The following table provides information about equity and non-equity awards granted to the named executives in 2006: (1) the grant date; (2) the estimated future payouts under non-equity incentive plan awards, which consist of potential payouts under the LTPA granted in 2006 for the 2006 – 2008 performance period; (3) estimated future payouts under equity incentive plan awards, which consist of the PSUs awarded to Mr. Immelt; (4) the number of shares underlying all other stock awards, which consist of RSUs awarded to the named executives other than Mr. Immelt, (5) all other option awards, which consist of the number of shares underlying stock options awarded to the named executives other than Mr. Immelt, (6) the exercise price of the stock option awards, which reflects the closing price of GE stock on the date of grant and (7) the grant date fair value of each equity award computed under SFAS 123R.
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| 1 | These columns show the potential value of the payout for each named executive under the 2006-2008 LTPA if the threshold, target or maximum goals are satisfied for all four performance measures. The potential payouts are performance-driven and therefore completely at risk. The business measurements, performance goals and salary and bonus multiples for determining the payout are described in the CD&A on page 17. As reflected in the Summary Compensation Table, no awards were paid for 2006. |
| 2 | This column shows the number of PSUs granted in 2006 to Mr. Immelt, which is the maximum number of PSUs that will convert into shares of GE stock at the end of the five-year performance period, if GE achieves the specified performance. The performance period commenced January 1, 2006, and ends December 31, 2010. 50% of the PSUs will convert into shares of GE stock only if GE’s cash flow from operating activities, adjusted to exclude the effect of unusual events, has grown an average of 10% or more per year over the performance period. The remaining 50% of the PSUs will convert into shares of GE stock only if GE’s total shareowner return meets or exceeds that of the S&P 500 over the performance period. The company also awarded Mr. Immelt 180,000 two-year PSUs in February 2006 instead of his annual bonus for 2005, which was reported in the 2006 proxy statement. |
| 3 | This column shows the number of RSUs granted in 2006 to the named executives. Half of the RSUs granted will vest and convert into shares of GE stock on September 8, 2009, three years from the date of grant, with the remaining half vesting on September 8, 2011, five years from the date of grant. During the restricted period, each RSU entitles the individual to receive quarterly payments from the company equal to the quarterly dividends on one share of GE stock. |
| 4 | This column shows the number of stock options granted in 2006 to the named executives. These options vest and become exercisable ratably in five equal annual installments, beginning on September 8, 2007, one year after the grant date. |
| 5 | This column shows the exercise price for the stock options granted, which was the closing price of GE stock on September 8, 2006, the date the MDCC granted the options. |
| 6 | This column shows the full grant date fair value of PSUs under SFAS 123R granted to Mr. Immelt, and the full grant date fair value of RSUs and stock options under SFAS 123R granted to the other named executives, in 2006. Generally, the full grant date fair value is the amount that the company would expense in its financial statements over the award’s vesting schedule. As Mr. Wright is eligible for retirement, the fair value of his awards that have been held for more than a year would be fully expensed in that year. See note 3 of the Summary Compensation Table for a discussion of fair value calculation related to the PSUs. For RSUs, fair value is calculated using the closing price of GE stock on the grant date of $34.01. For stock options, fair value is calculated using the Black Scholes value on the grant date of $7.60. The fair value shown for stock awards and option awards are accounted for in accordance with SFAS 123R. For additional information on the valuation assumptions, refer to note 24 of the GE financial statements in the Form 10-K for the year ended December 31, 2006, as filed with the SEC. These amounts reflect the company’s accounting expense, and do not correspond to the actual value that will be recognized by the named executives. For example, the PSUs granted to Mr. Immelt are subject to specified performance objectives over the performance period, with half tied to average growth in cash flow from operating activities and the other half tied to total shareowner return on GE stock compared to the S&P 500. Based on the market value of GE’s stock on the date of grant of the PSUs, the PSUs had a grant date value of either zero, $4,251,250 or $8,502,500 depending on whether neither, one or both performance conditions are ultimately met. |
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