1. Abhishek Nagre
Abhisheknagre777@gmail.com
Case write up – GE Executive compensation program
After much criticized Jack Welch’s Severance package and slowest growth rates over the decades the fame of the biggest
company in America GE was in jeopardy. Perhaps the new CEO Jeff Immelt saw the toughest conditions of the company.
With the Terror attack of 9/11, mismanagements and frauds of companies like Tyco, Enron - all these led to a suspecting
attitude of people toward companies like GE and other multinationals.
Executive compensation at GE – Key elements:
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Salary & Bonus
Stock Options and Stock appreciation rights
Restricted Stock units
Long term performance awards
Till 2002 these elements were extensively used to motivate and reward the performances of the Executives
The Modifications of 2003 Compensation plan
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Replacing 40 % of estimated value of new grants with Restricted stock units out of which 50 % lapsed after 3years
and 50 % after 5 years
From 2003 December to 2005 - Linking long term awards to three goals namely Threshold, Target, Maximum with
4 metrics – Average earnings per share Average revenue growth rate, average return on capital and cumulative
cash generated. each of these metrics weighed equally
Immelts stock options and restricted stock options would be replaced by performance share units [psus] –
essentially stock that would be vested over 5 years but they would be awarded only if the specific targets are met.
BOD Compensation plan - $ 250,000 paid to each director in 4 quarterly installments that too 40 % in cash and 60
% in deferred stock units [DSU’s]
The DSUs will be paid either in lump or equally over 10 years beginning a year after director left the board
Charitable award program wherein each director would recommend up to 5 charitable organizations that upon the
directors death / Retirement would share among them a gift of $ 1 million
Liability insurance for each of the directors
Non renewing 1997 stock option plan for non-employee directors
Terminating the benefits of old retirement plan
Replacing the pension rights due with DSU which will be payable one year after the director left the board
Compensation policy for 2005
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Replacing all SRAS with same value stock options and no anticipated granting’s of SARS In future
No severance agreements with executives granting the flexibility to remove executives when it serves the
company’s interests
Immelts compensation replaced by performance share units which can be converted into GE Shares after 5
years on conditions that GE met specific performance criteria like growth in operating cash flow by 10 % and
second total shareholder return to meet or exceed over the 5 year performance period
No granting of PSUs to any other executive except sir. William being an exception who received them in 2004
due to his service agreement.

2. Imaginative Breakthrough program
Business leaders to submit at least 3 ideas / proposals which will be reviewed and later will be pumped in money for its
implementation with condition that each has to give GE incremental growth of at least $ 100 million
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Change in the Executive compensation with respect to granting of the Rewards for Customer satisfaction, sales and
new ideas thereby giving less importance to financial results
For the first time customers satisfaction will affect the compensation of the leaders of the company