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Last Updated: Dec 19th, 2007 - 13:17:15 |
GE Chairman/CEO Jeff Immelt says in CNBC interview that CEOs should not have contracts and should accept same risk as every other employee
By Finfacts Team
Jan 20, 2007, 15:29
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| Jeffrey R. Immelt, 51, is Chairman of the Board and Chief Executive Officer of GE. Immelt, the 9th Chairman in GE's 129-year history, was appointed to this post on September 7, 2001. His father Joseph was a manager of the Aircraft Engines Division and his wife Andrea worked as a GE Customer Service Representative - - The company traces its beginnings to Thomas A. Edison, who established Edison Electric Light Company in 1878. In 1892, a merger of Edison General Electric Company and Thomson-Houston Electric Company created General Electric Company. GE is the only company listed in the Dow Jones Industrial Index today that was also included in the original index in 1896. | GE - General Electric - announced on Friday record full-year 2006 earnings from continuing operations of $20.7 billion or or $1.99 per share, up 11% and 13%, respectively, from 2005.
US oil giant Exxon Mobil overtook GE as the world's most valuable public company in February 2005.
Full-year revenues from continuing operations were also a record $163.4 billion, up 10%, increasing 9% organically.
GE has a total payroll of about 315,000 and 160,000 are located in the US.
“With strong performances at Infrastructure, Healthcare and the financial services businesses, GE delivered double-digit growth in earnings and revenues for the quarter and the year,” GE Chairman and CEO Jeff Immelt said. “NBC Universal’s turnaround is advancing and Industrial had a good year in spite of continued commodity inflation and competitive challenges at Plastics. We completed the disposition of Advanced Materials in the quarter at a favorable tax rate, which enabled us to accelerate our comprehensive restructuring efforts.
Demand for our services and products continues to grow globally. Our higher-margin services revenues grew 13% for the quarter, and global revenues accounted for $78 billion of revenues for the year, up from approximately $40 billion in 2000.
GE restated earnings for 2001 through the first three quarters of 2006 for the second time, after the Securities and Exchange Commission questioned its accounting methods for hedging commercial paper.
The restatements have not had a material impact on earnings. The first, in May 2005, added $318 million to earnings, but the current one reduced them by $343 million. Thus, the net impact was only $38 million spread over six years.
The restatements did not affect fourth-quarter earnings, which came in at $6.6 billion, up 12 percent from the quarter last year. And it added a penny to earnings per share for 2006, bringing them to $1.99 a share, up 13 percent. For the year, G.E. posted earnings of $20.7 billion from continuing operations, Revenue rose 10 percent from 2005, to $163.4 billion.
Keith S. Sherin, GE’s chief financial officer, said he was “disappointed” that G.E.’s accounting for interest rate swaps did not meet “technical requirements,” but assured analysts that the problem had been corrected.
In December, GE estimated its 2006 tax rate would be around 17.2%. On Friday, GE reported an annual tax rate of about 16% for 2006.
GE and Abbott, a leader in medical diagnostic instruments and tests, announced on Thursday that they have entered into a definitive agreement for GE to acquire Abbott’s primary in vitro diagnostics businesses and Abbott Point-of-Care diagnostics business (formerly known as i-STAT) for $8.13 billion in cash. Abbot has a workforce of 3,400 in Ireland and two of its plants at Sligo and Longford, are part of the deal. GE has a medical diagnostic pharmaceutical plant in Co Cork
CNBC Interview
In an interview Friday on the CNBC business channel, which is owned by GE, Jeff Immelt would not comment on the $210 million bonanza that his former colleague at GE Bob Nardelli had received when he was recently fired as CEO of Home Depot, said that he does not believe that CEOs should have a contract. They should be prepared to accept the same risk as those working under them.
"Transparency is key," Immelt said. "In my belief, and again it's just my belief, people shouldn't have contracts....I think you ought to be in the same position that every other person in the company is. You've got to bring it every day, and if you don't bring it, you shouldn't have a contract that defines what you get when you fail. That's my own philosophy. You have to have a lot at risk."
Immelt said he wouldn't want compensation to be regulated. However, he said, it could happen if businesses don't reform the situation on their own.
As for himself, Immelt said: "I value my own reputation more than I value the money I make."
Immelt does not have a contract in contrast with many counterparts who can make a killing even though they are failures. A popular contract term is to get a big payout for cooperating with a takeover that is approved by the board.
Immelt said he will earn a salary of $3 million this year and get a bonus of about $6 million. In three years, he will clear about $15 million, which would not put him in the top 50 earners at Wall Street investment bank Goldman Sachs.
US investment bank Goldman Sachs Group Inc., which last month reported the best quarterly results in Wall Street history, has paid its new chairman and chief executive, Lloyd Blankfein, about $54 million for 2006, a record for Wall Street bosses.
Blankfein, who became CEO last summer when Henry "Hank" Paulson became Treasury Secretary, saw his pay soar 42% from $38 million for 2005, when he was president and chief operating officer.
Blankfein's mass winnings were a record for a "hired hand." Goldman was founded in 1869.
Immelt said on CNBC that his pay should have a reasonable relationship with his top 20 reports in GE and remarked that it would for example be "weird" if his earnings were 14 to 15 times the Vice-Chairman's.
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