Human Capital & Careers

GE Comes Up With New Formula

Bowing to union pressure, conglomerate will reportedly ditch pension income when calculating executive pay. Meanwhile, bonus ban still on at Nortel
Lisa YoonFebruary 24, 2003

General Electric Co. is changing the way it pays top executives by disregarding pension income, according to Friday’s Wall Street Journal.

Currently, GE calculates the pay of senior executives based on several factors, including earnings per share. This model lets the conglomerate include any income generated by the company pension plan (the difference between return on pension assets and the plan’s current costs).

Under the new approach, GE’s compensation committee will exclude such income when assessing executive compensation. The company will also exclude pension income when considering executive bonuses, a company official told the Journal.

In 2002, the pension plan contributed $1 billion income after tax, the Journal reported.

GE made the change in response to a shareholder proposal by the Communications Workers of America (CWA), which includes thousands of the company’s workers and retirees, the paper noted.

Next month, GE compensation committee head Andrew Sigler will meet with several large shareholders to talk about executive compensation, according to the newspaper. During the discussion, Sigler plans to explain the new pay plan, which will affect the long-term incentive compensation program for the three-year period starting this year.

In other executive-compensation news, Nortel Networks is continuing its ban on executive bonuses as part of its plan to regain profitability, according to the Ottawa Business Journal.

The bonus ban includes Frank Dunn, the telco’s onetime CFO who took over as Nortel chief executive in 2001.

Still, Dunn didn’t exactly go broke in his first full year at the helm of Nortel. The company’s latest proxy filing with the Securities and Exchange Commission put Dunn’s compensation at nearly $850,000.

Survey: Front-line Leadership a Priority

Front-line leadership development is a priority, according to a January survey by online-training company Development Dimensions International.

Of 1,100 human-resources executives surveyed, 79 percent reported that the number of people seeking leadership training is steady or growing, even in the face of a weak economy and budget cuts.

The bad news is that about 41 percent of the respondents said they were dissatisfied with their company’s training programs, saying the material emphasized in the programs need updating. They said they would like to see their leadership training revamped to include coaching, leadership styles, career development, decision making, and management of employee performance, and skills.