Remember all of the exotic benefits former General Electric chairman and CEO Jack Welch was to receive when he retired?
Well, the Securities and Exchange Commission wasn’t too happy to learn about them for the first time from sources other than securities filings.
As a result, the regulator swung into action and last week settled enforcement proceedings against the conglomerate. The charged GE with failing to fully describe the substantial benefits it had agreed to provide Welch under an “employment and post-retirement consulting agreement.”
Under the settlement, GE agreed to cease and desist from violating the proxy-solicitation and periodic reporting provisions of the federal securities laws.
“Shareholders have a clear interest in knowing how public companies compensate their top executives,” said Paul Berger, associate director of the SEC’s enforcement division. “Compliance with SEC disclosure rules ensures that shareholders are provided a full and accurate understanding of senior executives’ compensation arrangements.”
The commission asserted that in proxy statements and annual reports filed from 1997 to 2002, GE failed to fully and accurately describe the retirement benefits Welch was entitled to receive from the company.
For example, in a December 1996 “employment and post-retirement consulting agreement,” Welch received lifetime access to the perquisites and benefits he had received as GE’s chairman and CEO, according to the SEC. GE’s proxy statements, however, only referred to Welch’s entitlement to “…continued lifetime access to company facilities and services comparable to those that are currently made available to him by the company.”
The company didn’t supply any other specific information about the “facilities and services” Welch would receive in retirement, the commission said.
GE didn’t disclose in its proxies many of the most significant “facilities and services” Welch had been provided prior to his retirement, including personal use of GE-owned aircraft, as well as chauffeured limousines and home-security systems, the SEC asserted.
The commission also found that in the first year following Welch’s retirement in September 2001 that the SEC learned that Welch received about $2.5 million in benefits under the agreement with GE, according to the commission. The benefits included access to GE aircraft for unlimited personal use and for business travel; exclusive use of a furnished New York City apartment that, as of 2003, had a rental value of about $50,000 a month and a resale value of more than $11 million; and the unrestricted access to a chauffeured limousine driven by professionals trained in security measures.
Welch’s other retirement benefits included a leased Mercedes Benz; office space in both New York City and in Connecticut; bodyguards for a number of speaking engagements, including a book tour to promote his autobiography, Jack: Straight from the Gut; and installation of a security system in one of Welch’s homes and continued maintenance of security systems GE had previously installed in three of Welch’s other homes.
The company stated that it “believes that the settlement represents a constructive conclusion to this matter. During more than 40 years at GE, Jack Welch delivered extraordinary value to GE investors, customers, and shareowners.”
“I’m pleased it’s over,” Welch said, according to Bloomberg. “I hope it clarifies things more for others.”