Before discussing my votes for directors and the proposals, find
below a 10, 5, and 1-year performance comparison between GE, the
S&P 500 and the Dow.
10-year performance (through Friday, April 9th)
GE: -65%, S&P 500: -21%, DJIA: +0.7%
GE: -48%, S&P 500: +1%, DJIA: +5.7%
GE: +63%, S&P 500: +46%, DJIA: +41%
Election of directors
Starting off with the election of the 16 directors, a board size
which some may call unwieldy, exactly half have served since 2000
or prior, including Chairman/CEO Immelt himself. Among the other
half, five of them have served since between 2000 and 2005. The
tenure of all but two of the directors has clearly not coincided
with positive returns as evidenced by GE's stock price. The rise
and fall of GE Capital happened on many of these directors'
watches. It seems certain all of them save perhaps Mr. Warner
(former chairman of JP Morgan) likely had no cognizance of
company's transformation into a giant speculator.
After a review of GE's directors, in which I considered their
tenure (many are too long in the tooth to be considered
"independent," not to mention GE's disappointing stock performance
mentioned above), expertise (see comments below), and other
professional commitments (many directors hold multiple
directorships and equivalent roles at nonprofits), I was left
scratching my head at the dubious collection of bodies who neither
seem to be holding management accountable nor representing any
value to shareholders.
Accordingly, I am only voting in favor of Mr. Immelt, Mr.
Mulva, and Mr. Castell
As for Mr. Immelt, I believe that he should not be chairman of
the board (see shareholder proposal 3 below), but I don't see a
problem with him remaining a board member. Finally, overall the
board is seriously lacking in industrial exposure and has an
overall soft feel featuring consumer products (Ms. Jung, Avon; Mr.
Lafley, P&G; Mr. Larsen, J&J), marketing (Ms. Lazarus,
Ogilvy & Mather; Ms. Fudge, Young & Rubicam Brands), and
academia (Mr. Swieringa, Ms. Hockfield, and Mr. Cash).
Selection of independent auditor
I am rather agnostic concerning the selection of an independent
auditor. GE's board advises voting for retaining KPMG, which billed
the company $110M in 2009 and $133M in 2008. I don't have much to
say on this topic other than that given the questionable value and
accountability of having an auditor sign off on the books (no need
to name names), I don't see much point wasting time pondering if
KPMG would be better than anyone else. ABSTAIN.
*Note GE's board is against each of these proposals
1. Cumulative voting - FOR - note 32.3% in favor in 2009; it is
clear even if your eyes are closed that the board is practically
meaningless to shareholders. It is far too entrenched. Cumulative
voting may be the only way to shake things up.
2. Special shareowner meetings - FOR - the individual who
submitted this proposal has clearly done his homework and has a
laundry list of governance issues at GE. I believe that without
cumulative voting, lowering the threshold to call special meetings
is reasonable. In fact, given the broad shareholder base of GE, I
don't see why the board would not go along with this proposal,
since unless GE shareholders miraculously unite, there seems little
risk to the board and management actually having to meet
shareholders beyond normal correspondence.
3. Independent board chairman - FOR - I don't see the need for
Mr. Immelt to head both the company and the board. Heading the
latter hinders the independence of the board. Note that CalPERS is
supportive of independent board chairmanships.
4. Pay disparity - AGAINST - While I can understand the thinking
behind this proposal, I don't think conducting such a review is
practical. That said, I like the idea behind the 4th matter for
review that was submitted within this proposal, which involves the
compensation and provision of benefits such as health care to
5. Key board committees - FOR - This is a no-brainer, especially
since there is no cumulative voting (yet).
6. Advisory vote on executive compensation - FOR - "Say on pay"
matters are critical, particularly when shareholder value is being
eroded. A number of companies have agreed to implement said vote,
and groups such as RiskMetrics are supportive as well. Furthermore,
it may become law.
The author is a GE shareholder.
Insiders Still Not Buying the Recovery Talk