FAIRFIELD, Conn.--(BUSINESS WIRE)--Nov. 7, 2002--GE today announced changes in corporate governance designed to strengthen the board of directors' oversight of management and to serve the long-term interests of shareowners, employees and other stakeholders.
The actions implement requirements of the Sarbanes-Oxley legislation and the proposed New York Stock Exchange listing requirements, as well as GE's own vision of good governance. They are the product of a three-month board process that involved detailed review of issues, materials and options and culminated in two special board meetings. A summary of the key changes is below.
The changes are contained in GE's corporate governance documents, which are available on a new corporate governance website, www.ge.com/governance. The documents include: GE's corporate governance principles; charters and key practices of the board committees; and a list of board and committee members who will serve effective January 1, 2003.
GE Chairman and CEO Jeffrey R. Immelt said, "In preparing and making public these documents, we were guided by some basic ideas: We should talk externally the way we run GE internally. We should try to satisfy the spirit, not just the letter, of the new corporate governance requirements. We should act promptly to implement changes in governance, and not wait for `formal' effective dates in the law that may be many months in the future.
"I want directors to probe with hard questions which stretch management so that, within the context of mutual respect, board meetings can deal in depth with core issues affecting the long-term interests of shareowners and other stakeholders," Immelt said. "By the same token, I expect directors to have even greater involvement and participation in GE -- in understanding the Company and advising the management team.
"Directors need to be our most constructive critics and our wisest counselors," Immelt said. "In short, they need to be engaged and committed partners in our task of continuing to make GE a great company, and a good company."
Unless otherwise required by law or company practice, the actions described in the governance documents will become effective on January 1, 2003.
GE (NYSE:GE) is a diversified technology and services company dedicated to creating products that make life better. From aircraft engines and power generation to financial services, medical imaging, television programming and plastics, GE operates in more than 100 countries and employs more than 300,000 people worldwide. For more information, visit http://www.ge.com.
General Electric Company
Changes in Governance Practices
Key governance actions taken by GE include:
-- On January 1, 2003, 11 of GE's 17 directors will be independent under NYSE standards (11 of the 19 current members are independent). GE's goal is for two-thirds of its directors to be independent.
-- GE will consider directors independent if the sales to, and purchases from, GE total less than one percent of the revenues of the companies they serve as executive officers. Similar tests will be applied to loans from and to GE -- and to charitable contributions from GE to an organization that a GE director serves as officer or director.
-- Audit Committee members must meet an additional "independence" test under Sarbanes-Oxley: their directors' fees must be the only compensation they receive from the Company. GE will apply this stricter test to members of the Management Development and Compensation Committee and Nominating and Corporate Governance Committee, even though not required by law to do so.
-- Non-employee directors will meet without management at least three times a year. The board has decided that the chairperson of the compensation committee, currently Andrew C. Sigler, will serve as presiding director at these meetings. The non-employee directors will meet more often if the presiding director so directs.
-- The presiding director will also advise on the selection of committee chairs and on the agenda for board meetings.
-- In December of each year, the CEO will discuss with the full board key future issues relating to strategy, risk and integrity that the board should consider. The board then will set a schedule of major discussion items for the following year.
-- Each director will visit two of GE's businesses a year without the presence of corporate management so that directors can have direct exchanges with operating leadership.
-- The Board has established an annual self-evaluation process under which information will be gathered annually in November and then discussed at both Board and Committee meetings in December.
-- Directors who also serve as CEOs should not serve on more than two public company boards in addition to the GE board, and other directors should not serve on more than four public company boards in addition to the GE board. The chair of the Audit Committee should not serve on more than one other audit committee of a public company, and other members of the Audit Committee should not serve on more than two.
-- The responsibilities of the Audit Committee will increase, and it will meet at least seven times per year. These responsibilities include: review of public disclosure processes and public financial disclosures -- 10Qs, 8Ks, 10K, earnings releases, presentations to analysts and rating agencies; review of key auditing principles and decisions; approval of independent auditor and all audit and non-audit work; concurrence in the appointment of the head of the internal Corporate Audit Staff; review of the annual audit plan conducted by both internal and independent auditors; and separate quarterly meetings with head of internal auditors and with independent auditor.
-- As announced in July 2002, GE senior management are required to hold a specified amount of GE stock as a multiple of the executive's base salary, as well as holding for at least one year the net shares of GE stock that they receive by exercising stock options.
-- To align its interests with the long-term interests of shareowners, the Board decided that Deferred Stock Units (DSUs) will be 60 percent of the annual director compensation in the future. These DSUs will not pay out until one year after a director leaves the board. DSUs will replace stock options as the equity portion of annual director compensation going forward, and when directors exercise existing stock options they will be subject to the same one-year holding period that applies to GE senior management.
CONTACT:
General Electric, Fairfield
Gary Sheffer, 203/373-3476