GE CEO Larry Culp Cuts Compensation to Appease Shareholders
Shareholders thought GE CEO Larry Culp was making too much money, so he’s agreed to cut his compensation this year.
March 18 2022, Published 10:25 a.m. ET
General Electric (GE) chairman and CEO Larry Culp has agreed to cut his overall compensation in response to a shareholder vote. Shareholders at GE’s 2021 annual meeting voted against Culp’s pay package. Dating from 2020, the contract was initially set to extend until the company split into three separate entities in 2024.
With a pay cut on the horizon, in 2022, Culp could make up to $10 million less than last year. While his salary is only a portion of this, other compensation (equity awards) will be trimmed off the top.
How much did GE CEO Larry Culp make in 2021?
Culp earns $2.5 million annually in salary. In 2021, this was just a fraction of his compensation. He also made $4.2 million in bonuses and $15 million in equity awards. Altogether, Culp earned $22.7 million last year.
This ticked shareholders off, and at the annual shareholder meeting, about 58 percent of them voted against Culp’s compensation contract. Shareholders thought the compensation didn't align with GE’s financial performance, which many say is below competitor thresholds.
How much is Larry Culp cutting his pay by?
According to GE, Culp will make about $10 million less in 2022 than he did last year. The move shows how powerful shareholder votes can be. Anyone who owns stock in GE is able to vote on corporate matters at shareholder meetings. Whereas dissent for executive pay is rare, GE shareholders were able to shift the paradigm this time around.
Culp’s equity award for 2022 is poised to be $5 million instead of the previous $15 million, “representing a 67 percent reduction of annual equity compared to the amount previously provided in the employment agreement” according to a GE filing. His salary of $2.5 million will remain the same. His bonus is likely to be similar to that of last year, but shareholders won’t know for certain until the end of GE’s current fiscal year.
About the move, GE wrote, “This action reflects our desire to continue incentivizing Larry to lead GE’s transformation and improve the company’s financial performance alongside the rest of the senior leadership team, his demonstrated strong performance as CEO and our Board’s support for his leadership. It also reflects our desire to recognize and meaningfully respond to our shareholders.”
Culp is committed to remaining at the helm of GE at least through 2024, when the larger brand will spin off into three separate entities. At that point, GE will be made up of GE Renewable Energy, GE Power, and GE Digital—all of which will technically be their own companies with unique stock market ticker symbols.
As for how Culp’s compensation could change in the future, the company says, “The 2020 grant was driven by unique and extraordinary circumstances; as such, the Board does not intend to enter into a similar modification of the CEO’s employment agreement again in the future.”