Risk & Compliance

GE to Seek Shareholder OK on Severance

New guidelines, adopted in advance of the company's annual meeting, aren't as sweeping as those that were narrowly defeated last year.
Stephen TaubMarch 19, 2004

Companies are becoming increasingly responsive to shareholders in this age of Sarbanes-Oxley and high-profile executive trials. A growing number of companies are acting on shareholder wishes that are not binding — and sometimes that have not garnered majority support.

The most recent example: General Electric Corp., which agreed to give shareholders approval of large severance packages for senior executives.

A similar, more extensive version of the proposal, sponsored by the Teamsters Affiliates Pension Plan, was narrowly defeated at last year’s annual meeting, according to the Associated Press.

That proposal — following a format popular among shareholder activists — would have required the company to seek shareholder approval if a severance package were worth more than 2.99 times an executive’s salary and bonus.

The new guidelines — which the company adopted in advance of its April 28 annual meeting, according to the GE web site — will apply only to the five executive officer listed in the company’s proxy, and then only if they are terminated before retirement for performance reasons, reported the AP. In addition, the new rule defines “severance package” far more specifically.

Teamsters spokesman Louis Malizia said the union was pleased nevertheless, according to the AP, because the company met the essentials of the original proposal. He added that he believes the company made the changes because the proposal won such strong support even without a major campaign by the union. GE said the company made the changes because they make sense, reported the wire service.

At next month’s annual meeting, to be held in Louisville, Kentucky, GE shareholders will be asked to vote on no fewer than 15 resolutions, according to the company’s proxy. They include proposals would require cumulative voting; that an outsider serve as chairman of the board; that executive compensation be reined in; and that GE hire an investment bank to sell the company because its stock is undervalued.