GE's John Flannery May Get Nothing After 14-Month Tenure as CEO
GE's John Flannery May Get Nothing After 14-Month Tenure as CEO
(Bloomberg) -- Add this to the indignities facing General Electric Co.’s ex-Chief Executive Officer John Flannery: He may not get a golden parachute after being ousted just 14 months into his reign.
Many senior executives at large public companies have contracts that promise severance payments if they’re terminated prematurely. But GE’s top bosses are employed at will and don’t have such benefits clearly defined. That gives the board’s compensation committee flexibility to decide the terms based on the “facts and circumstances,” according to GE’s most recent proxy statement.
What’s more, if GE terminates an executive before retirement because of performance and the person is in line to receive severance worth more than 2.99 times the sum of his or her salary and bonus, the board must get shareholder approval for the payout.
Under those terms, the threshold for Flannery, 57, would be $15 million, based on his $2 million annual salary and $3 million target bonus.
Executives typically get severance of up to three times the annual average of salary plus bonuses paid to them in the past few years if they’re dismissed, as long as the departure isn’t caused by a violation of company policy. That can amount to tens of millions of dollars, even if they’ve not done particularly well.
GE didn’t disclose Flannery’s pay until he became CEO in 2017, so it’s unclear what any such calculation would yield for him. A spokeswoman for the Boston-based firm declined to comment.
Flannery had unvested stock awards worth about $10 million as of Friday’s close, some of them tied to specific performance goals. If he departed because of a policy violation, they will probably be canceled. Otherwise, they may continue to vest according to their respective terms, or be immediately paid out in part or in full.
He also has about 3.2 million stock options with strike prices ranging from $11.95 to $30.11. Exiting workers who hold options are typically allowed to exercise them within a certain period after they leave a firm. If they don’t, they expire. Even with GE stock surging on Monday to $12.30 at 1:28 p.m. in New York, less than 5 percent of the securities are in the money.
Accrued pension benefits typically aren’t included when determining severance payouts. Over his three decades at the company, Flannery accumulated at least $23.6 million under two pension plans. As much as $21.9 million of that could be lost because he hasn’t reached retirement age.
Whatever the case, Flannery’s payouts will pale in comparison to those made to his predecessor. Jeffrey Immelt, who stepped down as chairman and CEO last year after 16 years at the helm, retired with at least $112 million, most of it in pension benefits, according to data compiled by Bloomberg.
--With assistance from Richard Clough.
To contact the reporters on this story: Anders Melin in New York at amelin3@bloomberg.net;Alicia Ritcey in New York at aritcey@bloomberg.net
To contact the editors responsible for this story: Pierre Paulden at ppaulden@bloomberg.net, Steven Crabill
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