed in discussion with Trian Fund Management.
- 6Company will review and potentially further align executive incentives for 2018.
- 7The reported metrics (Industrial operating profit and structural costs) are non-GAAP financial measures.