The annual report of the venerable General Electric (GE) contains some very interesting figures:
1. Consolidated Revenues were down almost 16% from 2008.
2. Total Segment Profit was down almost 27% from 2008
3. Consolidated Net Earnings Attributable to the Company were down almost 37% from 2008.
4. 24% of â€œNon-U Sâ€ Residential Mortgages were loans with introductory, below market rates that are scheduled to adjust at future dates, with high loan to value ratios at inception; whose terms permitted interest only payments; or whose terms resulted in negative amortization.
5. Impaired loans increased almost 360% over 2008.
6. The stock price fell almost 44% from the high in the 2nd Q of 2008 to the 4th Q of 2009.
7. The dividend was reduced by over 32%, from, $0.31 to $0.10 in the 2nd Q of 2009.
8. In 2009 vs. 2008 the Total Compensation of Jeffrey Immelt, CEO was 6.5% higher.
9. The total compensation of all other senior executives remained over 8 figures.
10. The only good news was that previously granted options were now â€œout of the moneyâ€.
GE obviously became involved in making questionable loans and, it remains to be seen how much more money will be lost in their financing and real estate operations or whether the amounts reserved for those losses will be adequate. But, the bottom line is that senior management, at least, is not suffering along with the shareholders. Their lives havenâ€™t changed and they are still enjoying the perks of using the corporate jet, company paid financial planning, company provided autos etc. Many shareholders owned GE in their retirement accounts, looking to the once good dividends to help them enjoy retirement. However, that is now gone and the shareholders are left holding the bag while the executives do not appear to face any meaningful reduction in either their compensation or retirement benefits. One must wonder how these executives can face the shareholders, with a straight face, on the annual meeting day. Shareholders do not need a cadre of overpaid executives to lose money. They most probably could have done better with lower priced help.
It is really past the time when advisory votes on compensation are adequate to protect the shareholder interests. Shareholders should be able to fire executives for cause when their performance has been so abysmal and should be able to reign in their compensation and perks as well. The Board of Directors should be putting the senior executives collective â€œfeet to the fireâ€ and force them to accept some of the pain being suffered by shareholders. It is time for the management of public corporations to stop using the company as their private â€œcandy jarâ€.