8-KLeadership ChangesRegulation FD

GENERAL ELECTRIC CO 8-K Report, Executive Changes (Mar 22, 2017)

Filed March 22, 2017For Securities:GE

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.

Frequently Asked Questions

GE has set an Industrial operating profit target of $17.2 billion for 2017. They have also increased their target for reducing Industrial structural costs to $23.9 billion for 2017, with a further reduction to $22.9 billion targeted for 2018.

The 2017 bonuses for GE's executive management team are now tied to the achievement of these specific targets. Bonuses can increase by 20% if both the Industrial operating profit and Industrial structural cost targets are met, or decrease by 20% if neither is met. There's no change if only one target is achieved.

These metrics are central to GE's investor framework, developed in discussions with Trian Fund Management, to drive operational efficiency and profitability. The company believes these measures, while non-GAAP, provide a clearer view of the core industrial business performance and cost management efforts.

The Industrial operating profit and Industrial structural cost metrics discussed in this filing are considered non-GAAP financial measures. GE states that providing a reconciliation to the equivalent GAAP measure for forward-looking targets is impractical due to unknown variables like future acquisitions, dispositions, and currency exchange rates.