• Compensation Policies for Executive Officers

The Management Development and Compensation Committee of the Board of Directors (the Committee), consisting entirely of non-employee directors, approves all of the policies under which compensation is paid or awarded to the Company’s executive officers. The Company’s basic compensation program for executive officers currently consists of the following elements: annual payments of salary and bonuses; annual grants of stock options; and periodic grants of restricted stock units (RSUs) and other contingent long-term financial performance awards. As described more fully below, each element of the Company’s executive compensation program has a somewhat different purpose. All stock option, RSU and contingent long-term financial performance awards are made under the share owner-approved GE 1990 Long-Term Incentive Plan (the Plan), which limits total average annual awards to less than 1% of issued shares. In 1997, the share owners approved the material terms of performance goals to be set by the Committee for payments of bonuses, RSUs and long-term performance awards to the Company’s executive officers, and approved an amendment to the Plan to establish a limit on the number of stock options that may be awarded to any individual, so that the Company could continue to obtain tax deductions for the full amount of such payments and awards under pertinent tax law.

As in prior years, and in accordance with the material terms of the performance goals approved by the share owners, all of the Committee’s judgments during 2000 regarding the appropriate form and level of executive compensation payments and incentive awards were ultimately based upon the Committee’s assessment of the Company’s executive officers’ embodiment of the “4-Es” of GE leadership — the personal energy to welcome and deal with the speed of change; the ability to create an atmosphere that energizes others; the edge to make difficult decisions; and the ability to consistently execute. The Committee’s determinations were also guided by the increasingly competitive demand for superior executive talent, the Company’s overall performance, and GE’s future objectives and challenges. The Committee did not rely solely upon a guideline or formula based on any particular performance measure or single event in 2000. Key factors affecting the Committee’s judgments included: strong increases in earnings and productivity; aggressive Six Sigma quality programs to provide customer value in all the Company’s product and service offerings; rapid development and implementation of initiatives to expand e-Business opportunities; increased revenues generated outside the United States and further improvements in the Company’s global competitive position; accelerated growth of the Company’s product service offerings; unyielding integrity and leadership in ensuring compliance with applicable law and Company ethics policies; and continuation of productivity, asset utilization and employee involvement initiatives that, among other things, provided improved cash flow and increased return on share owner equity. The Committee also considered the compensation practices and performances of other major corporations that are most likely to compete with the Company for the services of executive officers. Based upon all factors it deemed relevant, including those noted above and the Company’s superior overall long-term performance, the Committee considered it appropriate, and in the best interest of the share owners, to set the overall level of the Company’s salary, bonus and other incentive compensation awards above the average of companies in the comparison group in order to enable the Company to continue to attract, retain and motivate the highest level of executive talent possible.

Salary payments in 2000 were made to compensate ongoing performance throughout the year. Bonuses for 2000 were based upon the Committee’s determination that the Company’s 2000 financial results had exceeded the performance goals previously established by the Committee and upon its judgment regarding the significance of each executive officer’s contributions during 2000. The number of stock options granted to the Company’s five most highly compensated executive officers, and the hypothetical potential value of the awards, are shown in the table on page 27. Each stock option permits the holder, generally for a period of ten years, to purchase one share of GE stock from the Company at the market price of GE stock on the date of grant. Stock options for executive officers normally become exercisable in two installments, the first half after three years and the other half after five years from the date of grant.The number of RSUs awarded to the five most highly compensated executive officers last year, and their market value on the date granted, are shown in the table on page 23. In most cases, the restrictions on 25% of RSUs lapse three years after grant, an additional 25% lapse in seven years and the remaining 50% lapse at retirement. Stock options and RSUs provide strong incentives for continued superior performance because, under the terms of these awards, unexercised stock options and RSUs for which restrictions have not lapsed are forfeited if the executive officer is terminated by the Company for performance or voluntarily leaves the Company before retirement. The Committee also granted long-term contingent financial performance incentive awards to key executives for the 2000-2002 period to provide a continued emphasis on specified financial performance goals which the Committee considers to be important contributors to long-term share owner value. The new awards, which were more fully described in last year’s Proxy Statement, will be subject to forfeiture if the executive's employment terminates for any reason other than disability, death or retirement before December 31, 2002.

The Committee’s decisions concerning the specific 2000 compensation elements for individual executive officers, including the Chief Executive Officer, were made within this broad framework and in light of each executive officer’s level of responsibility, performance, current salary, prior-year bonus and other compensation awards. As noted above, in all cases the Committee’s specific decisions involving 2000 executive officer compensation were ultimately based upon the Committee’s judgment about the individual executive officer’s performance and potential future contributions, and about whether each particular payment or award would provide an appropriate reward and incentive for the executive to sustain and enhance the Company’s long-term superior performance.

• Basis for Chief Executive Officer Compensation

For 2000, Mr. Welch earned $16,700,000 in salary and bonus, as shown in the Summary Compensation Table on page 22. The Committee considered this level of payment appropriate in view of Mr. Welch’s leadership of one of the world’s most respected and successful companies. In 2000, the Committee also granted Mr. Welch 3,000,000 stock options, which will become exercisable on or after his retirement, and 850,000 RSUs for which the restrictions lapse on April 30, 2001. The primary basis for the Committee’s determination to grant such stock options and RSUs to Mr. Welch in 2000 was to recognize his 20 years of outstanding service as CEO and his role in developing and implementing plans and initiatives designed to increase the value of the Company during the remainder of his employment and following his retirement. Last year, the Committee also approved the Company's payment of annual premiums for a new split-dollar life insurance policy for Mr. Welch, all of which will be repaid to the Company from the policy. As reported in the last four Proxy Statements, the Board of Directors entered into an employment contract with Mr. Welch in 1996, which required him to serve as the Chairman and Chief Executive Officer of the Company until at least December 31, 2000, at the pleasure of the Board of Directors on terms no less favorable than his then current conditions of employment. In addition, after his retirement, the contract requires Mr. Welch, when requested by the Company’s then current Chief Executive Officer, to be available for up to 30 days a year for the remainder of his lifetime to provide consulting services or to participate in external events or activities on behalf of the Company. In return for these commitments by Mr. Welch, the Board agreed to pay him, during the term of the consulting agreement, a daily consulting fee for the days he renders services based on his daily salary rate in the year prior to his retirement, the first five days of which will be paid in advance through an annual retainer, and to provide him continued lifetime access to Company facilities and services comparable to those which are currently made available to him by the Company.

The specific bases for the Committee’s determinations regarding Mr. Welch’s compensation in 2000 included his aggressive leadership, which drove the Company’s outstanding financial results and improved its overall global competitive position; his determination to confront the challenges and seize the opportunities presented by e-Business and digital technology, and to achieve preeminent customer-focused Six Sigma quality in all of the Company’s products and services; his drive to reinforce a culture of integrity, compliance, diversity, stretch targets, boundaryless behavior and employee involvement throughout the Company; and his firm commitment to create a leadership team that will continue the Company’s success well into the 21st century. As in prior years, the key judgment the Committee made in determining Mr. Welch’s 2000 compensation was its assessment of his ability and dedication to continue increasing the long-term value of the Company for the share owners by providing the leadership and vision that he has provided throughout his twenty-year tenure as Chairman and Chief Executive Officer, during which GE’s market value had increased by more than $460,000,000,000 at the end of 2000. This performance is further highlighted by the performance graph on page 25, which covers Mr. Welch’s tenure as CEO and compares GE stock performance with the stock performance of other companies, as measured by broad market indices.

• Broad-Based Employee Stock Option Program

Over 30,000 employees below the executive officer level have been awarded one or more stock option grants under a broad-based stock option program initiated in 1989. This program is an increasingly vital element of the Company’s drive to identify, develop and motivate the high-potential leaders who will sustain GE’s outstanding performance far into the 21st century. It also reinforces in the Company the entrepreneurial environment and spirit of a small company by providing real incentives for these employees to sustain and enhance GE’s long-term performance. The Committee believes that the superior performance of these individuals will contribute significantly to the Company’s future success.

• Compensation Committee Interlocks and Insider Participation

The Management Development and Compensation Committee is composed of the following non-employee directors: Silas S. Cathcart (Chairman), Claudio X. Gonzalez, Kenneth G. Langone, Gertrude G. Michelson, Sam Nunn, Roger S. Penske, Frank H. T. Rhodes and Andrew C. Sigler. Mr. Cathcart was reappointed to the Committee in 1992 and became Chairman in 1993. He served as a member of the Committee from 1977 to 1987 and as a director of GE since 1972, except for the period during 1987 to 1989 when he served as Chairman and CEO of Kidder, Peabody Group Inc., a former operating subsidiary of the Company.

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The foregoing report on executive compensation is provided by the following non-employee directors, who constituted the Management Development and Compensation Committee during 2000:

Silas S. Cathcart (Chairman) Claudio X. Gonzalez Kenneth G. Langone Gertrude G. Michelson

Sam Nunn Roger S. Penske Frank H. T. Rhodes Andrew C. Sigler