The Director Compensation Project: General Electric (GE)

This post is part of an ongoing series that examines the way stock exchange independence rules relate to director compensation. We are for the most part including companies from 2016’s Fortune 500 and using information found in their 2016 proxy statements.

NASDAQ and the NYSE have similar rules with respect to director independence. NYSE Rule 303A.01 requires that each listed company’s board of directors be comprised of a majority of independent directors. A director does not qualify as “independent” if he or she has a “material relationship with the company.” NYSE Rule 303A.02(a). In addition, the director is not considered independent under NYSE Rule 303A.02(b)(ii) if the director received more than $120,000 in direct compensation, other than director’s fees, during any of the previous three years. The NYSE imposes a higher independence standard for directors serving on the company’s audit committee by requiring them to comport with Rule 10A-3 (C.F.R. §240.10A-3) (see Rule 303A.06) and requires consideration by the board of directors of certain specified factors in designating directors for the Compensation Committee.  See NYSE Rule 303A.02(a)(ii).

Finally, as the Commission has noted with respect to director independence:

• All compensation committee members must meet the general independence standards under NYSE’s rules in addition to the two new criteria being adopted herein. The Commission therefore expects that boards, in fulfilling their obligations, will apply this standard to each such director’s individual responsibilities as a board member, including specific committee memberships such as the compensation committee. Although personal and business relationships, related party transactions, and other matters suggested by commenters are not specified either as bright-line disqualifications or explicit factors that must be considered in evaluating a director’s independence, the Commission believes that compliance with NYSE’s rules and the provision noted above would demand consideration of such factors with respect to compensation committee members, as well as to all Independent Directors on the board. 

Exchange Act Release No. 68639 (Jan. 11, 2013); see also Exchange Act Release No. 68641 (Jan. 11, 2013).

Independent directors are compensated for their service on the board. The amount of “total compensation” can be seen from examining the director compensation table from General Electric’s (NYSE: GE) 2016 proxy statement. According to the proxy statement, the company paid the directors the following amounts: 

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
W. Geoffrey Beattie	0	299,237	0	25,000	324,237
John J. Brennan	0	374,046	0	25,000	399,046
James I. Cash, Jr.	110,000	164,580	0	69,357	343,937
Francisco D’Souza	0	274,300	0	15,138	289,438
Marijn E. Dekkers	110,000	164,580	0	22,471	297,051
Ann M. Fudge*	37,500	55,150	0	1,012,250	1,104,900
Susan J. Hockfield	100,000	149,618	0	9,410	259,028
Andrea Jung	110,000	164,580	0	25,000	299,580
Robert W. Lane	120,000	179,542	0	0	299,542
Rochelle B. Lazarus	0	249,364	0	27,450	276,814
James J. Mulva	0	274,300	0	25,000	299,300
James E. Rohr	130,000	194,504	0	0	324,504
Mary L. Schapiro	66,000	233,662	0	25,000	324,662
Robert J. Swieringa	99,000	175,395	0	24,735	299,130
James S. Tisch	0	249,364	0	0	249,364
Douglas A. Warner III	120,000	179,542	0	32,729	332,271

*Ms. Fudge retired from the board in April 2015.

Director Compensation.  During fiscal year 2015, General Electric held thirteen board of directors meetings and fifty-five committee meetings. Each current director attended at least 75% of the total number of board and committee meetings on which he or she served. Directors are also expected to make at least two visits to GE businesses annually. Directors are reimbursed for travel expenses. The “other compensation” directors receives is composed of two categories, first is the Matching Gifts Program which matches contributions directors make and report timely to the company, and second is other benefits which is composed of the fair market value of products received under the Executive Products and Lighting Program. 

Director Tenure.  In 2015, Ms. Lazarus, who has held her position as a member of the Board of Directors since 2000, held the longest tenure. Mr. D’Souza, Mr. Rohr, and Ms. Schapiro hold the shortest tenure as they joined in 2013. All of the directors sit on other boards: Mr. Beattie serves as Chairman for Relay Ventures; Mr. Brennan serves as a Director for Guardian Life Insurance; Mr. D’Souza serves on the Board for the New York Hall of Science; Mr. Dekkers serves as President for German Chemical Industry Association; Ms. Hockfield serves as a Board member for Partners Healthcare; Mr. Immelt serves as a Trustee for Dartmouth College; Ms. Jung serves as a Director for Grameen America; Mr. Lane serves as a Trustee for the University of Chicago; Ms. Lazarus servers as a Director for the World Wildlife Fund; Mr. Mulva serves as a Chair-elect for M.D. Anderson Cancer Center; Mr. Rohr servers as Chairman for Carnegie Mellon University; Ms. Schapiro serves as Vice chair for the Sustainability Accounting Standards Board; and Mr. Tisch serves as Director for Mount Sinai Medical Center. Ms. Fudge retired from the board in April in 2015 but received notably higher compensation compared to other directors because of a $1,000,000 contribution under the Charitable Award Program for her.

CEO Compensation.  Jeff Immelt, General Electric’s Chairman and Chief Executive Officer since 2007 and Chairman of the Board since 2010, earned total compensation of $32,973,947 in 2015. He earned a base salary of $3,800,000, a bonus of $5,400,000, stock awards of $6,238,766, incentive compensation of $7,614,000, deferred earnings of $6,336,805, and other compensation totaling $620,376. Jeff Bornstein, Senior Executive Vice President and Chief Financial Officer, earned total compensation of $13,260,816 in 2015. He earned a base salary of $1,600,000, a bonus of $2,500,000, stock awards of $2,746,623, incentive compensation of $3,351,200, and other compensation totaling $161,000.